February 29, 2012
Addressing Wage & Hour Issues Before the Department of Labor Arrives
The U.S. and State Divisions of Wage & Hour have increased their enforcement efforts in recent years. While many investigations are the result of an employee complaint, a happy staff does not guarantee the Division will never knock on your door. Sometimes employers are just randomly selected because the Division has targeted a particular industry or geographic region. And it takes only one former, disgruntled employee in need of cash to start a federal or state investigation of your business. In terms of things most people would like to avoid, a visit from the Division of Wage & Hour ranks up there with going to the dentist. Often employers view these visits as an intrusion and an unnecessary interference with their business. What employers often do not realize is that while the Division may use words like “visit” and “inspection,” they are conducting a formal investigation that has legal implications and they have the authority to subpoena your business and payroll records, to assess the company for any wages determined to be owing to your employees, to fine you and to take you to court to collect unpaid wages and fines. What sometimes starts as a one hour visit can turn into an ordeal lasting months, maybe years, requiring trips to the Division’s offices and even a courtroom. Sticking with the dentist visit analogy, think of your wage policies and records as your teeth and gums. Neglecting them makes that inevitable visit more painful than it needs to be. But preventive care, like regularly reviewing and revising your payroll policies and conducting periodic self-audits, will make the visit more tolerable and certainly less expensive. A good self-audit pinpoints the same issues DOL investigators look for – are employees being paid for all compensable time, are employees improperly classified as exempt or independent contractors, is overtime being calculated correctly, are there improper deductions from employee paychecks, and is the employer maintaining the right records. The prudent employer identifies issues and addresses them before they become problems. We frequently assist our clients in self-audits and can tell you that it is the rare employer that is in complete compliance with the FLSA and State wage and hour laws. Identifying issues on your own gives you the opportunity to self-correct, which immediately begins reducing your exposure in the event of a future audit. Self-audits are also looked upon favorably by the Division and can save your company tens of thousands of dollars when negotiating a reduction in the inevitable fines that flow from a Division citation. For more questions about self-audits or the Wage & Hour investigation process, contact John R. Vreeland, Esq. or Patrick McGovern, Esq. in our Labor Law Practice Group.