The Department of Labor is on a Mission
You have to be Careful Out There
In over 30 years of practicing Human Resources, I have never seen the Department of labor being so aggressive in finding violators of employment laws
When Hilda Solis, the current Secretary of Labor took over her position in February of 2009, her first statement was, "There's a new sheriff in town." Her intention now is to ensure that the employees of American businesses are treated fairly. However the concept of fairness may be defined very differently by business owners and managers than by an agent of the Department of Labor. Therefore, it is good to know what we are dealing with.
Wage and Hour Division (WHD)
Last year the Wage and Hour Division of the department of labor hired over 700 new investigators. Their mission is to find the companies that are in violation of the Fair Labor Standards Act (FLSA), or the law that sets minimum wage, overtime and child labor standards throughout the country. The Department of Labor already estimates that over 75% of the employers in the country are in violation of the law and they are on a mission to find them to make things right to their employees. The WHD is looking for such things as:
Misclassified employees - There are pretty specific guidelines that must be followed to classify your employees as salaried employees or exempt from the FLSA. This is the most common violation of the law.
Employees working "off the clock" – One of the biggest violators of this law are well intentioned employees who clock out and go back to work to finish their jobs. These people know their employers are having some financial troubles, so they think they are doing the employer a favor. The problem comes when an investigator comes in and sees that the employee clocks in at 8:30 and out at 5:00 every day. This is a red flag to the investigator because no one works these exact hours day in and day out.
Another problem we have seen is employees working through their meal break. If an employee is working by driving a truck, answering the phone or answering questions during their unpaid meal time, then the employee is working while off the clock.
W-2 Employees vs. Independent Contractors – There are too many companies out there that classify all of their workers as independent contractors. These companies are playing with fire and will be caught eventually. If not by the WHD investigators who are looking for the proper level of income and FICA taxes to be paid, then by the state investigators looking for companies that are not paying into the empty unemployment fund or paying workers compensation.
Penalties are Big Dollars – If the WHD finds that you are in violation of the law, you will be required to go back a minimum of two years and make all of the people (even former employees) whole. Let's say you have 5 employees making $15.00 per hour. Each employee averaged 45 hours a week and were not paid overtime for the additional 5 hours. You have 5 people times $22.50 (the overtime rate or 1½ times $15.00) = $110.50. Multiply this by 510 (5 hours times 102 weeks) and the total amount owed is over $55,000. OUCH!!
Personal Injury Attorney's are also on the Prowl - The WHD employees are not the only one looking for violations. The personal injury attorneys are also looking for people to sue their employers. Many are openly advertising for people who have not been paid overtime. If there is one person in a company that calls and there is some credibility to the caller's story, the attorney knows there are others in the same company being treated the same way. The next thing you have is a potential class action case.
Equal Employment Opportunity Commission (EEOC)
With regard to the new sheriff being in town, it is very apparent with the recent experience we have had with the EEOC. Things have certainly changed in the last year or so as it appears that the EEOC investigators are on a mission to find something wrong. The investigators are asking for more information than ever before and even coming on-site to interview employees of the organization for what I consider to be nuisance charges. This process has proven to be extremely time consuming and expensive to our clients.
We all need to understand that a great majority of discrimination complaints filed with the EEOC have no merit. About 90% of the claims come after an employee is terminated. The complaint is filed because the former employee feels that he or she was not treated fairly at the time of the termination. Filing a complaint is easy. Fighting a complaint is not.
Prevention is the Only Solution
This is easy to say, but the only solution to these problems is to make sure you are in compliance with Wage and Hour legislation. As stated before, the Wage and Hour Division of the Department of Labor estimates that 75% of the companies are in violation of the regulations. In our dealing with small companies, we believe this is true. Too many are trying to cut expense corners with independent contractors, refusing to pay overtime and either allowing or forcing employees to work off the clock. Others are making employees salaried that should be classified as hourly.
Do it Right – The best defense is to know the rules and make sure you are in compliance with them. If you are not sure get an expert to look at your pay structure and make changes where it is deemed necessary. Pay a little more now, or be put out of business later.
With regard to EEOC complaints, all of us in business must remember that every employee is a member of a protected class. The only way to avoid discrimination charges is to ensure that employees are treated with respect and dignity at all times – even when they are terminated. It is possible to terminate an employee and allowing them to walk out the door with their dignity intact.
Business is tough enough right now. There is no need to make it tougher.
Readers' Comments:
From Terri Hannold, MHR, PHR, HR Manager at Florida Custom Marble regarding September's newsletter in which I thought I coined a new motivational saying,
"First I want to let you know how much I enjoy your newsletter. I never fail to glean something meaningful from it. Your quote in today's edition was no exception; I loved it! Sometimes, though, I just cannot help myself and I have to do my own research before I can believe something. I googled "follow crowd get lost" and found that the line "Unfortunately, those who follow the crowd usually get lost in it" appears in Rick Warren's Purpose Driven Life, (a truly inspiring book in case you have not read it.) I guess that is further proof that great minds do think a like!"
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