proactive wage and hour compliance strategies
TRANSCRIPT
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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© 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
© 2012 Cozen O’Connor. All Rights Reserved. 575 Attorneys • 21 Offices • www.cozen.com
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Self-Audit Strategies
B. Areas of Review
– Scope of the audit • Reason for the audit
• Changes in the industry
• Make up of workforce
• State law requirements
© 2012 Cozen O’Connor. All Rights Reserved. 575 Attorneys • 21 Offices • www.cozen.com
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Self-Audit Strategies
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
© 2012 Cozen O’Connor. All Rights Reserved. 575 Attorneys • 21 Offices • www.cozen.com
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Self-Audit Strategies
B. Areas of Review
– Exempt Status
– Independent Contractor Status
© 2012 Cozen O’Connor. All Rights Reserved. 575 Attorneys • 21 Offices • www.cozen.com
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Self-Audit Strategies
B. Areas of Review
– Calculating Overtime Pay • Regular rate for nonexempt employees
• Straight time
• Fluctuating work week
• Day rate
© 2012 Cozen O’Connor. All Rights Reserved. 575 Attorneys • 21 Offices • www.cozen.com
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Self-Audit Strategies
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?
© 2012 Cozen O’Connor. All Rights Reserved. 575 Attorneys • 21 Offices • www.cozen.com
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Self-Audit Strategies
C. Documenting the audit, including work- product and privilege issues.
– What to document • Person conducting the audit
• Context of audit
© 2012 Cozen O’Connor. All Rights Reserved. 575 Attorneys • 21 Offices • www.cozen.com
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Self-Audit Strategies
C. Documenting the audit, including work- product and privilege issues.
– What to document • Intended use of results
• Is audit going to be privileged?
© 2012 Cozen O’Connor. All Rights Reserved. 575 Attorneys • 21 Offices • www.cozen.com
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Self-Audit Strategies
C. Documenting the audit, including work- product and privilege issues.
– Is the Audit Work Product?
– Is the Audit Otherwise Privileged?
© 2012 Cozen O’Connor. All Rights Reserved. 575 Attorneys • 21 Offices • www.cozen.com
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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
© 2012 Cozen O’Connor. All Rights Reserved. 575 Attorneys • 21 Offices • www.cozen.com
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B. Employer Classification
– Exempt Status • Applicability of salary basis requirement
– Business owners
– Teachers
– Practicing law
– Computer professionals
Wage and Hour Policies and Procedures
© 2012 Cozen O’Connor. All Rights Reserved. 575 Attorneys • 21 Offices • www.cozen.com
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B. Employer Classification
– Exempt Status • Exempt duties
– Administrative duties
– Executive duties
– Professional duties
• How to determine duties – Job descriptions
– Employee interviews or surveys
Wage and Hour Policies and Procedures
© 2012 Cozen O’Connor. All Rights Reserved. 575 Attorneys • 21 Offices • www.cozen.com
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B. Employer Classification
– Independent Contractor Status
• Sufficient control factors
• Economic reality factors
Wage and Hour Policies and Procedures
© 2012 Cozen O’Connor. All Rights Reserved. 575 Attorneys • 21 Offices • www.cozen.com
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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
Wage and Hour Policies and Procedures
© 2012 Cozen O’Connor. All Rights Reserved. 575 Attorneys • 21 Offices • www.cozen.com
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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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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”?
Voluntary Reclassification
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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…
Voluntary Reclassification
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.
Paying Back Wages Voluntarily
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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.
Paying Back Wages Voluntarily
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
Working With the USDOL
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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”
Working With the USDOL
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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?
Working With the USDOL