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A Guide to Wage & Hour Compliance in 2008: Cutting-Edge Strategies January 30, 2008 Presented by: Association of Corporate Counsel www. acc. com
Page 3 Shanti Atkins, Esq. President & CEO of ELT. Specialist in online ethics and legal compliance training. Advises clients across multiple industries and of all sizes about strategic risk management and compliance initiatives.
Page 4 Tammy D. Mc. Cutchen Shareholder, Littler Mendelson. Formerly, an Administrator of the Wage and Hour Division of the U. S. Department of Labor (200104). Currently representing management in litigation and employment related matters with an emphasis on wage and hour. Routinely advises employers on legal compliance and litigation prevention measures relating to wage and hour. Assists clients to implement compliance programs that manage wage and hour risk.
Page 5 Who We Are Created by Littler Mendelson in 1996 The nation’s largest employment law firm 1 st to Launch Online Compliance Solution
Page 6 Used by more than 1, 000 organizations More than 2, 000 employees and managers trained
Page 7 Agenda 1. Uncovering The Greatest Risks ü ü 2. Misclassification Off-the-Clock Work Avoiding Wage and Hour Liability ü ü ü Building an effective compliance program Conducting Internal Audits Changing your risk profile with training
Page 8 A Question for You Are you concerned about potential wage and hour compliance issues for your organization?
Page 9 The State of the Nation FLSA collective actions outnumber all other federal discrimination class actions, combined. Plaintiffs firms specialize in large and lucrative collective actions. Easier to certify class Often few or no defenses Copycat claims are common Multi-million dollar settlements are common. DOL estimates 70% of employers are out of compliance.
Page 10 Getting It Wrong Is Expensive If employer gets it wrong damages can be enormous Up to 3 years of back pay Liquidated damages Attorneys’ fees, Interest, fines Benefit of doubt goes to employee Employer must have good records of hours worked Otherwise, the employee’s word rules the day as to amount of OT worked
Page 11 The Biggest Wage and Hour Risks Today Misclassifying Employees Off-the-Clock Work Meal and rest periods Time shaving Preliminary and postliminary activities
Page 12 Misclassification Claim Challenge to employer’s decision to classify employees as exempt (not eligible for OT) Plaintiff generally alleges that he or she was misclassified and is thus owed overtime pay for all hours worked over 40 In most cases, employer has not kept records of hours worked
Page 13 Most Common Exemptions Executive Administrative Professional Computer Employee Outside Sales Retail Commissioned Sales Interstate Truck Drivers State laws may vary.
Page 14 Targeted Industries Insurance Financial Services Retail/Restaurant Technology Pharmaceutical
Page 15 Financial Service Industry Citigroup: $98 million to misclassified brokers Morgan Stanley: $42. 5 million to financial advisors Merrill Lynch: $37 million to misclassified brokers Countrywide Home Loans: $30 million to account executives
Page 16 Controlling Your Risk Conduct an audit to ensure jobs are classified correctly Keep job descriptions up to date, and have employees confirm accuracy during performance appraisal Centralized review of new and changed jobs by HR/Legal Periodic training for HR/Legal
Page 17 A Question for You Are your employees reporting all hours that they work?
Page 18 Off-the-Clock Work Off-clock work occurs when an employee performs work-related tasks but does not report the time on his or her time record. Both voluntary (employee choice) and involuntary (manager order or suggestion) violate the law
Page 19 Off-the-Clock Work Definition of work: Any activity an employer “suffers or permits, ” even if not requested or authorized. From first principle activity to last principle activity.
Page 20 Targeted Practices Meal and Rest Breaks not provided Interrupted breaks State law varies (CA) Pre- and Post-liminary Activities Donning and doffing Security check-in Pre- or post-shift meetings Checking e-mails Booting up computer Picking up work
Page 21 Liability Looms Large UPS: $87 million for deducting for rest/meal periods employees did not take Albertson’s Inc. : $53. 3 for offthe-clock work Sprint: Thousands of call center employers filed collective action in May 2007 alleging that they were not permitted to record hours worked for pre-shift tasks.
Page 22 Control Your Risk Adopt employment policies “Off-the-clock” policy Payroll integrity policy Overtime policy Rest and meal break policy Be aware of time-clock defaults (e. g. , rounding) Conduct periodic audits of payroll records Provide training to front-line managers and employees Hold managers accountable
Page 23 A Question for You Does your organization have a wage and hour compliance program?
Page 24 Building A Solid Compliance Program Risks are real and potential liability can be devastating Compliance doesn’t happen by accident The laws are complex and often defy common sense Employers must take a proactive and preventative approach
Page 25 Why Establish A Compliance Program To ensure that employees are paid properly. To build an affirmative defense Bar to liability if employer acted in good faith in reliance on any written guidance published by the Wage & Hour Administrator May avoid award of liquidated damages if employer can demonstrate good faith May avoid 3 rd year back wages for willful violations
Page 26 An Effective Compliance Program Wage and Hour Policies Complaint and Investigation Procedures Audits Training
Page 27 An Effective Set of Policies must address all areas of potential wage and hour compliance concerns Policies must be wellpublicized and easy to locate All employees should acknowledge and review policy review on a regular basis. All employees should be trained on key policies
Page 28 Common Wage/Hour Policies Payroll integrity Off-the-Clock Work Overtime policy Meals and rest periods Compensatory time off prohibited On-call/emergency call-back Non-exempt employee travel Paid time off Holidays Vacation PTO Bank
Page 29 A Question for You I am confident that employees at my organization know how to make a wage/hour complaint and that we address such complaints promptly.
Page 30 Implement A Complaint Mechanism An effective and confidential complaint mechanism allows the employer to uncover and correct issues before litigation. Give employees a choice: Ethics or compliance hotline (1 -800 #) Designated HR professional A senior manager Must be well publicized
Page 31 Follow Through: Investigate & Resolve Your organization must follow through on complaints Ensure confidentiality to extent possible Investigate promptly and thoroughly Provide closure to complaining employee Fix problems promptly
Page 32 A Question for You My organization has conducted a wage and hour compliance audit within the past:
Page 33 Before You Start an Audit, Consider: Attorney Involvement Privilege Issues Documentation Back Wages Other Remedial Measures Working with USDOL SOX Issues State Law Issues Your company must be prepared to quickly fix uncovered errors
Page 34 Compliance Areas to Audit Exempt classifications Off-the-clock Regular rate calculations and other pay practice issues (including state law)
Page 35 Exempt Classifications Review documents Job descriptions Performance reviews Compensation analysis Training materials Manuals and guidelines Interview employees Subject-matter-expert managers Incumbents
Page 36 Exempt Classifications Update job description SME manager and incumbents should agree that description is accurate Job shadow if no consensus Legal opinion memoranda
Page 37 Off-the-Clock Work Look at both policies and practices for recording hours worked Clocking in and out Employees working remotely Rounding of time Adjustments to work time Donning and doffing Rest and meal periods Compare time punches with payroll data Compare payroll data with other electronic “touches”
Page 38 Regular Rate Research incentive pay and bonus programs Do you know them all? Are they added to regular rate of pay? Review payroll system programming to ensure pay codes are properly included/excluded from RR
Page 39 Regular Rate Review overtime calculation formulas State law daily OT and DT RR calculated weekly RR for salaried non-exempt Employees paid commissions
Page 40 Other Pay Practices Minimum wage Adjustments to hours worked Automated time-clock rules Meal and rest break practices Deductions from pay Paycheck disclosures Vacation pay Termination pay Record-keeping
Page 41 A Question for You Do you currently provide wage and hour training to your workforce?
Page 42 Train, Train • Most employees and managers don’t know the basic rules or understand them • The best policies are useless if employees don’t understand them. • Training gives your employees the tools they need to become compliance allies.
Page 43 When To Train Should be integrated into employment relationship Should be done regularly to reinforce policies and understanding Employee orientation New manager training When there are new legal developments or policy changes Every 2 years More often for highly specialized compensation jobs
Page 44 Who Should Be Trained Training should be targeted to suit the needs of different employee audiences Managers Employees (non-exempt) Payroll/compensation specialists Employee training should focus on the basics, such as: What are hours worked Rules relating to OT How do I report errors and misconduct? Prohibition against off-clock-work
Page 45 Who Should Be Trained (cont. ) Manager training should focus on Off-clock work Hours worked Meal and rest periods Record keeping and the importance of good records Employee complaint handling Manager misconduct (time shaving and off-clock-work) Reporting misconduct Retaliation
Page 46 Benefits of Training Well-trained employees and managers are less likely to violate the FLSA inadvertently Training helps build a compliance mentality Training can help reduce damage awards and build good faith defense Training can help prevent costly claims from arising in the first place
Page 47 Putting It Back Together Pay attention to trends and recent settlements and verdicts. Stay in tune with what your employees are concerned about when it comes to pay and hours. Listen. Respond to employee concerns immediately and correct all errors. Develop a comprehensive wage and hour compliance program and implement it. Ensure that robust, effective wage and hour training is part of your overall compliance plan.
Questions? satkins@elt-inc. com tmccutchen@littler. com www. elt-inc. com │ 877. 358. 4621
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