Employers that have chosen to look the other way as employees rack up unpaid off-the-clock hours to get their work done may soon have a problem.
The Department of Labor (DOL) has proposed a rule that would drastically change its interpretation of the Fair Labor Standards Act (FLSA) with respect to overtime exemptions, says Jeffrey C. Miller, a Director at Kegler, Brown, Hill + Ritter.
The current rule, put in place in 2004, exempts employees with salaries of at least $455 a week ($23,660 a year) who perform executive, administrative, professional, outside sales and/or computer duties from overtime regulations.
Last month, under President Barack Obama’s directive, the DOL proposed updated regulations which would raise the 2016 salary exemption to $970 a week, or $50,440 a year. The federal agency estimates that 4.6 million workers would be newly qualified for overtime in the first year of this new rule.
“Many are projected as administrative and entry-level executive professionals who are trying to advance in their respective companies,” Miller says. “They will no longer be exempt. So you’re going to need to look at the hours they are working. If you haven’t been paying attention, you need to start.”
Smart Business spoke with Miller about the new rules and how wage and hour claims that come about as a result of not playing by the rules could affect your business.
What do business owners need to know?
Going into 2016, the budget for the DOL’s Wage and Hour Division, which enforces FLSA policy, went up almost 20 percent. Wage and hour actions will increase with more resources available to use for enforcement.
Perform an audit of your employees to be sure you are classifying them correctly as exempt vs. non-exempt. You also want to be sure you are calculating overtime correctly for non-exempt employees. Have an attorney perform that audit to ensure the results are protected by attorney-client privilege. If you don’t have that confidentiality, the results could be discovered by the DOL or by a plaintiff’s attorney.
In 2014, the DOL collected more than $240 million in back wages and had about 30,000 investigative actions. Another 8,000 or so actions are initiated by employees each year.
How do wage and hour claims occur?
Predominantly, companies are directing or permitting employees to work off the clock, but often employees realize the budget constraints of their employer and choose to work off the clock on their own.
But another cause is missing minutes where somebody is required to do something integral to their job, but is not compensated for it. If an employee has a job that requires safety equipment, he or she may be entitled to compensation for the time spent putting it on and taking it off. Lunch breaks are another concern, if employees are not actually taking a 30-minute uninterrupted meal break.
An area of immediate concern is remote work. With smartphones, tablets, and remote access, non-exempt employees are performing remote work, after hours, but not getting paid. I’ll get an email chain from a client that includes a message sent after hours from a non-exempt employee. When that employee is sending out comprehensive emails at 7:30 in the evening, it’s compensable time.
How can you protect your company?
Have policies in place about when employees can and can’t work. Your basic policy is that you can’t work off the clock unless it’s approved by management and if it’s not, you’ll be subject to discipline. You should have an open-door policy so that concerns can be brought to management to keep the company’s good faith defenses.
Use technology. Only allow approved employees to access company systems after hours. Include a prompt when employees clock out to ask if they had an uninterrupted lunch break, and a prompt when they clock in to ask if they performed any work since they clocked out. If the answer is yes, it goes to HR and can be addressed.
Start with the audit to eliminate any potential exposures and to look for all cost savings. Be proactive because once the DOL comes in, you’re pulling time records for every employee at every location and responding to discovery and depositions.
Insights Legal Affairs is brought to you by Kegler Brown Hill + Ritter