The U.S. Department of Labor (DOL) is getting tough on wage and hour violations, and you don't want them to be the ones doing your FLSA audit. Far better to find and fix problems—before DOL starts going over your books.

It shouldn’t be hard to calculate pay and overtime, yet employers are losing big–dollar wage and hour lawsuits with alarming frequency. What's happening and how can you make sure that you are not next?

Why the Upswing in Wage and Hour Lawsuits?

FLSA (Fair Labor Standards Act) lawsuits are on the increase, and there are three main reasons why.

1. Wage and hour seems simple, but it actually has a lot of grey areas, like the dividing line between exempt and nonexempt, donning and doffing time, and non-exempt travel time, just to mention a few.

2. The U.S. Department of Labor (DOL) is pursuing wage and hour cases aggressively, believing that low wage earners are least able to fight for their rights. FLSA actions have now replaced discrimination as the agency’s prime enforcement target. (Note to readers: they are finding a lot of violations.)

3. Attorneys are jumping from other practice areas into wage and hour because they see easy pickings. That means a lot of attorneys are out there trolling for new clients—your employees.

The big attraction is that wage and hour suits are relatively easy to bring and, because of the number of people involved, they can often be filed as class actions that involve huge amounts of money. Also, FLSA case defendants often settle, because employers know that juries tend to feel sympathy around the subject of paychecks.

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What can you do? Experts agree that regular wage and hour audits are your best bet for staying out of trouble.

Why Audit?

Why should you audit your wage and hour practices? Attorneys Victoria Donati and Jason Kim, both with the Chicago based law firm of Meal, Gerber & Eisenberg LLP, answered the question recently in Professional Roofing magazine. They say the benefits of a wage and hour audit are:

  • Reduces likelihood of a suit. Auditing reduces lawsuits because it allows you to identify and correct problems before they spiral into official complaints or visits to an attorney.
  • Ensures that you are treating employees fairly. The audit may uncover unintentional inconsistencies or compliance issues that you were not aware of.
  • Avoids double damages. FLSA lawsuits will net double damages if the company can’t show that it acted in good faith. Regular auditing is a primary indicator of good faith.
  • Keeps you abreast of legal complexities and changes. Preparing for your audit will push you to examine recent changes in the laws and regulations and to assess how they apply to your organization and its practices.
  • Helps prepare for a DOL investigation and audit. You’ll have data available and will be able to spot potential weak spots and prepare to be questioned about them. In many cases, you will be able to tell the investigator, "We've already corrected that problem."

All the checklists you need to avoid overtime payment errors are in BLR’s award-winning FLSA Wage & Hour Self-Audit Guide. Try it for 30 days. Click here

How Often Should You Audit?

In a perfect world, you would conduct thorough audits annually, Donati and Kim say. However, they recognize that's not possible for many organizations, so they recommend, at least, a partial audit when “red-flag” conditions occur, such as:

  • Complaints about pay practices
  • Significant reorganization, modification, or restructuring of job classifications
  • Significant changes in employees’ duties
  • Significant increases in hours worked by employees
  • Significant changes in employees’ pay
  • Changes in federal or state law or in DOL regulations
  • FLSA settlements or lawsuits when they relate to your business practices, and especially if they are prominently publicized
  • Union organizing campaigns, since unions often use wage and hour lawsuits as part of their organizing tactics.

What should be included in your audit? We’ll discuss that in the next Advisor, and offer a tip about the one factor you must have in place before doing an audit -- and why not having it could be worse than not auditing at all!

Wage and Hour Errors?
They’re easy to make when you don’t clearly know the rules of the Fair Labor Standards Act (FLSA). Audit your compliance with BLR’s award-winning FLSA Wage & Hour Self-Audit Guide. All the information and checklists you need to keep FLSA trouble away. Try it at no cost for 30 days! Click here for info.