Why is now the time to conduct a wage and hour audit at your company? Because now is the time that you are going to get sued, warns attorney Marc L. Jacuzzi.
Jacuzzi attributes the significant increase in Fair Labor Standards Act (FLSA) claims to the fact that so many people are out of work, and the longer they are out work, the more likely they will sue their former employers.
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®.
To illustrate the magnitude of federal FLSA claims, Jacuzzi gave a “snapshot” view of FLSA claims in just one area, the southern district of Florida, which covers only three counties. In 2008, 1,304 FLSA claims were filed in that district court.
Why So Many Claims?
In addition to the fact that the economy has made employees and ex-employees more eager to sue, there’s the incentive for lawyers. They need work, too, and compared to other types of claims (such as sexual harassment or discrimination), FLSA claims are fairly straightforward and easy to prove. (“You didn’t pay overtime” is pretty easy to prove compared to “You fired me because I’m a member of a protected class.”)
As an additional incentive, there is the multiplier effect of class actions. One employee not paid overtime may not seem like so much, but multiply it by 50 or 100 and the amounts involved rise dramatically.
Also, a number of surveys have suggested that most companies are in violation of wage and hour standards in some way or another. Hungry lawyers can poke around until they find the violation and then pounce.
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Conducting Your Audit
Conducting a wage and hour audit will help your company correct any violations and ensure they do not occur in the future, Jacuzzi says. Before conducting an audit, employers should make sure that they are familiar with relevant federal and state law.
For example, keep in mind that your state may require you to pay a higher minimum wage than required by federal law. Additionally, some municipalities have ordinances requiring employers to pay a “living wage” that is higher than either the federal or state minimum wage.
And, while the FLSA requires employers to pay nonexempt employees overtime if they work more than 40 hours in a workweek, some states require overtime pay for time worked in excess of 8 hours on a workday. Finally, employers should be aware of the dual salary and duties tests for the categories of employees who are exempt from minimum wage and overtime laws.
Jacuzzi shared the following checklist for conducting a self-audit:
Exempt Employees
Salary basis. Are the employees paid a fixed amount guaranteed per week and not subject to fluctuation based on quality or quantity of work? (Make sure that the salary is not less than $455 per week.)
Docking. Are you docking the pay of exempt employees on a daily or hourly basis? Examine your company’s docking practices and policies to make sure that you are not docking exempt employees’ pay in a way that would jeopardize the salary basis.
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Duties. Examine how employees spend their time. Do not rely on job descriptions, because it is the actual activities that count. Interview employees about what they do.
If you determine that some exempt employees need to be reclassified as nonexempt, Jacuzzi suggests that you can minimize the risk of a wage and hour lawsuit by putting a positive spin on the reclassification. For example, assure the employee that his or her salary will remain the same.
In tomorrow’s Advisor, we’ll cover more of Jacuzzi’s tips, and we’ll take a look at a unique, ready-to-go set of audit checklists that cover all major HR challenges.