proactive wage and hour compliance strategies

Proactive Wage and Hour Compliance Strategies Leveraging Self-Audits, Effective Policies and Procedures,

and Corrective Measures to Reduce Liability Exposure

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TUESDAY, AUGUST 14, 2012

Presenting a live 90-minute webinar with interactive Q&A

Paul J. Siegel, Partner, Jackson Lewis, Melville, N.Y.

Charles H. Wilson, Member, Cozen O’Connor, Houston

Jonathan T. Hyman, Partner, Kohrman Jackson & Krantz, Cleveland

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FOR LIVE EVENT ONLY

575 Attorneys • 21 Offices

www.cozen.com © 2012 Cozen O’Connor. All Rights Reserved.

Presented by:

Proactive Wage and Hour Compliance Strategies

Charles Wilson 1221 McKinney St., Suite 2900 Houston, Texas 77002 Direct: (713) 750-3117 Main: (832) 214-3900 Email: [email protected] www.cozen.com

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HOUSTON-

http://www.cozen.com/

© 2012 Cozen O’Connor. All Rights Reserved. 575 Attorneys • 21 Offices • www.cozen.com

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Self-Audit Strategies

A. Who should conduct audit?

– Senior Management Involvement

– Human Resources

– In-House Counsel

– Outside Counsel


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B. Areas of Review

– Scope of the audit • Reason for the audit

• Changes in the industry

• Make up of workforce

• State law requirements


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B. Areas of Review

– Scope of the audit • Positions or job categories

• Purpose

• Impact of change in law

• Worksites or Company-wide

• Which employees should be interviewed

• Timing and results may require change in scope


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B. Areas of Review

– Exempt Status

– Independent Contractor Status


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B. Areas of Review

– Calculating Overtime Pay • Regular rate for nonexempt employees

• Straight time

• Fluctuating work week

• Day rate


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B. Areas of Review

– Timekeeping and Payroll Practices • Compensable time

• Off the clock work

• Donning and doffing

• Fair rounding practices

• False time entries

• Who reports time?


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C. Documenting the audit, including work- product and privilege issues.

– What to document • Person conducting the audit

• Context of audit


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– What to document • Intended use of results

• Is audit going to be privileged?


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– Is the Audit Work Product?

– Is the Audit Otherwise Privileged?


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A. Time and Manner of Wage Payment

– Determining amount of back pay

– Current and/or former employees

– Acknowledgements or settlement agreements?

Wage and Hour Policies and Procedures


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B. Employer Classification

– Exempt Status • Applicability of salary basis requirement

– Business owners

– Teachers

– Practicing law

– Computer professionals



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– Exempt Status • Exempt duties

– Administrative duties

– Executive duties

– Professional duties

• How to determine duties – Job descriptions

– Employee interviews or surveys



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– Independent Contractor Status

• Sufficient control factors

• Economic reality factors



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C. Overtime Pay

– Authority to work overtime

– Should you track overtime for exempt employees

– What should overtime policy say

– Handling violations of overtime policy



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Thank you!

Charles H. Wilson Cozen O’Connor, P.C. Board Certified by the Texas Board of Legal Specialization in Labor & Employment Law

Email: [email protected] Direct line: 713-750-3117

Jonathan T. Hyman

Kohrman Jackson & Krantz P.L.L.

Proactive Wage and Hour

Compliance Strategies:

Policies and Procedures August 14, 2012

Commission Payments

• Who is exempt?

• Outside (exempt) vs. Inside (non-exempt).

• Christopher v. SmithKline Beecham Corp.

• Overtime for non-exempt commissions.

• What is the regular rate?

• Calculating the “regular rate” for other than

weekly commissions.

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Bonus Payments • Types of Bonuses Not Included in Regular

Rate.

• Discretionary

• Both as to fact of payment and amount

of payment.

• Gifts, holiday, and special occasion bonus.

• Must be bona fide gift.

• Is it paid with regularity?

• Do amounts vary?

• Calculating the regular rate.

• Deductions for overpayments?

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Recordkeeping 1. Employee’s full name and SSN.

2. Address (including zip code).

3. Birth date, if 18 or younger.

4. Sex and occupation.

5. Time and day of week when workweek

begins.

6. Hours worked each day.

7. Total hours worked each workweek.

8. Basis on which employee’s wages are paid

(“$9 per hour”, “$440 a week”, “piecework”).

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Recordkeeping 9. Regular hourly pay rate.

10. Total daily or weekly straight-time earnings.

11. Total overtime earnings for the workweek.

12. All additions to or deductions from wages.

13. Total wages paid each pay period.

14. Date of payment and the pay period

covered.

Retain payroll records and CBAs for 3 years,

and everything else for 2.

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Meal and Rest Breaks

• Not required by any federal law

(mileage varies under state law)

• Rest period = breaks of 20 minutes or less

• Counts as hours worked and must be

paid.

• Meal period = not hours worked if employee

totally relieved of work duties.

• “Totally relieved” = not required to perform

any active or inactive work duties.

• Predominant benefit test.

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Leave Policies: Deductions 7 Permitted Deductions

1. Exempt employee absent from work for one or

more full days for personal reasons, other than

sickness or disability.

2. Absences of one or more full days for sickness or

disability, if the deduction is made in accordance

with a bona fide plan, policy or practice of

providing compensation for loss of salary

occasioned by such sickness or disability.

3. Offsets for amounts received as jury fees, witness

fees, or military pay.

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Leave Policies: Deductions 7 Permitted Deductions

4. For penalties imposed in good faith for infractions

of safety rules of major significance.

5. For unpaid disciplinary suspensions of one or

more full days imposed in good faith for infractions

of workplace conduct rules imposed pursuant to a

written policy applicable to all employees.

6. For any time not actually worked during the first or

last week of employment.

7. For any time taken as unpaid FMLA leave.

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Leave Policies: Other Issues

• Furloughs and alternative work schedules.

• Salaries, partial pay, and risked exemptions

• Penalties for mistaken deductions.

• Lost exemption applies to all employees in same

job classification.

• Safe harbor for clearly communicated policies.

• Prohibit improper pay deduction.

• Include complaint procedure.

• Reimburse employees for improper deductions.

• Make a good faith effort for future compliance.

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Jonathan T. Hyman

216.736.7226

[email protected]

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Proactive Wage and Hour Compliance Strategies:

Corrective Measures

Paul J. Siegel

Long Island Office

August 14, 2012

Internal Compliance Program

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Compliance Program – Key Components

1. Check for misclassified Independent Contractors;

2. Conduct a review of any “borderline” non-exempt and exempt positions to determine if reclassification is warranted;

3. Review salary levels and identify any current exempt employees who fall below the minimum;

4. Review payroll practices to ensure no improper deductions are taken from exempt employees' salaries;

5. Review written policies relating to deductions for exempt employees’ pay;

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Compliance Program – Key Components

6. Develop, implement and publicize a Safe-

Harbor Deduction Policy;

7. Train personnel regarding deduction policies;

8. Institute a reporting mechanism for employees

to report payroll errors;

9. Review payroll software to make sure overtime

and other calculations are correct;

10. Review timekeeping systems to make sure

hours worked and breaks are accurately

recorded;

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Compliance Program – Key

Components

11. Develop Specific Criteria for Initial

Compensation Recommendations

12. Review Compensation

Recommendations Before Finalizing

Decision

13. Implement or Revise Internal Complaint

Procedures to Specifically Address Pay

Issues

14. Conduct Periodic Statistical Analyses of

Compensation Data

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Voluntary Reclassification

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Refers to reclassification of “exempt” employees as non-

exempt, and also to any change in a potentially unlawful

pay practice, such as calculation of the “regular rate” or

rounding of hours worked;

Can the change be cost neutral?

• Consider the FLSA’s authorized payment methods:

fluctuating workweek, Belo contract, piece rate, fee basis,

multiple rates for multiple work (but beware state law);

• Consider operational changes to come into compliance.

Example – call center “boot time.” Are computer software

and hardware properly upgraded? Do computers need to

be rebooted every day/shift? Is there a “grace period”?


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Have a message for affected

employees regarding the policy change

– even if they will make more money

under the new practice, they may view

any change suspiciously;

Can you answer the $64,000 question:

“Why didn’t I receive overtime before?”

Which leads us to…


Paying Back Wages Voluntarily

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Will the payments raise more questions than they

answer?

What methodology and terms will apply?

•Incumbents versus all affected employees;

•Payment of liquidated damages;

•“Full” relief?;

•Address state law or only FLSA.

Will the employee be asked to sign an agreement

waiving any right? If so, you must consider the

Supervision Problem.


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Historically, FLSA waivers required court or DOL approval to be

valid. Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350

(11th Cir. 1982);

Lynn’s Food has been widely adopted, including in jurisdictions

where wage/hour claims are prevalent, such as NY and CA;

A ray of hope:

Martin v. Spring Break '83 Prods., LLC, 2012 U.S. App. LEXIS

15285 (5th Cir. July 24, 2012)(no supervision required where

bona fide dispute exists, and adversarial process protected

FLSA claimants).

However, your jurisdiction may require supervision, and absent

a litigation, DOL may be the only option.


Seeking “Supervision” from DOL

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Should I self-report to DOL?

• It’s better than dealing with a plaintiffs’

attorney

• DOL will usually require:

2 years of backpay

Overtime premium based on

additional half-time, barring unusual

circumstances

Permanent injunction (for mandatory

settlement)

Working With the USDOL

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• DOL usually does not ask for:

Third year of backpay

Liquidated damages (unless matter

goes to contested litigation)

Interest

Overtime premium based on full

additional time and a half

• Better for employee relations


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How do I ensure that claims are released?

• Complaint / consent decree

Right to file private litigation “shall

terminate upon the filing of a

complaint by the Secretary”

• Supervision of backpay

An employee’s agreement to accept

backpay under DOL’s supervision

“shall upon payment in full constitute

a waiver by such employee”


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• Will DOL provide WH-58? WH-56?

• Again, private releases of FLSA claims

are generally unenforceable

• Does resolving FLSA issues protect me

from claims under state law?

• Should I consider working with state

labor departments to resolve issues?


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Paul J. Siegel

(631) 247-0404

[email protected]

proactive wage and hour compliance strategies

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