Keeping time Featured

8:00pm EDT September 25, 2009

The Department of Labor is tightening its scrutiny of employers’ compliance with the federal wage and hour law. Business owners need to understand the issues and take the necessary steps to correct any problems. Otherwise, they will face heavy litigation costs and collateral damage to their reputations.

Secretary of Labor Hilda Solis announced the Department of Labor’s Wage and Hour Division has begun adding 150 new investigators for general wage and hour enforcement.

“Those numbers are going to translate into what employers are mostly concerned with: what this means in terms of increased enforcement in the field,” says James A. Prozzi, a partner with Jackson Lewis LLP.

Smart Business spoke with Prozzi about how employers can ensure their policies stand up to the extra scrutiny.

Why does the Department of Labor need these new investigators?

The Department generally investigates complaints phoned in by employees about minimum wage or overtime violations. Most employers know that in terms of minimum wage, you have to be sure you’re paying the applicable minimum wage. The primary concern for the Department of Labor is the alleged failure to pay overtime when it’s due. The new labor secretary announced when she was confirmed that she wanted to increase the investigative force because the allegation has been that the overtime law hasn’t been enforced as rigorously as it should be.

How have plaintiffs filing court actions affected this situation?

The development of concern for employers hasn’t been just from what is coming from the Department of Labor’s Wage and Hour Division. We’ve seen over the last 10 years a two or threefold increase in the number of court cases that are being filed. So we’ve actually seen the most activity not coming from Department of Labor but from individuals or groups of employees who can file their own lawsuits — private actions, as we call them under the wage and hour law. The number of these private lawsuits has really exploded even before the news came that the administration would be ramping up its own investigative force. That has been the biggest change in the last 10 years — the increase in employee litigation.

So you have the Department of Labor ramping up its investigative powers. At the same time, employers are seeing and have seen that employees and their lawyers have been coming at them in court for some time. So you have a two-pronged approach to the whole assault on employers under the federal wage and hour law.

What is the major concern for employers under the federal wage and hour law?

The No. 1 issue employers face is the misclassification of employees as being exempt from the obligation to be paid overtime. That problem is exacerbated by the fact that the regulations are very vague and difficult to apply. There is a tremendous amount of liability involved when an employee should have been paid overtime and wasn’t.

Another problem area is the allegation that non-exempt employees haven’t gotten an uninterrupted meal period. We’ve seen a lot of those kinds of cases, especially with attorneys attempting to solicit employees to see if they have ever had their meal interrupted to do work and asking how often that happens. Those kinds of cases have increased significantly in the last six months.

If employees are provided with a 30-minute unpaid lunch, the reason it is a problem is because that is excluded from their work hours for calculating any overtime. If they work during that time period, it has to be included in the hours of work. If it happens every day, you’re talking about an overtime problem. That’s why it has to be carefully monitored. With hundreds of employees, it can really pile up.

How can employers reduce the risk of employee misclassification?

Employers must be constantly evaluating their job classifications to make sure their people are properly classified as exempt if that is the position they are taking. It is much easier to address this long before either private litigation or the Department of Labor investigation begins. A little preventative practice goes a long way.

What steps can employers take to reduce their legal risks in this other area involving meal periods?

A lot of it has to do with the method of timekeeping many employers use, which is a computerized system that automatically deducts every day for an employee taking his or her 30-minute meal period, but it puts a premium on employers making sure that if employees haven’t gotten that uninterrupted unpaid meal, then those employees must be paid for that time.

So employers should make sure their supervisors are aware when employees do or don’t take the lunches they are supposed to be taking, and make sure that is accurately recorded. Employers should also make sure they clarify their record-keeping practices so employees understand that if they don’t get their meal, that they should report that. That’s the best you can do — but accurate record-keeping is ultimately the employer’s responsibility, under the federal wage and hour law.