Webinar held on September 25, 2013.

1. Copyright © 2013. Infor. All Rights Reserved. www.infor.com 11
How to survive – and
pass – a labor audit

2. Presented by:
Lisa Schreter
Shareholder
Littler Mendelson, P.C.
Atlanta
404-760-3938
lschreter@littler.com
Angelo Spinola
Shareholder
Littler Mendelson, P.C.
Atlanta
404-760-3921
aspinola@littler.com

3. Triggers for DOL Investigations
• Complaints
– Employees, unions, competitors, advocacy groups
– DOL will not disclose whether a complaint has been filed or the
source of the complaint
• Targeted Investigations
– Designed at district or regional level to address specific issue in
an industry or geographic area
• Statistically Valid Compliance Surveys
– National surveys to assess compliance in an industry (e.g.,
retail) or with a specific FLSA provision (e.g., child labor)
3

4. USDOL Investigation Process
4
Investigation
Preparation
Opening
Conference
Document
Review
Employee
Interviews
Back Wage
Calculations
Closing
Conference

5. The Care and Feeding
of a USDOL Investigator
• Always treat with deference and respect
• Provide a private and comfortable room
– Preferably in an area where the investigator will not
have immediate access to employees
• Assign a management employee to facilitate the
investigation
– Gather requested documents
– Assist with scheduling employee interviews
– Ensure investigator does not wander unescorted
5

6. Keys to Successful Resolution
of a US DOL Investigation
• Involve attorneys at an early stage
– But, in most cases, behind the scenes
– Investigators will feel less threatened working with an HR
professional of facility manager
– If investigation cannot be resolved with the investigator,
attorneys can “appeal” to the District Director
• Establish a reputation as a good faith
employer and your commitment to
compliance
• Cooperate with the investigation
– Do not give in to unreasonable demands
– Do not tolerate an abusive investigator
6

7. Keys to Successful Resolution
of a US DOL Investigation
• Work towards getting the investigator out of your
workplace quickly
– Investigators should start small (spot check of payroll records, a
few employee interviews), and close the investigation quickly if
satisfied that the employer is in substantial compliance
– If investigator is not satisfied as to compliance, s/he will expand
the investigation
• Commit to taking additional steps to ensure future
compliance
– DOL considers back wages as a necessary but temporary
resolution, and thus cares more about future compliance
7

8. The Pandemic Continues:
Wage and Hour Class Actions Are Here To Stay
• 4,204 wage and hour state
and federal court
class/collective actions filed
in 2012.
• Represents 92% of all
employment
class actions filed.
• 2,257 cases involved
challenges
to timekeeping
practices. 8

9. Industries Targeted
Employers’ payroll & timekeeping procedures
are under attack
• Employers who have been sued represent a
“Who’s Who” of corporate America.
• Cases have targeted virtually every sector of our
economy:
– Healthcare
– Telecommunications
– Retail
– Transportation
– Manufacturing
– Banking
– Insurance
9

10. Automation
Automated Payroll, Timekeeping and Scheduling
Solutions, When Properly Designed and
Implemented, Can Reduce Payroll Costs and
Wage and Hour Compliance Problems.
10

11. Targeted Practices
But.....some automated pay practices have been
the target of wage and hour class claims.
11

12. Top 4 Payroll Practices Subject to
Class Action Claims
• Automatic Meal Deductions
• Rounding
• Exception Time Reporting
• Time Shaving
12

13. Auto Deductions for Meal Periods:
The Problem
• Class actions challenging employers’ use of
automated deductions for meal periods are
rampant.
13

14. Auto Deductions for Meal Periods:
The Law
• DOL opinion letter and field operations handbook
make clear under federal law that an auto deduction
is permissible if employee actually takes the meal.
• Courts are split.
14

15. Auto Deductions for Meal Periods:
What’s an Employer to do?
• The most conservative approach? Eliminate use of auto
deduction feature.
• Alternative approach? Pair use of auto deduction feature
with additional compliance measures.
– Clear written policy describing bona fide meal period and what to
do if the meal is not taken or interrupted by work.
– Provide training to managers and non-exempt employees on
proper timekeeping - including meal and rest period compliance.
– Utilize advanced clock features that ask an employee if the meal
period was taken. If the employee certifies the meal was taken
the deduction is taken. If not, the employee is paid for the meal.
– Require employees on a daily basis to review time entries, and if
correct, certify the accuracy of the records.
15

16. Rounding: The Risk
Class Action Lawyers Have Successfully
Challenged Employer Rounding Practices.
• $1.29 million settlement with DOL based on
allegations that included rounding down of time
for a class of 16,000 workers.
• $19 million settlement with class of 13,000
employees based on allegations that included
rounding down of time.
16

17. Rounding: The Problem
• Supervisors can eviscerate proper rounding rule
by instructing employers to only clock in within
narrow window (i.e. with a 15 minute round within
7 minutes before shift start).
• Some employers do not review operation of
rounding rule over time.
• Law requires you to look at how rounding works
for each employee.
• Warning: Advances in time clock technologies
make it difficult to argue that “actual” start and end
times cannot be captured.
17

18. Rounding: The Law
• As an “enforcement
policy” DOL accepts
rounding if:
– Arrangement averages out
so employees are “fully
compensated for all the time
they actually work.”
– Over time rounding does not
result in a failure to compensate
employees for all working time.
– Rounding to nearest 5 minutes,
one-tenth or quarter of an hour.
18
General Rule:
Insubstantial or
insignificant
periods of time
that cannot
as a “practical
administrative
matter be precisely
recorded” may be
disregarded

19. Rounding: What’s an Employer to do?
• Eliminate rounding rules.
OR
• Monitor actual operation of
rounding rule to ensure all non-
exempt employees are being fully
paid for all working time.
19

20. Exception Time Reporting: What is it?
• A timekeeping system where
the employer pays the
employee for his or her
scheduled work time unless the
employee provides the
employer with notice that he or
she did not actually work the
scheduled time.
20

21. Exception Time Reporting:
The Problem
• May not comply with federal and state law which
requires employer to retain records of the time
actually worked by employees.
• Does not provide records to refute plaintiffs’ claims
they worked more than their scheduled work time.
21

22. Exception Time Reporting: The Risks
• January 2009 – $8.8 million settlement, where call
center employees’ time reported as 40 hours every
week.
• Plaintiff’s Attorney: “Using exception time reporting
is a sure way to get a class action.”
• Park v. Seoul Broadcasting System (S.D. N.Y.):
Summary judgment denied because payroll
records showed 40 hours each week. Company
claimed it let employees leave early after 40
hours, but court rejected argument because
Company had no records to support.
22

23. Time Shaving: The Risk
• Class action lawyers routinely claim that supervisors
instruct employers to work off the clock and
improperly edit time records to meet budgetary
constraints.
23

24. Time Shaving: The Problem
• Timekeeping systems allow managers to edit non-
exempt time records.
• Some systems have not required supervisor’s to
record the reason for time edits.
• Some supervisors are not familiar with legal
obligations and have improperly “edited” employee
time records to reduce overtime and
reported hours.
24

25. Time Shaving: The Law
• Supervisors may edit
timecards to correct
legitimate errors (i.e.
missed time punches).
• Supervisors may not
alter a timecard for other
reasons such as
inefficiency, failure to
obtain advance approval
of overtime.
25

26. Time Shaving:
What’s an Employer to do?
• Provide managers and employees with training regarding
wage and hour compliance and proper timekeeping.
• Utilize a time and attendance system that provides managers
with a field where they can notate the reason for payroll edits.
• Publish a clear timekeeping policy which:
– Prohibits off the clock work.
– Instructs employees to immediately report any manager who
instructs an employee to work off the clock and falsifies time
record.
– Advises employees that no one is authorized to instruct another
employee to work off the clock.
26

27. Time Shaving:
What’s an Employer to do? (continued)
• Provide a robust compliant
mechanism that allows anonymous
reports of wage and hour concerns.
• Promptly investigate and resolve
wage and hour complaints.
• Periodically audit manager “edits”
particularly where there is a high
incidence of missed punches and
edits.
27

28. An Effective Compliance Program
• Wage and Hour Policies
• Eliminate Assumptions
• Complaint and Investigation
Procedures
• Training
• Audits
• Exemptions: Developing
Evidentiary Support
28

29. What The Future Holds?
29

30. Questions?

31. How to Survive
(and pass)
a Labor Audit
Lisa Schreter
Shareholder
Littler Mendelson, P.C.
Atlanta
404-760-3938
lschreter@littler.com
Angelo Spinola
Shareholder
Littler Mendelson, P.C.
Atlanta
404-760-3921
aspinola@littler.com

32. 32Copyright © 2012. Infor. All Rights Reserved.
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Copyright © 2012. Infor. All Rights Reserved.
www.infor.com
32
Human Capital Management
Your largest asset … your largest opportunity for competitive
advantage

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5 Ws of HCM
Attract, retain, develop, promote the right workforce to
flexibly meet business goals
Workforce
Skillsets
Payroll
Geographical
Allocation
Shifts

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Copyright © 2012. Infor. All Rights Reserved.
www.infor.com
34
Key to a Solid HCM Strategy
Transform the way people and organizations perform and unify
any content, process, software, service and device … to raise
Return on Capability

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For More Information
• For a free ROI calculation, copy of today’s slides, recording link,
pricing or additional product information: Look for email next 24
hours from Wendy Cook to make request
• Upcoming webinars and events: infor.com and enwisen.com
• HR Technology Show – October 7-9 – Las Vegas
• IQPC HR Shared Services – October 16-18 – Orlando
• Timekeeping Practices for the Affordable Care Act – October 24
• HR Tech Europe – October 24-25 – Amsterdam
• DevLearn – October 23-25 – Las Vegas

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