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 Real Workplace Issues |
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Welcome to the latest
installment
of "Real Workplace Issues," a newsletter
dedicated to
providing our clients and friends with practical,
everyday employment law and HR
information. In Part I of
our issue on
overtime compliance, we examined the basic criteria
for being considered an "exempt" employee, and thus
ineligible for overtime pay under the Fair Labor
Standards Act (FLSA). We also highlighted the
specific exemptions under the revised 2004 U.S.
Department of Labor (DOL) regulations for computer,
executive, administrative and professional
employees. This month
we bring you Part
II of our in-depth look at the issues surrounding
overtime compliance, including a review of the
penalties/sanctions provided by law for
noncompliance, the "safe harbor" provision, and the
components of a compliance review. Please note - while it remains a
complex
and often tedious area of the law, it is essential that
employers
maintain compliance with state and federal overtime
requirements. More clients come to us with questions
regarding overtime compliance than any other area of
the law. And most importantly, very few legal issues
can "break an
employer's piggy bank" the way an overtime violation
can.
Oftentimes, violations of the
FLSA are discovered either as a result of an
audit/investigation conducted by the Wage and Hour
Division or a charge filed by an employee for unpaid
wages
with the DOL (or state
equivalent). When an
employer is
determined to be in violation of the FLSA, an
investigator representing the Wage and Hour Division
may recommend changes in employment practices to
bring the employer into compliance. The FLSA provides several
methods by which employees can recover unpaid
overtime wages:
In addition, willful violations of the FLSA may be
prosecuted criminally and the employer fined up to
$10,000, with a second conviction resulting in
imprisonment. Employers who willfully or
repeatedly violate overtime pay requirements are also
subject to a civil money penalty of up to $1,000 per
violation under the FLSA.
In New York, an employer
who willfully violates the state's wage and hour law
will be required to pay an additional amount as
liquidated damages equal to 25% of the total amount
of wages found to be due.
The DOL will investigate
claims going back three years from the date the claim
is filed for willful violations of the FLSA, and two years
for claims where no such "willfullness" is
apparent. The New York
State Department of Labor will investigate claims
going back six years from the date the
claim is filed.
Combine these time limits with
the reality that oftentimes, an entire group of
employees (i.e., a "class" ) will file a lawsuit for unpaid
overtime, and the lack of overtime compliance
becomes extremely expensive for employers.
Employers sometimes make
improper deductions from the salary of exempt
employees. These deductions, like the
misclassification of employees as exempt, are
violations of the FLSA. The revised 2004 DOL regulations
provide employers with a "safe harbor," which is a
brief period of time in which employers have the
opportunity to correct any such improper deductions.
The creation and implementation of a "Safe Harbor"
provision can protect the Company so long as the
provision:
If you have not yet assessed
whether your Company is in compliance with the DOL
regulations, you are not alone.
All employers should, at some point,
conduct a "compliance review" in order to determine
which employees are covered by an exemption. It is a
good idea to retain legal counsel to assist in the
review, as the actual DOL
regulations are complex and involve more nuances
than the summaries provided above. Our compliance
reviews often involve:
The number of Wage and Hour
investigations and employee lawsuits to collect
unpaid wages is on the rise, and the penalties for
noncompliance are exorbitant. It is therefore essential
that employers devote significant resources toward
properly classifying employees.
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