october2021 - 16

Wage and Hour Audits May Be Coming
IN THE PAST, the Department of Labor Wage and Hour Division (WHD) would commonly
randomly select employers for compliance audits with the provisions of the Fair Labor
Standards Act (FLSA). Random audits have all but ended for a variety of reasons. In
recent years, virtually all WHD investigations have resulted from employee complaints.
It includes work in such areas
Referrals by other federal agency
or WHD prioritizing a particular
industry or geographic area also
account for a small number of audits.
However, random wage and hour
audits may soon be in the picture
again. The Biden administration
has pledged to aggressively enforce
workplace laws and regulations. FLSA
wage and hour violations are among
the most common employer errors
in the workplace. Now is the time for
employers to take the necessary steps
to ensure their compliance.
The most frequent employer
mistake that generates the greatest
liability is the misclassification of
employees as " exempt " from overtime
pay under the so-called " white collar "
exemptions. In order to be exempt, an
employee must satisfy both a duties
test and a salary test. Currently the
salary threshold for exempt status is
$684 per week ($35,568 annually). The
required duties vary for the " administrative, "
" professional, " " executive, "
" highly compensated, " " computer, "
and " outside sales " exemptions. It is
the duties requirements rather than
the salary requirements that generate
most liability to employers, and
mistakes under the " administrative "
exemption are most common.
A " bona fide administrative
employee " must 1) have the primary
duty of performing office or nonmanual
work directly related to the
management or general business
operations of the employer or its customers,
and 2) have a primary duty
that includes the exercise of discretion
and independent judgement with
respect to matters of significance.
as finance, budgeting, purchasing,
marketing, personnel management,
public relations, legal and regulatory
compliance, and similar work. Simply
because an employee performs a
function that is important to the
operation and is paid a salary does
not provide exempt status. The
duties must be related to running
the business and include discretionary
decisions on significant business
matters. If an employee merely
applies standard procedures without
exercising discretion on matters
of importance, the employee is not
exempt no matter how important
the duties. Payroll clerks, accounts
receivable, bookkeepers, and similar
business-related jobs typically don't
exercise sufficient discretion and
independent judgement.
Misclassification involving the
other exemptions arise less frequently
because the required duties are
more straight-forward leaving less
uncertainty about their application.
A " bona fide executive " must manage
the enterprise or a recognized
department thereof, regularly direct
two or more employees, and have the
authority to hire and fire or effectively
recommend such action.
Cases have arisen where an
employee's duties include some
manual or production work, such as
stocking shelves. If the employee's
primary duty (50% of their time) is
managerial work,
the exemption
applies. Additionally, while the duties
for the " outside sales " exemption are
clear, engaging in sales activity away
from the employer's place of business,
16 OCTOBER 2021 ■ www.CPAPracticeAdvisor.com
it is not uncommon for employers to
treat inside sales staff as exempt. That
would be a classic case of misclassification
and would entitle those
misclassified employees to overtime
pay for each week they worked more
than 40 hours, as well as liquidated
(double) damages.
Another type of wage and hour
complaint that has increased recently
is off-the-clock work. These claims
often involve work-related duties that
were performed before punching in or
after punching out, such as donning/
doffing, gathering supplies, or completing
paperwork after punching out.
Under the Portal-to-Portal act, certain
preliminary and postliminary activities
are not considered compensable
To be considered paid time, the
activities must be an integral part of
and essential to the employee's principal
activities. Preparing equipment
necessary to complete the principal
work duties is generally compensable
time. Transporting tools and equipment
may be paid time depending
upon the circumstances. Attending
employer-mandated meetings or
training is usually considered to be
compensable time. Shift-change
activities such as roll-calls or instruction
meetings have also generally
been found to be compensable.
One that has arisen with some frequency
was the time spent in security
screenings. In 2014 the U.S. Supreme
Court ruled that such screenings
were not compensable because they
were neither a principal activity nor
integral and indispensable to the work
performed by the employees. Under
Senior Partner
Alaniz Schraeder Linker Faris Mayes, L.L.P.
some state laws, such as California,
time spent waiting to go through
screening is compensable.
Off-the-clock work claims have
arisen in " white collar " settings as
well. The potential for such claims
may be greater in the white collar
setting. It is not uncommon for
employees to receive and respond to
e-mails or texts after they have left
work, sometimes well into the evening
and on weekends. No issue exists
where exempt employees engage in
such activity.
However, when non-exempt
employees do so after or before working
hours, it is compensable time. This
type of unpaid compensable time can
lead to backpay owed going back two
or three years. Particularly with the
constant access to email through cell
phones, this activity may take some
effort to control.
One measure to consider to limit
off-the-clock claims is posting a
clear policy that off-the-clock work
is prohibited and overtime requires
preapproval from a supervisor. While
an employer would still be obligated
to pay an employee who violates
this policy, it could discipline the
employee for the violation.
It is not clear when employers
may begin to see the aggressive
enforcement of workplace laws from
the Biden administration. However,
by taking the time now to carefully
review pay practices and related
procedures, employers may be able
to avoid at least those wage and hour
violations that are the most frequent
to arise. ■


Table of Contents for the Digital Edition of october2021

From the Editor: 2FA, MFA, GWTP
The State of Automation in Finance
Automation Solves Payroll Headaches
What is Human Capital Management?
The 2021 "40 Under 40" and "20 Under 40"
Marketing Your Firm: How to Create a Lead-Generating YouTube Channel
From the Trenches: Client Experience for Today: Leveraging Payroll
The Leadership Advisor: The Great Resignation: How to Keep Employees Happy and Prevent Burnout
The Labor Law Advisor: Wage and Hour Audits May Be Coming
The Millennial Advisor: Go For It!
The Staffing & HR Advisor: Hiring Remotely? Here's What You Need to Know
Will the 2022 Tax Filing Season Be Normal?
5 Covid Impacts on Internal Audit that Are Here to Stay
Bridging the Gap: Marketing for the Modern Accounting Firm
october2021 - 1
october2021 - 2
october2021 - 3
october2021 - From the Editor: 2FA, MFA, GWTP
october2021 - The State of Automation in Finance
october2021 - Automation Solves Payroll Headaches
october2021 - What is Human Capital Management?
october2021 - The 2021 "40 Under 40" and "20 Under 40"
october2021 - 9
october2021 - 10
october2021 - Marketing Your Firm: How to Create a Lead-Generating YouTube Channel
october2021 - From the Trenches: Client Experience for Today: Leveraging Payroll
october2021 - 13
october2021 - 14
october2021 - The Leadership Advisor: The Great Resignation: How to Keep Employees Happy and Prevent Burnout
october2021 - The Labor Law Advisor: Wage and Hour Audits May Be Coming
october2021 - The Millennial Advisor: Go For It!
october2021 - The Staffing & HR Advisor: Hiring Remotely? Here's What You Need to Know
october2021 - Will the 2022 Tax Filing Season Be Normal?
october2021 - 20
october2021 - 21
october2021 - 5 Covid Impacts on Internal Audit that Are Here to Stay
october2021 - Bridging the Gap: Marketing for the Modern Accounting Firm
october2021 - 24