By Patricia M. Trainor, J.D.
BLR Legal Editor

In yesterday's Advisor, attorney Marc L. Jacuzzi pointed to the surge in wage and hour lawsuits and gave tips for preventive audits. Today, we'll finish his tips and take a look at a unique HR audit system.

Jacuzzi, a partner in the law firm of Simpson, Garrity, Innes, Jacuzzi, P.C., delivered his wage and hour tips at the 2009 National Employment Law Update in Las Vegas, sponsored by BLR®.

[Go here for Jacuzzi's tips for exempt employees.]

For Nonexempt Employees

Consider these factors when reviewing nonexempt employees:

Time worked. Are all hours worked recorded properly? Make sure that employees are recording start times, time out for meals, time in from meals, and time out at the end of the day. Review your procedures for maintaining time records.

Breaks and lunch. Are meal and break periods carefully observed and recorded? These are not required by the Fair Labor Standards Act (FLSA), but many states require employers to provide breaks and meal periods. (Editor's tip: Be wary of timekeeping systems that automatically calculate lunch hours.)

Overtime. Is overtime being recorded and properly paid? Remember that overtime is calculated using the "regular rate" of pay, which includes nondiscretionary bonuses.

Using the "hope" system to avoid lawsuits? (We "hope" we're doing it right.) Be sure! Check out every facet of your HR program with BLR's unique checklist-based audit program. Click here to try HR Audit Checklists on us for 30 days!

Other Wage and Hour Checks

Benefits. Are you properly accruing vacation? Generally, vacation accrual can be capped, but not forfeited. Usually, accrued vacation or paid time off (PTO) is considered wages. However, this area is governed by state law and rules can vary.

Final Payment. Are you observing all final payment rules? The timing and notice of final pay are also governed by state law. Whether deductions are allowed from nonexempt employee's final pay for breakage or failure to return equipment is also an area governed by state law.

Finally, Jacuzzi suggests some proactive steps employers can take to improve and/or ensure compliance with wage and hour laws. These steps include:

  • Appointing a compliance manager, usually the HR manager.
  • Adopting a system for auditing violations and showing overtime payments.
  • Establishing a system for employees to report violations.
  • Training associates on proper timekeeping.
  • Educating managers on the law, especially the need for nonexempt employees to record time in and time out.
  • Making managers "own" the problem. Institute serious consequences for managers if their groups are not properly recording time, such as a demotion or a cut in pay.
  • Revising and/or updating handbooks and policies.
  • Having cash register or e-mail reminders about timekeeping compliance.
  • Requiring nonexempt employees to sign a statement on their time sheets verifying that they have worked only the hours recorded.

Of course, wage and hour is only one of many HR activities in which the threat of expensive lawsuits is ever present. But for all the activities, the first step is the same—an audit. It's the only surefire way to identify problems early and correct them before they turn into expensive lawsuits.

Experts recommend an annual audit, but as Jacuzzi suggests, maybe next week would be a better time to start. In either case, to do a good audit, you need audit checklists, and there's good news: BLR's editors have already written them—for all of the most difficult HR challenges you face.

Find problems before the feds do. HR Audit Checklists ensures that you have a chance to fix problems before government agents or employees' attorneys get their chance. Try the program at no cost or risk.

Why Checklists?

Why are checklists so great? Because they're completely impersonal, and they force you to jump through all the necessary hoops, one by one. They also ensure consistency in how operations are conducted. And that's vital in HR, where it's all too easy to land in court if you discriminate in how you treat one employee over another.

HR Audit Checklists compels thoroughness. For example, it contains checklists on Preemployment Inquiries: What You Can and Can’t Ask, and also on Preventing Discrimination Against Individuals with Disabilities. You'd likely never think of all those possible trouble areas without a checklist, but with it, just scan down the list and instantly see where you might get tripped up.

In fact, housed in the HR Audit Checklists binder are dozens of extensive lists organized into reproducible packets, for easy distribution to line managers and supervisors. There's a separate packet for each of the following areas:

  • Staffing and training (incorporating Equal Employment Opportunity in recruiting and hiring, including immigration issues)
  • HR administration (including communications, handbook content, and recordkeeping)
  • Health and safety (including OSHA responsibilities)
  • Benefits and leave (including health cost containment, COBRA, FMLA, workers' compensation, and several areas of leave)
  • Compensation (payroll and the FLSA)
  • Performance and termination (appraisals, discipline, and termination)

HR Audit Checklists is available to HR Daily Advisor readers for a no-cost, no-risk evaluation in your office for up to 30 days. Visit HR Audit Checklists and we'll be happy to arrange it.