Legally Speaking: Wage-Hour Enforcement Escalates

Bob Dunlevey

Bob Dunlevey is an attorney with Dunlevey, Mahan & Furry (www.dmfdayton.com) in Dayton, Ohio. He is well recognized for his counseling and defense of businesses having employment-related issues, including federal and state court litigation and OSHA proceedings, wage-hour compliance, collective bargaining, wrongful discharge defense, and regulatory compliance. He can reached at rtd@dmfdayton.com.

September 1, 2010

Employers beware! The Department of Labor’s (DOL’s) rule-making efforts and enhanced enforcement activities mean employers face a much greater risk of being found in violation of federal wage-hour laws.

In late spring, the DOL announced an enhanced regulatory and enforcement strategy called “Plan, Prevent, Protect.” This program will require employers to take affirmative efforts to ensure compliance with federal wage and hour laws, as well as other laws such as the Occupational Safety and Health Act. To ensure regulatory compliance, the DOL is reallocating its resources and hiring 177 new investigators to perform employer audits. The DOL has also stopped issuing opinion letters, which used to be provided to give guidance to employers. But now employers will be left on their own to interpret the law as the DOL shifts its funds to field enforcement. DOL’s current budget is $116.5 billion.

The new Plan/Prevent/Protect Program will place new requirements on employers to create compliance action plans and to identify and remediate violations of wage-hour laws. The DOL will require employees to have participation in the plan, and the plan will have to be made available to all the employees so they can monitor compliance. The plan must be vigorously implemented to prevent violations, and a component of prevention will be the auditing of wage-hour practices by the employer. Finally, the plan must protect employees from violations of their workplace rights. The program will soon be presented through the DOL rule-making process.

Many employers already are concerned about efforts by the DOL to reclassify independent contractors to true employees, which attacks a longstanding problem of misclassification and is seen as a tax revenue-raising tactic for the federal government. Under the new program, an employer may be required to prepare a written explanation of why workers should be considered contractors rather than employees and provide the contractors with that explanation. Any employer that seeks to exclude workers from the Fair Labor Standards Act coverage of minimum wage and overtime would be required to perform a classification analysis, disclose that analysis to the worker, and retain that analysis to give the DOL investigators a head start on any investigation.

Currently pending in Washington is the Employee Misclassification Prevention Act. Sherrod Brown (D-OH) has introduced legislation to amend the wage-hour laws to prevent misclassification of workers as independent contractors without regard to the DOL initiative. This proposed law would require that each worker be advised of his classification as an independent contractor, be directed to the DOL website that addresses employee rights, and be provided contact information for the local DOL office. The proposed law creates a rebuttable presumption that these individuals are employees and not independent contractors if the requirements of the Act are not met. Congressional hearings have occurred on this bill.

Recently, a DOL interpretation overturned the position it had adopted for 10 years with respect to mortgage loan officers, who were considered exempt from minimum wage and overtime. The DOL now claims that mortgage loan officers are production workers as opposed to administrative workers and not exempt under the white collar exemptions covering executives, administrative workers, and professionals.

Then, on June 16, the DOL issued an opinion that the donning and doffing of protective equipment before and after the start of work is a compensable activity. In prior opinions, protective equipment worn by employees performing such things as meatpacking and poultry processing were not eligible for compensation as they put on and took off their protective equipment. Protective equipment includes such things as safety glasses, aprons, guards, sleeves, boots and gloves.

In Ohio, employees are protected by state laws as well as the federal laws. Seldom discussed but often used is Ohio Revised Code § 4111.14(G), which permits third parties such as claimant attorneys to gain information about the pay practices of employers. Ohio voters caused this enactment through voting for a constitutional amendment. In addition, Ohio’s Prompt Pay Act, Ohio Revised Code § 4113.15, imposes penalties on employers for failing to properly pay employees. There has been a tremendous surge in class action wage-hour litigation in the recent past, and these state and federal laws have been used as effective tools for claimants.

With Washington’s current campaign to enhance employees’ rights and impose additional obligations on employers through agency rule-making and legislation, it is obvious that employers must do their best to comply with state and federal wage-hour laws. Understand your obligations under the Fair Labor Standards Act and perform an audit as to your company’s pay practices.

Remember, generally, that time and one-half must be paid for hours worked in excess of 40 in any 7 consecutive calendar day period. In addition, merely paying an employee a salary does not exempt that employee from the minimum wage and overtime provisions. Also, short term rest breaks are compensable.

Your company cannot afford to sit back and wait to be caught by the DOL because the consequences will be too severe. Take affirmative efforts to ensure compliance now!