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November 04, 2010
Do You Comply with Wage & Hour Laws?

Employers can have tons of headaches with the Family and Medical Leave Act (FMLA), but more organizations get in trouble because of faulty compliance with the Fair Labor Standards Act (FLSA) than because of FMLA. That’s probably because FLSA is so poorly understood.

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DOL is focused on wage & hour issues. In a recent webcast sponsored by ELT, the training arm of nationwide law firm Littler Mendelson, attorneys pointed to some alarming statistics: Class action lawsuits on wage & hour issues in 2009 were 83 percent of all class action suits. The Obama administration is putting people and funding behind Department of Labor (DOL) enforcement of these issues, as well as educating employees through a program called “We Can Help.”

But do you want to see how extensive these efforts are? Go to DOL's Enforcement Data page. Click on WHD (for Wage and Hour Division), and then on the state(s) in which you operate. Look how many employers have been investigated and how many employees have been involved.

Attorneys Scott Schneider of ELT and Angelo Spinola of Littler noted especially that DOL has focused on healthcare organizations and sought out such violations as interrupted or missed meal breaks and employers’ failure to aggregate hours worked. Spinola commented that Littler used to advise clients to “settle” with DOL—accept responsibility, pay damages, and avoid large attorney fees. But that is not the firm’s advice now; DOL used to strike a relatively neutral stance, but it’s become very employee-friendly.

What are the danger areas? According to Schneider and Spinola, there are three main focus areas for DOL right now:

  1. Whether workers are employees or independent contractors
  2. Whether workers are paid employees or unpaid interns
  3. Whether workers are exempt or nonexempt.

To avoid these risks, employers should conduct a self-audit. Don’t wait until after you’re sued to change your practices, the speakers advised; doing so will look like an admission of guilt. The Internal Revenue Service has a 20-factor test regarding contractors, and DOL has its own test. The core principle in both is the degree of control the employer has over where and how a job is performed. If you’re supplying an office and all resources to a worker, and directing the work, the person is likely not a contractor.

DOL also has extensive rules for the roles of interns if they are unpaid, including that they should not be doing work that employees do and that their activities should give them training rather than benefit the employer. And, the administrative exemption can be a quagmire: The speakers recommended that when your audit has identified those of your exemptions that are close calls, you run them past your local employment lawyer.

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