March 8th, 2010
Even though the economy is down, the U.S. Department of Labor (“DOL”) continues to vigorously enforce overtime rules, minimum wage rules, certain pay related immigration rules, and similar laws and regulations. Violations of these rules can cost an employer as much as two or three times the amount of wages that the employer should have paid, not to mention attorney’s fees and related administrative and litigation costs. In these areas, an ounce of prevention truly is worth a pound of cure.
Because of the likelihood of increased administrative enforcement, we want to highlight a few important regulatory compliance issues that we often find to be the subject of violations. Employers that voluntarily address these issues before receiving an employee complaint or government audit may literally save thousands of dollars. JacksonWhite Labor and Employment attorneys are anxious to help employers avoid these problems.
1. Areas of Enforcement.
In a recent meeting with members of the Labor and Employment Bar in Arizona, the Wage and Hour Division of the DOL announced it would be adding new staff members to its department for the purpose of increasing enforcement. In addition, it anticipates opening a Flagstaff office sometime this year. Indications from the DOL are that enforcement will focus on the needs of low skilled and low-wage workers, the agricultural, reforestation and construction industries, government contractors, and the improvement of its response to investigating complaints. Apparently, H2A (agricultural workers) and H2B (non-agricultural workers) Visa compliance issues and compliance with respect to new regulations and statutes protecting military and former military personnel will also be a subject of serious review. Finally, the Obama Administration has repeatedly indicated its objective in enhancing the ability of labor unions to organize employee workforces.
2. Overtime Requirements.
In general, federal law requires that an employee who does not meet a regulatory exemption to overtime requirements must be paid one and one-half times that employee’s hourly rate for every hour worked in excess of 40 hours per week. We find that employers frequently misinterpret the overtime rules. For example, many believe that if they pay employees on a salaried basis, the payment of overtime is not required. And yet, this is not the basis for an exemption from paying overtime. The overtime regulations provide relatively clear guidance concerning which employees are exempt from overtime requirements and which are not. We find that many employers inappropriately classify employees as exempt when they do not meet the requirements of the exemptions. This exposes these employers to the potential of paying double or treble damages in connection with an administrative enforcement action or a lawsuit.
3. Record Keeping.
Some employers who may otherwise comply with the overtime rules and regulations may still be liable if they fail to keep proper records of the work performed by their employees. Even an employer who has properly paid overtime may be liable to pay more if the employer’s records are insufficient to prove full compliance with the law. Regulations require the employer to keep records of information such as:
- Time of day and the day of the week on which an employee’s work week begins;
- The rate of pay and the basis of the pay an employee receives;
- An itemization of all deductions or reductions from pay;
- Total hours worked for each day and week;
- Total straight time and overtime paid for each week;
- Work week schedules of the employees;
- Total wages paid;
- The date payment and pay periods occur; and
- Copies of employment contracts.
4. Using Independent Contractors.
An issue closely related to the overtime issue is the classification of workers as employees or independent contractors. Many employers classify and pay employees as independent contractors when they are more appropriately classified as employees under the law. In general, the amount of control that an employer exercises, the extent to which an employer provides tools of a job, and the exclusivity of the worker’s service for a single employer, are important factors considered in determining whether an individual is an independent contractor or an employee. An employer’s failure to properly classify a worker as an employee can result in tax penalties, interest costs, double or treble damages for failure to pay wages, and other significant financial penalties. The determination of a workers status as an employee or an independent contractor must be made under several areas of the law including the overtime rules, tax rules, workers compensation rules, and insurance policy provisions and related rules, to name a few.
5. Immigration Issues.
In recent years, immigration issues and the lack of federal action with respect to those issues have resulted Arizona legislation designed to penalize employers for hiring unauthorized aliens. Employers are able to protect themselves from liability by taking action at the commencement of the hiring process. Employers must take care once an employee has been hired in responding to questions concerning immigration status to avoid claims of discrimination. In addition, the DOL has indicated its intent to enforce rules within its purview regarding H2A and H2B Visa issues. So compliance reviews for employees seeking to hire foreign workers are advisable.
6. Safety Issues.
Both federal and state governments continue to regulate and review safety incidents in compliance of companies around the state of Arizona. Violations of safety laws and regulations can expose employers to significant liability for penalties to the government and civil liability to employees. Employers who are negligent in the enforcement of safety regulations may not be protected, for example, by worker’s compensation statutes, and may therefore be the subject of civil actions by their workers. State and federal regulators can also impose expensive penalties for regulatory violations.
JacksonWhite Labor & Employment attorneys have substantial experience in helping businesses avoid the kind of enforcement problems described above. We represent companies in both government proceedings and private civil lawsuits with respect to discrimination issues, overtimes issues, employee benefits and ERISA issues, employee classification issues, and many other issues affecting the workforces of our clients. We have significant experience both in federal and state courts, and before the Internal Revenue Service, the United States Department of Labor, the U.S. Equal Employment Opportunity Commission, the National Labor Relations Board, the Arizona Department of Occupational Health and Safety, and many other governmental entities and agencies.
We find that many of the problems described above and others can be avoided when employers internally audit their practices and records to insure compliance with these rules and regulations. This is particularly an important step in a time of increased enforcement such as we anticipate may be coming shortly.
For more information on this or to schedule a consultation, contact Otto S. Shill, III at (480) 464-1111.
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