As most employers know, the federal wage/hour law under the Fair Labor Standards Act (“FLSA”) includes the requirement to pay “non-exempt” employees time and one half of their “regular rate” for work in excess of 40 hours in a work week. The U.S. Department of Labor (“DOL”) is charged with enforcing the FLSA through its Wage and Hour Division. (It is currently engaged in a multi-year ongoing enforcement initiative focused on vendors performing services for the fracking and pipeline industry that has recovered nearly $200,000 in wages in that industry alone.) Prudent employers will want to be diligent to ensure compliance with wage and hour matters in light of the DOL’s willingness to audit employers.
How Can You Protect Yourself from a DOL Audit?
Employers should perform an internal audit at least once a year, addressing the following topics:
- Record-keeping: Computer-based payroll systems will contain the information necessary to meet most DOL requirements. Time worked and bonus calculation records should be kept as part of the pay records, which should be kept for a minimum of three years.
- Employee vs. Independent Contractor: The distinction between an employee and an independent contractor is not governed solely by how the parties title themselves; the DOL has specific tests to determine who is an employee and who is an independent contractor and often focus on who controls the manner of work. Employers using independent contractors should be careful to ensure that they are not directing, or only minimally directing, how and when independent contractors are performing their duties.
- Exempt vs. Non-Exempt: The exemptions from the overtime requirements which are often at issue in the shale industry include whether the employee meets the criteria to be exempt under the “salaried basis,” “professional,” “executive” or “administrative” categories. Determining if the employee meets the exemption criteria can be extremely fact-intensive.
- Compensable Time: A major area of litigation in recent years has centered on what should be considered to be time worked and therefore compensable and count toward overtime hours. This includes the use of cell phones and computers outside of normal working hours. Travel time can also be an issue in circumstances where the employer provides a take-home vehicle. The employer should have a written policy on the use of take-home vehicles to insure that the commute from home to work is not compensable.
Be Aware That Noncompliance with the FLSA Can Result In Considerable Costs!
The FLSA has provisions for doubling the amount of unpaid wages and overtime, attorney fees and for a special form of class action. When current or former employees hire private counsel to prosecute FLSA claims, the employer can expect a class action suit for double damages going back three years under the FLSA, as well as a companion claim of violations of the applicable state wage payment law and state overtime law. State laws are often used because some state law provisions are actually more favorable to the employee than the FLSA. Such is the case in matters including the use of class actions, the scope of exemptions and the calculation of overtime.