Counsel to Counsel - November 2008 - (Page 11) BAkEr & DANIELS LLP wAGE AND Hour VIoLATIoNS: Calling “Timeout” Wage and hour claims under federal and state law continue to grow at alarming rates, and systemic violations can result in catastrophically expensive collective or class action litigation. situation implementation steps • Review job descriptions to make sure each is accurate and the classification is appropriate. • Check with your payroll department to confirm all deductions are appropriate. • Ensure the employee handbook has been updated to reflect all of the 2004 regulation amendments that provide “safe harbor.” • Train supervisory employees on wage and hour law requirements for non-exempt employees. • Assess the company definition of “regular rate” of pay when calculating overtime to ensure all the necessary pay elements are included. Effectively addressing potential sources of wage and hour liability requires inside counsel to get in front of this issue. Proactively discover and rectify violations before the Department of Labor (DOL) shows up for an audit or private litigation is commenced. challenge in-house counsel approach adopted Ways to violate wage and hour laws are numerous. But focusing on a few key areas can eliminate most frequently litigated claims: Misclassifications. Employees misclassified as exempt from overtime pay are the single greatest potential liability. Pay particular attention to jobs classified as exempt under the administrative exemption—a “gray” area that can lead to trouble. The DOL believes that employers consistently abuse this exemption by stretching it to cover truly non-exempt jobs. An exempt administrative employee must have a “primary duty” of performing office or nonmanual work directly related to the general business operations of the employer or its customers. Additionally, the exemption applies only if the employee exercises discretion and independent judgment with respect to matters of significance. Thus, an administrative assistant who performs office clerical work but does not exercise discretion and independent judgment is not exempt. Some positions may remain gray enough to require research into case law and DOL opinion letters. Reclassify any positions that are misclassified as exempt. Resolve related issues: Decide whether the change will be implemented only prospectively or whether there will be an attempt to go back and retroactively calculate and pay any overtime that may be owed to the affected employees. Consider the number of affected employees, whether there are any records of hours worked available upon which to base calculations and how “close” the call on exempt versus non-exempt status proved to be. Inappropriate deductions. unauthorized deductions can result in loss of exempt status. The 2004 regulation amendments adopted a new “safe harbor” defense, which requires amending the employee handbook to include a written policy with several specific elements. These include a prohibition of improper deductions, a complaint mechanism for employees to raise concerns about deductions, a commitment to reimburse employees for any improper deductions and a good faith commitment to make only lawful deductions. Employers who have such a policy will not lose exempt status for any employees based on inadvertent improper deductions. If your employee handbook hasn’t been updated with this information, do so now. Policies regarding off-the-clock work, breaks and overtime. Make sure your company has and enforces a written policy against off-the-clock work and does not permit employees to “volunteer” their time. Train supervisory employees so that they do not require or permit non-exempt employees to work off the clock. Federal law doesn’t require employers to offer meal or rest breaks, but does determine whether break time that is provided must be paid or can be unpaid. Some states impose requirements beyond federal law by mandating paid or unpaid breaks. Check your company’s policies to make sure they are in compliance and are actually being followed. Overtime must be paid at time and a half the “regular rate” of pay. Shift differentials, on-call pay and most—but not all—bonuses must be factored into the calculation. Audit the various forms of compensation your non-exempt employees receive to make sure your company is in compliance. Wage and hour violations are easy for employers to commit. By thinking like the DOL or a plaintiff’s lawyer, in-house counsel can identify potential liability areas, conduct an internal audit and fix any problems uncovered before a claim actually arises. measuring success Edward E. “Ted” Hollis is a partner at Baker & Daniels LLP who counsels employers and defends them in employment law disputes. Ted can be reached at edward.hollis@bakerd.com. www.martindale.com/c2c November 2008 best practices 11 http://www.martindale.com/c2c
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