A Guide to Combating Wage & Hour Liability


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The Department of Labor (DOL) estimates that 80%+ of employers are out of compliance with federal and state wage and hour laws. It’s no surprise that wage and hour class actions now outnumber all other discrimination class actions combined.

2010 has seen no letup in wage and hour lawsuits. Published reports show that wage and hour lawsuits in federal courts are up over 25% from the same time last year. Adding fuel to the fire, the DOL has a bigger budget and hundreds of additional field investigators. With settlements already averaging $23.5M at the federal level and $24.4M at the state level, the potential impact to employers is staggering.

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  • This is up from 83% in 2009!
  • The following is official data from the United States Courts on the total number of FLSA cases ( individual and class actions ) filed in federal court.  The federal courts do not separately report  individual and class actions.
  • U.S. Secretary of Labor, Hilda Solis, has announced a new program to advise workers of their labor and employment rights. The program, called "We Can Help," was launched last week. The We Can Help website provides a toll-free hotline for an employee or contractor to raise questions or concerns about how she is being paid. The worker is promised confidentiality and undocumented workers are protected from immigration enforcement for complaints about wage violations. To aid its efforts in getting the word about the We Can Help program out to workers, the DOL has teamed with various employee advocacy groups, including the AFL-CIO and others to educate workers. Plans include distribution of literature, public wage-rights forums, and facilitation of meetings with Wage & Hour enforcement staff within the DOL.    
  • The database, part of the President’s transparency initiative, includes detailed information (to be updated quarterly) regarding closed investigations, such as the number of "FLSA violations" per employer, amount of back wages the employer "agreed to pay," the number of employees the employer "agreed to pay," the type of violation (i.e., minimum wage or overtime) and the amount of civil money penalties assessed . The DOL suggests (pdf) this online data will be helpful in part because "maybe someone will create a mash up of the employers in their community and encourage neighbors to stop doing business with serial employment law violators." Or "[p]erhaps workers will review the database before beginning their job search, allowing them to more accurately assess a prospective employer’s reputation." More likely, it will be tracked by plaintiffs’ employment lawyers interested in potential litigation. As a result, employers considering voluntarily resolving a DOL investigation should consider, as one factor in their decision-making process, the fact that this information will now be available online. Companies that already have gone through investigations should confirm their information is correctly reflected in the database, so that inaccurate and potentially negative information is not disseminated to the public.  
  • A Guide to Combating Wage & Hour Liability

    1. 1. March 24, 2011 A Guide to Combating Wage & Hour Liability
    2. 2. Reid Bowman, Esq. <ul><li>General Counsel of ELT. </li></ul><ul><li>Over 25 years of HR and labor employment law experience, primarily working with multi-state employers. </li></ul><ul><li>Designs strategic ethics, wage & hour, discrimination prevention, and employment law compliance programs. </li></ul>
    3. 3. Garry Mathiason, Esq. <ul><li>Chairman of the Board, Littler Mendelson. </li></ul><ul><li>Mr. Mathiason has personally supervised the Firm's attorneys on over 1,000 employment and labor litigation matters and currently defends employers in complex wage & hour and discrimination class action cases </li></ul><ul><li>Mr. Mathiason oversees Littler’s Corporate Compliance and Ethics Practice Group and originated the Contingent Workforce Practice Group. He serves as Chair of the Open Compliance and Ethics Group's (OCEG's) Employment and Labor Law Domain writing legal requirements and guidelines for business. </li></ul><ul><li>Mr. Mathiason has been identified by the National Law Journal on its list of the 100 most influential attorneys in the nation. </li></ul>
    4. 4. Agenda <ul><li>The Numbers Tell the Story </li></ul><ul><li>Greater Enforcement by the DOL </li></ul><ul><li>Key Risk Areas </li></ul><ul><li>Practical Compliance Solutions </li></ul><ul><ul><li>Training Solutions that Tangibly Reduce Risk and Deliver a ROI. </li></ul></ul>
    5. 5. The Numbers Tell the Story
    6. 6. A Question For You Do you consider wage and hour issues to be the number one employment law risk facing your organization? <ul><li>Yes </li></ul><ul><li>No </li></ul>
    7. 7. <ul><li>Of the 4,152 employment class action lawsuits filed in federal or state court in 2010, 3,785(or approx. 91% ) were wage and hour related complaints! </li></ul>Wage & Hour Class/Collective Actions: The Flood Continues
    8. 8. <ul><li>Non-government wage and hour settlements in 2010 remained high. For the top 10 settlements in 2010: </li></ul><ul><ul><li>Total : $241M </li></ul></ul><ul><ul><li>Average: $22M </li></ul></ul><ul><ul><li>Median: $14.8M </li></ul></ul>Wage & Hour Lawsuits Becoming Stronger Focus for the Plaintiff’s Bar
    9. 9. The Beat Goes On <ul><ul><li>What does this all mean? </li></ul></ul><ul><ul><li>More class/collective action players for the future. </li></ul></ul><ul><ul><li>* http://www.uscourts.gov/Statistics/JudicialBusiness/JudicialBusiness2010.aspx </li></ul></ul>
    10. 10. The Department of Labor New Challenges and Old Problems
    11. 11. Changes at the DOL <ul><li>New Secretary of Labor, Hilda Solis: “ Make no mistake the DOL is back in the enforcement business.” </li></ul><ul><li>Added 250 new investigators in FY ’10, increasing the total number of Investigators by 1/3 </li></ul><ul><li>Expected to add 90 more in ‘11 with a $20M increase in enforcement budget. </li></ul>
    12. 12. And More Enforcement to Come <ul><li>DOL’s FY 2012 Budget Request: </li></ul><ul><li>“ To support the Department’s theme of expanding efforts to deter and detect worker misclassification WHD proposes an increase of 107 FTE and $15,223,000 as part of an initiative to detect and deter the inappropriate misclassification of employees as independent contractors and strengthen and coordinate Federal and State efforts to enforce labor violations arising from misclassification…. </li></ul><ul><li>The requested funding level will allow WHD to employ approximately 1,200 investigator FTE - approximately 15 percent more than employed at the FY 2010 level.” </li></ul><ul><ul><li>http://www.dol.gov/dol/budget/2012/PDF/CBJ-2012-V2-03.pdf </li></ul></ul>
    13. 13. DOL’s Enforcement Approach <ul><li>– From 4-26-2010 DOL Regulatory Agenda </li></ul>“ Plan, Prevent, and Protect ” <ul><li>Encourages employers to “find and fix” violations before the DOL Investigators arrive. </li></ul><ul><li>Employers are expected to design and implement plans to avoid violations of workplace laws. </li></ul><ul><li>According to the DOL: &quot;[a]ny employers that seek to exclude workers from the FLSA's coverage will be required to perform a classification analysis, disclose that analysis to the worker, and retain that analysis to give to WHD enforcement personnel who might request it.” </li></ul><ul><li>Bottom line : DOL making obligation to “find and fix” an affirmative duty; absence of those action viewed as a compliance failure. </li></ul>
    14. 14. DOL Wage Settlement Database Now Available Online! <ul><li>DOL now publishing, on a quarterly basis, an updated database regarding closed investigations. </li></ul><ul><li>Includes, for example: </li></ul><ul><ul><li>Name of employer </li></ul></ul><ul><ul><li>Number of FLSA violations /employer </li></ul></ul><ul><ul><li>Amount of “agreed to” back wages </li></ul></ul><ul><ul><li>Type of violation. </li></ul></ul><ul><li>http://ogesdw.dol.gov/search.php </li></ul>
    15. 15. DOL’s Policy and Enforcement Initiatives <ul><li>Targeting certain industries, such as healthcare, for missed and interrupted meal periods and failure to aggregate hours worked. </li></ul><ul><li>Directed recidivism audits for past violators. </li></ul><ul><li>Targeting “mis-designated” independent contractors. </li></ul>
    16. 16. Upcoming DOL Record Keeping Rule <ul><li>In April 2011, DOL is expected to issue its Record Keeping Rule. </li></ul><ul><ul><li>Would require explanation of exempt vs. non-exempt classification decision. </li></ul></ul><ul><ul><li>May also include some Independent Contractor notifications. </li></ul></ul>
    17. 17. DOL’s Expanded Use of All Available Remedies <ul><li>Liquidated damages for repeat or willful violations. </li></ul><ul><li>Limited use of DOL Release (Form 58) to “full investigations.” </li></ul><ul><li>Aggressive use of civil money penalties for repeat and willful violations. </li></ul><ul><li>3-year back wage period for repeat and willful violations. </li></ul>
    18. 18. A Question For You In the past 12 months, has your organization been faced with a wage & hour claim from current or former employees? <ul><li>Yes </li></ul><ul><li>No </li></ul><ul><li>I don’t know </li></ul>
    19. 19. Key Risk Areas
    20. 20. Employee Classification <ul><li>Employee vs. Independent contractors? </li></ul><ul><li>Paid employee vs. unpaid interns? </li></ul><ul><ul><li>See DOL’s guidelines on interns: http://www.dol.gov/whd/regs/compliance/whdfs71.pdf </li></ul></ul><ul><li>Exempt vs. Non-Exempt (from overtime pay requirements). </li></ul>
    21. 21. Pay Practices <ul><li>Auto Deductions for Meal Periods. </li></ul><ul><li>Deductions for Short Meal/Rest Breaks. </li></ul><ul><li>Exception Time Reporting. </li></ul><ul><li>Rounding. </li></ul><ul><li>Early Arrivers and Long Punching . </li></ul>
    22. 22. Pay Practices (con’t) <ul><li>Pre- and Post-shift Computer Logging and Other Activities. </li></ul><ul><li>Discrepancies Between Time Records and Other Electronic Records. </li></ul><ul><li>Remote Work. </li></ul><ul><li>Garbage In, Garbage Out. </li></ul><ul><li>Failure to Include Bonuses, Incentives, and Commissions in Overtime Calculation. </li></ul><ul><li>Editing Time Records. </li></ul>
    23. 23. Editing Time Records <ul><li>Missed punches can be a source of potential risk if employees are not asked to supply actually start or end times. </li></ul><ul><li>Managers should be trained regarding the limited circumstances in which time records can be edited. </li></ul><ul><li>When time records are edited, employers should record the reason and, if possible, the employee's consent to the edits. </li></ul><ul><li>Payroll personnel should be provided with training regarding how to handle missing time records including missed punches. </li></ul>
    24. 24. Practical Compliance Solutions
    25. 25. A Question For You In 2011, my organization is spending more on wage and hour compliance and risk management: <ul><li>Yes </li></ul><ul><li>No </li></ul><ul><li>I don’t know </li></ul>
    26. 26. What is a Faragher/Ellerth Defense? <ul><li>In certain areas of the law, courts historically have recognized something called the “doctrine of avoidable consequences,” which prevents a party from recovering damages where the injured party could have avoided harm through reasonable efforts. </li></ul>
    27. 27. What is a Faragher/Ellerth Defense? <ul><li>Used for 10+ years in Title VII matters, following US Supreme Court decisions in Faragher and Kolstad . </li></ul><ul><li>Courts have now started to recognize the validity of this defense in wage and hour actions. </li></ul>
    28. 28. <ul><li>Timekeeping policies should appear in handbooks, ethics policies, and collective bargaining agreements. </li></ul><ul><li>Require signed receipt to demonstrate knowledge of policies and procedures. </li></ul>Element 1: Adopt and Publicize Clear Timekeeping Policies and Procedures
    29. 29. Adopt and Publicize Clear Timekeeping Policies and Procedures <ul><li>Recommend policies should: </li></ul><ul><ul><li>Define working time with examples that target most common misconceptions. </li></ul></ul><ul><ul><li>Address meal periods, and instruct employees on what to do if a meal period is interrupted or missed. </li></ul></ul><ul><ul><li>Prohibit off-the-clock work but advise that in the event work is performed, employees will be paid. </li></ul></ul><ul><ul><ul><li>Require immediate reporting of off-the-clock work within 72 hours of occurrence. </li></ul></ul></ul>Element 1: (cont’d)
    30. 30. <ul><li>Recommend policies should: </li></ul><ul><ul><li>Provide a mechanism for employees to report off-the-clock work. </li></ul></ul><ul><ul><li>Require advance authorization for overtime except in the event of an emergency. </li></ul></ul><ul><ul><li>Advise employees that no one is authorized to require off-the-clock work. </li></ul></ul><ul><ul><li>Require employees to report violations of timekeeping policies within 72 hours of occurrence and require employees to pursue alternative complaint mechanism by calling 1-800 number if no response received from initial complaint within 5 business days. </li></ul></ul>Element 1: (cont’d) Adopt and Publicize Clear Timekeeping Policies and Procedures
    31. 31. A Question For You Regarding wage and hour training, in the next 12 months, my organization is: <ul><li>Already conducting training </li></ul><ul><li>Planning to implement training </li></ul><ul><li>Considering training </li></ul><ul><li>I don’t know </li></ul>
    32. 32. <ul><li>Train both managers and employees regarding FLSA and state law wage and hour requirements and Company timekeeping policies and procedures. </li></ul><ul><li>Training should involve interactive learning model with examples targeted toward  common violations (i.e., missed meal periods, improper supervisory instructions, and volunteers). </li></ul>Element 2: Training
    33. 33. When To Train <ul><li>Should be integrated into employment relationship. </li></ul><ul><li>Should be done regularly to reinforce policies and understanding: </li></ul><ul><ul><li>Employee orientation. </li></ul></ul><ul><ul><li>New manager training. </li></ul></ul><ul><ul><li>When there are new legal developments or policy changes. </li></ul></ul><ul><ul><li>Every 2 years. </li></ul></ul><ul><ul><li>More often for highly specialized compensation jobs. </li></ul></ul>
    34. 34. Who Should Be Trained <ul><li>Employee training should focus on the basics, such as: </li></ul><ul><ul><li>Review of key policies. </li></ul></ul><ul><ul><li>Define hours worked. </li></ul></ul><ul><ul><li>No off-the-clock work. </li></ul></ul><ul><ul><li>Meals and rest periods. </li></ul></ul><ul><ul><li>Rules relating to OT. </li></ul></ul><ul><ul><li>Reporting errors and misconduct. </li></ul></ul>
    35. 35. Who Should Be Trained <ul><li>Manager training should focus on employee topics, plus: </li></ul><ul><ul><li>Compliance responsibilities. </li></ul></ul><ul><ul><li>Handling employee complaints. </li></ul></ul><ul><ul><li>Manager misconduct. </li></ul></ul><ul><ul><li>Prohibition against retaliation. </li></ul></ul><ul><ul><li>Good record keeping practices. </li></ul></ul>
    36. 36. Training Solutions <ul><li>Live Training: </li></ul><ul><ul><li>Instructor led and tailored to audience (i.e., senior leaders). </li></ul></ul><ul><ul><li>When highly customized materials required. </li></ul></ul><ul><li>E-learning: </li></ul><ul><li>40%+ (and growing) of employers today chose e-learning solutions. </li></ul><ul><ul><li>Interactive and engaging – hands on experience. </li></ul></ul><ul><ul><li>Creates electronic records and employee acknowledgments. </li></ul></ul><ul><ul><li>Significant cost savings </li></ul></ul><ul><ul><li>Easy to reach bulk of managers and employees – repeatedly. </li></ul></ul><ul><ul><li>Content can be duplicated for evidentiary purposes. </li></ul></ul><ul><ul><li>Ensures exposure to policies and procedures. </li></ul></ul><ul><ul><li>View a demo: www.elt-inc.com . </li></ul></ul>
    37. 37. Online Training Advantage <ul><li>Online training is consistent and repeatable. </li></ul><ul><li>As a result, can be presented to a jury or mediator exactly the way learner saw it. </li></ul><ul><li>Clearly demonstrates that if after training employee violated policies, it was NOT because of lack of understanding, but deliberate attempt to circumvent employer’s pay rules. </li></ul>
    38. 38. ELT’s Wage and Hour Course <ul><li>Wage & Hour educates your workforce about the basics of the law---translates critical messages into real-life stories that your employees will understand and remember. </li></ul><ul><li>Smart Logic automatically configures the course to federal and state law where the learner works </li></ul><ul><li>Developed by , and its nationally recognized team of wage and hour experts. </li></ul><ul><li>Specifically designed to help establish powerful affirmative defenses. </li></ul><ul><li>Endorsed by </li></ul>
    39. 39. ELT’s Wage & Hour Course <ul><li>Employees must certify that they </li></ul><ul><li>Have completed the course; </li></ul><ul><li>Have reviewed your organization’s wage & hour and payroll policies and procedures, and will abide by them; and </li></ul><ul><li>Know who to call with any questions or concerns. </li></ul>
    40. 40. Training ROI <ul><li>Prevent inadvertent federal and state law violations. </li></ul><ul><li>Prevent claims: </li></ul><ul><ul><li>Policies are clear and irrefutable. </li></ul></ul><ul><ul><li>Plaintiff credibility? </li></ul></ul><ul><ul><li>More difficult to certify a class. </li></ul></ul><ul><li>Reduce damage awards and potentially build a good faith defense . </li></ul><ul><li>Build a culture of compliance . </li></ul>
    41. 41. <ul><li>Require non-exempt employees to review time records. </li></ul><ul><li>Daily review is ideal but something less frequent can be used provided employees have the opportunity to review actual records. </li></ul><ul><li>Provided records are correct, require employee certification as to accuracy. </li></ul>Element 3: Certification of Time Records
    42. 42. Certification of Time Records <ul><li>If records are not correct, require employee to identify any inaccuracies to permit immediate correction. </li></ul><ul><li>Require employees to review accuracy of paycheck and, if systems permit, certify secondary review. On-line tools make this level of review more available. </li></ul><ul><li>Certification should cover off-the-clock work and meal periods . </li></ul>Element 3:
    43. 43. <ul><li>Most employers already have some type of complaint mechanism in place…..but </li></ul><ul><li>Existing complaint mechanisms often do not specifically reference wage and hour issues. </li></ul><ul><li>Revise existing complaint mechanism to ensure it specifically addresses wage and hour issues. </li></ul><ul><li>Publicize complaint mechanism in handbooks, open door policies, collective bargaining agreements, ethics handbooks, and other employee communication channels. </li></ul>Element 4: Adopt a Robust Complaint Mechanism
    44. 44. <ul><li>Train managers and payroll personnel to be alert to payroll concerns and treat any complaints with same level of attention as other employee relations complaints (i.e., sexual harassment.) </li></ul><ul><li>Promptly investigate payroll concerns using same techniques and controls as other types of internal complaints. </li></ul><ul><li>If determined to be appropriate, take prompt and effective remedial steps. </li></ul><ul><li>Effective remediation may require payment of back wages. </li></ul>Element 4: (cont’d) Adopt a Robust Complaint Mechanism
    45. 45. <ul><li>Adopt an audit protocol to ensure employees and managers are following policies and procedures. </li></ul><ul><li>Audit protocol should be designed to be discoverable in the event of future litigation as part of Company's good faith defense. </li></ul><ul><li>Promptly investigate and remediate any discovered violations. </li></ul><ul><li>Implement appropriate discipline for managers and employees in the event of violations. </li></ul>Element 5: Audit Time Records for Compliance
    46. 46. <ul><li>In some reported cases, employers have been criticized for quickly disciplining employees for timekeeping violations but not doing so for manager violations. </li></ul><ul><li>Manager misconduct is increasingly being characterized as “wage theft”. </li></ul><ul><li>Promptly address Manager misconduct. Where confirmed, consider it a serious violation of the Company's most important policies. </li></ul>Element 6: Impose Appropriate Discipline for Policy Violations by Employees and Managers
    47. 47. <ul><li>Timekeeping policies and procedures should be reinforced through available communication means. </li></ul><ul><li>Annual letter to all employees. </li></ul><ul><li>Newsletters. </li></ul><ul><li>Postings. </li></ul><ul><li>Refresher training. </li></ul>Element 7: Periodic Reminders
    48. 48. The Case that Proves the Point <ul><li>Kuebel v. Black & Decker (U.S.) Inc.* </li></ul><ul><li>Court dismissed hourly employee’s claim of unpaid wages and overtime (and potential class claims), premised on an allegation that he was discouraged from reporting all his time worked. </li></ul><ul><li>In dismissing claims, Court cited with favor Black & Decker’s compliance efforts including written wage and hour and work time reporting policies ( including wage-related polices in its code of ethics ), an anti-retaliation policy for wage-related complaints, and an anonymous hotline for reporting wage violations. </li></ul><ul><ul><ul><ul><li>“ Live the Code” program which included written directives to employees to keep accurate business records, like time cards, and to report any instructions to the contrary. </li></ul></ul></ul></ul><ul><li>*2010 U.S. Dist LEXIS 46533 (WDNY 5/12/10) {NOTE: case now on appeal to Second Circuit.) </li></ul>
    49. 49. A Question for You… If your organization may be interested in purchasing ELT’s online training solutions, and you would like an ELT Sales Executive to follow up with you, type &quot;YES&quot; in the box below.
    50. 50. <ul><li>Interested in our solutions? </li></ul><ul><li>[email_address] </li></ul><ul><li>www.elt-inc.com │ 877.358.4621 </li></ul><ul><li> Additional substantive questions? </li></ul><ul><li>[email_address] </li></ul><ul><li>[email_address] </li></ul>