Wage & Hour Defense Blog : Wage & Hour Lawyer & Attorney : Epstein Becker Green Law Firm : DOL Enforcement, FLSA Coverage

By: Kara M. Maciel

Earlier this month, we released our Wage and Hour Division Investigation Checklist for employers and have received a lot of great feedback with additional questions. Following up on that feedback, we will be regularly posting FAQs as a regular feature of our Wage & Hour Defense Blog.

In this post, we address a common issue that many employers are facing in light of increased government enforcement at the state and federal level from the Department of Labor.

QUESTION: “I am aware that my industry is being targeted by the DOL for audits and several of my competitors in the area are facing wage and hour investigations.  What should I be doing now to proactively prepare my company in the event we are next for an audit?”

ANSWER:  Even though your company may not be in the midst of an investigation, there are still several action items that you can implement to place your company is the best possible position to defend against any DOL investigation.  For example:

• Check current 1099’s as well as all 1099’s going back several years and review the actual job duties of those persons paid as independent contractors to verify that they were not, in fact, employees.
•  Examine all written job descriptions to ensure that they: (i) accurately reflect the work done, (ii) have been updated where necessary, and (iii) indeed justify the applicable exemptions.
• Review time keeping systems to ensure that non-exempt employees are being paid for all work performed, including work pre- or post-shift and during meal breaks
• Ensure that required payroll records and written policies and procedures are current, accurate, and compliant.

Training staff is another key component of protecting your company from costly wage and hour claims. Not only could all managers be familiar with the FLSA and state wage and hour laws, but all employees should understand their role in proper record keeping and overtime. Key managers and personnel should be aware of the DOL’s inspection rights and what the DOL can and cannot do while on your property.

Finally, developing a response team with legal counsel is critical to being prepared if an inspection official knocks on your door unannounced. The response team should be armed with information and protocols so they know how to address the DOL’s subpoenas, questions, document requests, and other investigative demands.

In subsequent FAQs, we will discuss in more detail who should participate in a response team and what information they need to have in the event of an unscheduled DOL audit. But, in the meantime, regular internal reviews and audits of your wage and hour practices and documentation is key to protecting against costly exposure from a government investigation.

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Be sure to check out our Wage and Hour Division Investigation Checklist for more helpful tips and advice about preparing for and managing a Wage Hour Inspection.

By Douglas Weiner and Kara Maciel

“There’s a new sheriff in town.”  With those words in 2009, Secretary Hilda Solis initiated a policy at the Department of Labor that emphasized increased investigations and prosecutions of violators rather than the prior administration’s emphasis on providing compliance assistance.

Her departure – announced yesterday – is unlikely, however, to have much effect on the Department’s current aggressive enforcement policy, as the top enforcement officer of the Department remains Solicitor of Labor M. Patricia Smith.  Solicitor Smith was previously the New York State Commissioner of Labor, where she introduced task force investigations and procedures for government agencies to share information to enhance enforcement initiatives.  Under Solicitor Smith’s leadership, the Department has implemented many of these same techniques and hired additional investigators and attorneys to strengthen the Department’s enforcement of the Fair Labor Standards Act, and related wage and hour statutes. 

We expect enforcement to remain a top priority of the Department under the second term of the Obama Administration no matter who is appointed to replace Secretary Solis.  Accordingly, with the start of the new year, employers would be wise to take the time to closely examine payroll policies and practices, including exempt and independent contractor classifications, meal break deductions, and overtime calculations. Our advice is to be proactive with a self-audit that is protected by the attorney-client privilege and correct inadvertent errors before a government investigator or plaintiffs’ attorney comes knocking at your door. 

By Evan J. Spelfogel

In recent years employees have asserted claims for time allegedly worked away from their normal worksites, on their Blackberries, iPhones or personal home computers.  Until now, employers have been faced with the nearly impossible task of proving that their employees did not perform the alleged work.  The US Department of Labor and plaintiffs’ attorneys have taken advantage of the well-established obligation of employers to make and maintain accurate records of the hours worked by their non-exempt employees, and to pay for all work “suffered or permitted” to be performed.

Now, the United States Court of Appeals for the Tenth Circuit has issued a decision holding that an employer is shielded from an employee’s FLSA overtime claim where it has an automated time keeping system that the employee failed to utilize, to report the hours allegedly worked at home.  Frank Brown v. ScriptPro LLC, Case No. 11-3293 (10th Cir. Nov. 27, 2012).

The three judge panel held that a plaintiff has the burden of proving that he performed work for which he was not properly compensated, citing earlier Tenth Circuit and US Supreme Court precedent:  Baker v. Barnard Construction Co., Inc., 146 F 3d. 214, 220 (10th Cir. 1998); Anderson v. Mt. Clements Pottery Co., 328 US 680, 687 (1946).  It was plaintiff’s burden, the Tenth Circuit held, to produce evidence to show the actual amount and extent of his work.

Here, the Court held, plaintiff had failed to set forth the specific facts showing there was a genuine issue for trial, and granted the company’s summary judgment motion. 

In so doing, the Tenth Circuit acknowledged that plaintiff had produced to the district court in opposition to the company’s motion for summary judgment, “uncontroverted evidence that he actually worked overtime.”  This evidence, the Appeals Court said, included plaintiffs own testimony, his wife’s testimony and certain discussions between plaintiff and one of his supervisors concerning plaintiff’s work at home. 

However, plaintiff failed to show the actual amount of overtime by any justifiable or reasonable inference. 

The key to the Tenth Circuit’s decision was that ScriptPro kept accurate records of employees’ time worked, and had installed an automated recordkeeping system that allowed employees to access the timekeeping system from home and enter their daily time onto that system.  The burden on individual employees to show the amount of overtime worked is only relaxed, the Tenth Circuit held, where an employer fails to keep accurate records. 

In this case, the Court held, there was no failure by ScriptPro to keep accurate records, only a failure by plaintiff to comply with ScriptPro’s timekeeping system.  In summary, the Court concluded, where the employee fails to report time to the employer through the established overtime recordkeeping system, the failure by an employer to pay overtime is not an FLSA violation. 

In view of the Tenth Circuit’s ScriptPro decision, employers should review their recordkeeping and timekeeping systems, and may be well advised to implement systems that allow employees to enter asserted home work time into the systems directly.  Of course, this will require monitoring by employers to ensure employee accuracy and honesty in time reporting. 

Many employers utilize employee time recording systems for employees who spend significant amounts of their workdays away from a centralized jobsite.  Such a system could be easily be adapted to include time reporting for employees who legitimately spend time working from home or at other remote jobsite locations. 

The remedy historically available to employers where employees assert they are working unauthorized overtime hours (against company policy or in direct and flagrant disregard of orders from supervisors) has been to discipline the employee and, if necessary, terminate the employment relationship – but the employer has always been required to pay for the asserted overtime work. 

The Tenth Circuit’s ScriptPro decision is a wakeup call to employers to review their timekeeping systems and, where appropriate, to implement new techniques that would apply to employees allegedly working at home.

Wage and hour investigations and class action lawsuits continue to be a potentially serious problem for many employers, resulting in an abundance of new cases filed and many large settlements procured.  In addition, in September 2011, under the guidance of the Obama Administration, the Department of Labor and IRS announced an effort to coordinate with each other to address misclassification of employees as independent contractors, which is resulting in additional investigations, fines, and/or legal liability levied on an employer.

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By Amy Traub and Desiree Busching

Like the fashions in the magazines on which they work and the blockbuster movies for which they assist in production, unpaid interns are becoming one of the newest, hottest trends— the new “it” in class action litigation. As we previously advised, there has been an increased focus on unpaid interns in the legal arena, as evidenced by complaints filed by former unpaid interns in September 2011 against Fox Searchlight Pictures, Inc. and in February 2012 against Hearst Corporation. In those lawsuits, unpaid interns working on the hit movie “Black Swan” and at Harper’s Bazaar magazine, respectively, alleged that their high-profile employers violated federal and state wage-and-hour laws by failing to pay them for work they claim was more aptly suited for paid employees.

The newest case to hit the scene on this issue has been filed by Lucy Bickerton, a former unpaid intern of “The Charlie Rose Show” on PBS. In her March 14, 2012 complaint, Bickerton alleges that she worked for the show in 2007 for approximately 25 hours per week and that the show and its host had her performing “productive work”—work for which she claims she, and other interns like her, should have been paid.

According to a press release issued by the plaintiffs’ firm that has filed all three of these prominent unpaid intern cases, “[s]ince filing a lawsuit on behalf of unpaid Fox [Searchlight Pictures, Inc.] interns late last year, our office has received numerous calls from other current and former interns who were not paid for the productive work they performed. This [Bickerton] lawsuit should send a clear message to employers that the practice of classifying employees as ‘interns’ to avoid paying wages runs afoul of federal and state wage and hour laws.”

The clear message received is that this firm is on the offensive, and others will undoubtedly soon follow suit. For employers who have checked their unpaid internship programs to ensure that they are in compliance with the tests utilized by both federal and state agencies and courts in analyzing whether individuals qualify as “interns,” it is time to double-check. With the attention this issue is seeing in the media and before the courts, it is clear that if misclassified unpaid interns are not paid now, employers may just be paying later.

Wage Hour laws and regulations are complex, non-intuitive, and constantly changing.  Mistakes in wage and salary administration have led to class actions resulting in six and seven figure recoveries against the most sophisticated employers - banks and major industrial giants as well as smaller employers without in-house legal and high level Human Resources officials.  Peter M. Panken, Lauri Rasnick and Douglas Weiner in our New York Office have recently authored an article in conjunction with a major national Continuing Legal Education program in Washington entitled: “ An Overview of Wage Hour Laws and Litigation: Avoiding the Pitfalls of Back Wage Claims” which outlines the major traps employers can fall into and outlines ways to avoid the problems before litigation begins.

By:  Kara M. Maciel and Casey Cosentino

We were recently asked by a client to provide guidance on the wage and hour issues associated with company-provided on-line training programs for non-exempt employees.  Questions were raised as to when the training is "voluntary" and whether the time must be compensated if the training is completed at home using a personal computer.  The answer stems from federal wage and hour law, which provides that such time is likely compensable for non-exempt employees.     

The Fair Labor Standards Act requires employers to compensate employees for all hours worked regardless if the work performed is on or off the job site. Consequently, most time employees spend in training programs is compensable hours worked. Attending training is not compensable, however, if all of the following four criteria are met:

1. Attendance is outside of the employee’s regular working hours;

2. Attendance is in fact voluntary;

3. The training is not directly related to the employee’s job; and

4. The employee does not perform any productive work during such attendance.

Typically, it is the second and third factors that generate most of the wage and hour issues associated with employee training.      

First, training is not voluntary when it is required by the employer, or the employee understands or is led to believe that non-attendance would negatively affect his/her present working conditions or the continuance of his/her employment. Therefore, for attendance to be voluntary, employers must not directly or indirectly pressure employees to attend training programs, or impose employment-related consequences for non-attendance.  

Second, training is not directly related to an employee’s job when the training is designed to prepare the employee for advancement or promotion.  Conversely, training intended to improve employees’ efficiency and/or effectiveness in their current jobs is directly related to the employees’ job.

If an employer offers online training outside paid working hours and do not want to pay non-exempt employees for their time spent on the training, employers should do the following:  

·         Restrict employees’ participation in the training to non-working hours only;

·         Do not mandate employees’ participate, explicitly or implicitly;

·         Do not impose adverse consequences for employees non-participation;

·          Do not condition employees’ continued employment on completing the training;

·         Analyze the training to ensure it is designed to qualify employees for a new job or promotion (and is not intended to enhance employees’ current job skills); and

·         Ensure the employees do not perform other work during the training.

If all of the above factors are not satisfied, then employers must compensate their employees for any time spent completing the online training.  Because the requirements for providing non-compensable training are particular and precise, and the cost of non-compliance can be costly under the FSLA for unpaid time and/or missed overtime, the conservative wage and hour approach is to offer online training during paid working hours.    

By Betsy Johnson

President Obama just celebrated his first year in office and his Administration has been busy! Employers of all sizes are starting to see the effects of the Obama Administration’s workplace agenda; especially at the Department of Labor (DOL). The watchword for all employers in the wage/hour arena for 2010 is “compliance.”  The DOL is slated to receive a substantial budget increase this year and it is going on a hiring spree to increase the number of investigators and enforcement personnel. 

The DOL’s agenda includes increased audit and enforcement proceedings related to “off the clock” work and the misclassification of employees as “exempt” under the Fair Labor Standards Act (FLSA). In addition, the DOL (in cooperation with the IRS) will focus its audit and enforcement proceeding on employers who misclassify individuals as independent contractors.  Now, more than ever, employers must have programs in place to ensure compliance with the myriad of wage/hour laws and regulations, and implement a clear strategy for handling government audits and enforcement actions. While the thought of conducting a comprehensive payroll practices compliance audit can be daunting, employers can efficiently conduct “spot” audits of particular areas where they may be vulnerable. 

As an initial matter, employers should determine who will conduct the audits. Utilizing internal resources such as the Human Resources and/or Payroll Departments and/or the company’s General Counsel will help keep the costs down. However, using internal resources may not guarantee that the results will be protected by the attorney-client privilege should the company become involved in litigation regarding the subject matter of the audit. As such, employers may wish to seek assistance of outside counsel to conduct the audit and analyze the results.

The purpose of these “spot” audits is to: 1) identify areas of non-compliance; 2) identify policies, procedures and/or practices that can be improved; 3) develop a plan for improvement; and 4) implement the plan. The areas where most employers are vulnerable to government actions and employee claims in the wage/hour area are:

•         Overtime calculation and payment

•         Off the clock work

•         “Donning and doffing” issues

•         Classification of employees (exempt v. non-exempt)

•         Time keeping

•         Recordkeeping

•         Proper classification of independent contractors

In planning a “spot” audit, employers should determine: 1) the scope and depth of the audit; 2) what data needs to be collected; 3) what documents need to be reviewed; 4) which managers should be interviewed to obtain relevant information; and 5) whether the employees should be surveyed for relevant information. On a cautionary note, if the employer believes there may be too many “skeletons in the closet” that may be exposed in an audit, consideration should be given to retaining outside counsel to assist in the audit so that the process and the results can be protected by the attorney-client privilege.

Finally, employers must decide what to do with the results of the audit. Some things to consider are: 1) who will be apprised of the results and how (written or verbal); 2) will the person who conducted the audit make recommendations regarding problem areas; 3) what, if anything, is going to be done about any problems; 4) how should any changes be implemented (a “spin doctor” may be needed); and 5) how is the employer going to address employee questions and challenges.

In the short-term, the exercise of conducting internal audits may be viewed as a distraction from an employer’s business purpose. In the long run, however, getting the company’s “house in order” before a government agency knocks on the door will save time, attorneys’ fees and the intangible costs of being embroiled in administrative or civil litigation. Remember the old adage: “An ounce of prevention is worth a pound of cure.”

A number of recent lawsuits illustrate how changing workplace technology can form the basis for creative FLSA lawsuits.  A wave of claims have been brought against Fortune 500 companies alleging that non-exempt employees have not been paid for "off the clock "duties such as logging into computer systems and responding to email and text messages after work hours and on weekends.

Putting aside the merits of these cases, this trend illustrates the legal implications of introducing technology into the workplace, especially when used by non exempt employees to work remotely.  These cases are a good reminder of why every company should make sure that its payroll practices keep up with the fast pace of technological change, and capture all work related activities, whether they occur at work, at home, or via new channels of communication like blackberries or text messaging.

Some practical tips to minimize these types of claims include:

• Implement a clear "off the clock" policy requiring employees to report all work time regardless of where and when it occurs.
• Train supervisors to never request an employee to work off the clock.
• If issuing blackberries or remote access technology to non-exempt employees, consider requirement for them to sign an acknowledgment form noting the obligation to report all work time.
• If non-exempt employees log in and out of work on their computers, consider allowing employees to manually input time instead of automatic time stamping (which will eliminate claims for lost time due to lengthy start ups or other required steps before accessing payroll software).

Staying one step ahead of creative FLSA attorneys is no doubt difficult in today's ever changing workplace.  For that reason, we strongly recommend annual audits of payroll practices to ensure that polices and procedures are updated to adapt to technological or other changes which might have significant wage and hour implications.

Times are tough out there.  Company budgets are being slashed, along with the number of employees and available hours.  Many supervisors suddenly find their departments doing the same amount of work with half the people.  On the overtime front, this is a recipe for a disaster.

Under these conditions, many supervisors are trapped with little ability to approve overtime.  Hard working employees may not even request approval for overtime knowing that it will be viewed as an admission they cannot perform their job at the expected level (and thus place them at the top of the list for the next round of layoffs).   Overtime therefore goes underground - a tacit understanding exists between management and employees that no one will mention how the work gets done as long as it gets done and everyone keeps their jobs.

Of course, the above scenario is unlawful, and whatever the company saves in wages will be dwarfed by attorneys fees and damages in the class action lawsuit surely to follow.  For that reason, now is the time to remind all managers and supervisors of the importance of the company's off the clock policy.   Looking the other way to save in the short run is not a smart business move, and will inevitably come home to roost in the form of a disgruntled employee or ex-employee who reveals the practice.