By Ann Holden Kendell
Our
practice group has been sounding the alarm regarding wage and hour issues –
specifically highlighting “industry practices” and bonus plans. The Fair Labor Standards Act (FLSA) and its
attendant regulations are often an area of serious confusion for employers. Additionally, when employers in the same
industry compare notes and feel comforted that “everyone” is using the same pay
practice – this is often something that acts as a “red flag” to us as
practitioners. We recently received
confirmation about our concerns on these issues.
On
July 23, 2014, the U.S. Education and the Workforce Committee held a hearing on
“Improving the Federal Wage and Hour Regulatory Structure” to discuss the
report issued by the Government Accountability Office (GAO) outlining the
growth of FLSA-related litigation and the need for improving compliance
guidance. The GAO reports that
improvement in guidance “could increase the efficiency and effectiveness of
[the department’s] efforts to help employers voluntarily comply with the law.”
In
the testimony provided by Dr. Andrew Sherrill, Director, Education, Workforce
and Income Security, the following chart was provided showing FLSA lawsuits
filed in federal district court in fiscal year 2012 by type:
Director
Sherrill also provided the chart below showing FLSA lawsuits filed in this
same timeframe by type of allegation:
[NOTE: The percentages in the chart do
not add to 100% as FLSA lawsuits may contain multiple allegations. Also, “Other FLSA allegations” include, but
are not limited to, recordkeeping violations, failure to post FLSA information
and violations related to tipped workers.]
Director
Sherrill further noted that the DOL targets industries for enforcement where
enforcement data shows there is a higher likelihood of FLSA violations. (Director Sherrill’s testimony: http://edworkforce.house.gov/uploadedfiles/sherrill_testimony.pdf).
The
testimony at the hearing also included information about the aggressiveness in enforcement by
the Wage and Hour Division of the Department of Labor (WHD) with regard to
bonuses and the failure by employers to pay additional overtime on the
increased “regular rate” due to the payment of a bonus. Additionally, it was noted that “WHD will
challenge almost any bonus as non-discretionary,” therefore any reliance an
employer may have on the discretionary bonus language contained in the
regulations will likely be misplaced.
(DeCamp testimony, http://edworkforce.house.gov/uploadedfiles/decamp_testimony.pdf).
What this means for Iowa
employers – Employers
should ensure that workers are characterized correctly: employee v. independent
contractor; exempt v. non-exempt. Also,
all hours of work need to be recorded and paid at the right rate. Further, bonus programs should be reviewed to
determine whether bonus payments increase the regular rate (thereby increasing the
amount of overtime due). In addition to
making sure all these items are being handled correctly “in practice,” written
policies notifying employees of the need to record all time worked and
encouraging employees to identify and report mistakes or other pay issues can
provide valuable information to the employer to correct problems, as well as
legal defenses.
If you have questions about employment
policies and practices regarding wage and hour issues, you should contact your
BrownWinick employment law attorney.
For Additional information:
For the
“Highlights” of the GAO report: http://www.gao.gov/products/GAO-14-69
For the GAO
report: http://www.gao.gov/assets/660/659773.pdf
For information
on the hearing: http://edworkforce.house.gov/calendar/eventsingle.aspx?EventID=387870
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