I have been saying for the last few months, employers need to wake up and take notice! The Obama administration is serious about compliance with wage and hour laws. The DOL is taking actions to identify violators and any company caught violating of wage and hour laws can be sure that stiff financial penalties will follow.
The decision to add to the staff of investigators seems to signal that the government thinks the information published in a recent study by the Center for Urban Economic Development at the University of Illinois at Chicago, The National Employment Law Project and the UCLA Institute for Research on Labor and Employment is accurate and represents real problems.
The study indicates that:
· 76% of employees who worked overtime were NOT paid time-and-a-half for the overtime hours
· 26% of employee are paid less than minimum wage
· 69% of employees entitled to meal breaks either were no given any breaks, had their breaks interrupted by management or worked through their break.
Given the nation’s current economic crunch, employers are leaving themselves exposed to increased risk of government audits and lawsuits by overlooking their duties under wage and hour laws in order to survive, using fewer employees to do the same amount of work regularly done by a large staff. Now, with the government cracking down and actively searching for violators of wage and hour laws with the addition of more investigators, the chances of an employer continuing to violate employee pay rights are becoming less and less.
Any employer who does not take this issue seriously runs the real probability that they will be found out, and if wage and hour laws have been ignored, their businesses can be in jeopardy. This is the time to conduct a HR audit to ensure that wage and hour laws are being complied with, that all the paperwork and documentation will withstand any investigator’s scrutiny.
Showing investigators, government agencies and courts that the employer made a legitimate effort to comply with the FLSA and Wage laws, and are actively working to meet all of their duties to their employees, may be the difference between fines & penalties that break the employer’s financial “back” and company survival with minimal fines.
All the press that wage and hour violations have gotten recently, along with this increase in government investigators should clearly establish that this issue is not be taken lightly or dismissed out of hand. Take action before it is too late and your business is targeted.
Monday, September 21, 2009
Tuesday, September 8, 2009
Exempt vs. Non-Exempt Status
I am always amazed by the number of managers who continually make the mistake of assigning exempt status to anyone in the company who has management-related duties... or my favorite, equating “salary” with “exempt”!
Just because the employee is paid by salary or is called a "manager" does not make the employee exempt! It seems that the mistake made most often is calling an employee a manager in order to avoid paying overtime. In order to ensure you properly classify an employee as a manager, you need to evaluate whether the employee’s management-related duties actually fit into one of the exempt classification tests under the federal Fair Labor Standards Act (FLSA). Incorrectly classified managers could lead to class action lawsuits to back overtime pay.
For example if your managers spend almost no time performing managerial tasks; instead, perform customer service, cleaning, and sales duties you may have a real problem meeting the exemption classification. If your “managers” lack real authority over their departments and employees, and are required to confer with their district managers before making management decisions then they may not be exempt. The main question is, what is the employee’s main duty?
Time alone is not the only test for determining an employee's "primary duty," especially when, as in this case, the performance of managerial and non-managerial duties overlap. Courts have determined that when managerial duties are more critical to the success of the business than non-managerial duties they are most likely exempt.
So what are the tests? Managers do not need to be an ultimate decision-maker in order to be considered exempt employees. Additionally, a managers' exempt status is not jeopardized just because there is someone else higher up on the corporate ladder that has the final say in hiring, firing, and other employment decisions.
The Department of Labor (DOL) has stated that a manager meets the executive exemption test "even if a higher-level manager's recommendation has more importance and even if the employee does not have authority to make the ultimate decision as to the employee's change in status." The DOL looks at whether it is part of the manager's job duties to make such recommendations, and the frequency with which such recommendations are made, requested, and relied upon. Alternatively, to meet the administrative exemption test, a manager must exercise discretion and independent judgment. The fact that a higher-up may review and revise or reverse a manager's decisions does not mean that the manager is not exercising discretion and independent judgment.
When making a determination the DOL will evaluate the manager’s duties to evaluate if the manager:
· has authority to formulate, affect, interpret, or implement management policies or operating practices;
· carries out major assignments in conducting the operations of the business;
· performs work that affects business operations to a substantial degree;
· has authority to commit the employer in matters that have significant financial impact; or
· has authority to waive or deviate from established policies and procedures without prior approval.
Be sure to seek assistance from qualified advisors in order to evaluate all employees that are classified as exempt, to guard against paying back overtime wages which can run into the millions of dollars. In this case, a penny spent can save your entire business from financial disaster.
Just because the employee is paid by salary or is called a "manager" does not make the employee exempt! It seems that the mistake made most often is calling an employee a manager in order to avoid paying overtime. In order to ensure you properly classify an employee as a manager, you need to evaluate whether the employee’s management-related duties actually fit into one of the exempt classification tests under the federal Fair Labor Standards Act (FLSA). Incorrectly classified managers could lead to class action lawsuits to back overtime pay.
For example if your managers spend almost no time performing managerial tasks; instead, perform customer service, cleaning, and sales duties you may have a real problem meeting the exemption classification. If your “managers” lack real authority over their departments and employees, and are required to confer with their district managers before making management decisions then they may not be exempt. The main question is, what is the employee’s main duty?
Time alone is not the only test for determining an employee's "primary duty," especially when, as in this case, the performance of managerial and non-managerial duties overlap. Courts have determined that when managerial duties are more critical to the success of the business than non-managerial duties they are most likely exempt.
So what are the tests? Managers do not need to be an ultimate decision-maker in order to be considered exempt employees. Additionally, a managers' exempt status is not jeopardized just because there is someone else higher up on the corporate ladder that has the final say in hiring, firing, and other employment decisions.
The Department of Labor (DOL) has stated that a manager meets the executive exemption test "even if a higher-level manager's recommendation has more importance and even if the employee does not have authority to make the ultimate decision as to the employee's change in status." The DOL looks at whether it is part of the manager's job duties to make such recommendations, and the frequency with which such recommendations are made, requested, and relied upon. Alternatively, to meet the administrative exemption test, a manager must exercise discretion and independent judgment. The fact that a higher-up may review and revise or reverse a manager's decisions does not mean that the manager is not exercising discretion and independent judgment.
When making a determination the DOL will evaluate the manager’s duties to evaluate if the manager:
· has authority to formulate, affect, interpret, or implement management policies or operating practices;
· carries out major assignments in conducting the operations of the business;
· performs work that affects business operations to a substantial degree;
· has authority to commit the employer in matters that have significant financial impact; or
· has authority to waive or deviate from established policies and procedures without prior approval.
Be sure to seek assistance from qualified advisors in order to evaluate all employees that are classified as exempt, to guard against paying back overtime wages which can run into the millions of dollars. In this case, a penny spent can save your entire business from financial disaster.
Friday, September 4, 2009
Recruiters & EEOC changes on referral policy
Sometime in the future, the economy will spring back and businesses will start hiring again. How will they find the employees to replace the employees laid off during the economic hard times? Many businesses will ask their current employees to recommend people that they know. Often businesses believe that by have employee referral programs, the business’ corporate culture is improved because employees will enjoy working with “friends” and people that they know.
Often, businesses pay a fee to the employee who refers someone who is hired by the business. The prevailing thought is that paying an employee for a referral is much less expensive than paying 10% or 15% to a recruiter, or pay for a recruiting job board such as CareerBuilder.
However, prior to making that decision, employers must be mindful that the EEOC has looked upon employee referral programs as potentially creating homogeneous working environments reducing the diversity of the work place. The EEOC suggested that people tend to refer people like themselves and those businesses that are not careful could find their employee population reflects a racially unbalanced workforce.
So what? The EEOC has successfully sued a company that did not carefully monitor their recruiting programs, and relied on employee referrals and created a less than diverse workforce. Cost to the company? $2,200,000!
What is the lesson? Recruiting programs should be developed to seek employee candidates from as diverse a group of qualified candidates as possible. Relying on only one or two methods to identify candidates is dangerous. It is best to develop programs that recruit candidates from a wide variety of sources. It is also a good idea to use a reliable recruiting service in addition to other recruiting sources to establish that the company is not limiting candidates based on race.
In the end, it seems to me that businesses are better served by expanding their recruiting sources because the opportunity to uncover talented individuals who will be able to make significant contributions to the employer. During the period of recovery, this will be important to growing the business and getting back to normal.
Often, businesses pay a fee to the employee who refers someone who is hired by the business. The prevailing thought is that paying an employee for a referral is much less expensive than paying 10% or 15% to a recruiter, or pay for a recruiting job board such as CareerBuilder.
However, prior to making that decision, employers must be mindful that the EEOC has looked upon employee referral programs as potentially creating homogeneous working environments reducing the diversity of the work place. The EEOC suggested that people tend to refer people like themselves and those businesses that are not careful could find their employee population reflects a racially unbalanced workforce.
So what? The EEOC has successfully sued a company that did not carefully monitor their recruiting programs, and relied on employee referrals and created a less than diverse workforce. Cost to the company? $2,200,000!
What is the lesson? Recruiting programs should be developed to seek employee candidates from as diverse a group of qualified candidates as possible. Relying on only one or two methods to identify candidates is dangerous. It is best to develop programs that recruit candidates from a wide variety of sources. It is also a good idea to use a reliable recruiting service in addition to other recruiting sources to establish that the company is not limiting candidates based on race.
In the end, it seems to me that businesses are better served by expanding their recruiting sources because the opportunity to uncover talented individuals who will be able to make significant contributions to the employer. During the period of recovery, this will be important to growing the business and getting back to normal.
Thursday, September 3, 2009
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