How to Avoid Disney’s Not-So-Fairy Tale $3.8 Million Payment of Employee Back Wages

On Friday, March 17, 2017, the U.S. Department of Labor (“DOL”) and two subsidiaries of The Walt Disney Co. (“Disney”), the Disney Vacation Club Management Corp., and the Walt Disney Parks and Resorts U.S. Inc., reached an agreement to resolve claims under the Fair Labor Standards Act (“FLSA”), requiring the payment of back wages of over $3.8 million to more than 16,000 employees of the two Florida-based Disney companies.

According to the DOL, Disney deducted a uniform (or “costume”) expense from employee pay, which lead some employees’ hourly rate to fall below the federal minimum wage rate of $7.25 per hour. The subsidiaries also did not compensate the employees for performing pre- and post-shift duties while additionally failing to maintain required time and payroll records.

As part of the agreement, Disney agreed to start training all Florida-based managers, supervisors, and non-exempt employees on what constitutes compensable worktime and emphasizing the need to record all records pertaining to time accurately.

There are certain steps that employers can do to avoid the significant damages Disney incurred including:

  • Maintain accurate payroll, time, and schedule related records. This is particularly important to our hospitality and restaurant clients where record keeping can be especially difficult.  Also, remember that under the FLSA, the records must be  maintained for a minimum of three years for payroll records and six years under New Jersey and New York law.
  • Deductions are an easy target for the plaintiffs’ bar. Employers must make sure that any deductions are legal under state law and that the deductions if permissible do not bring the affected employee below the state or federal minimum wage;
  • Perform a wage and hour self-audit every two years to avoid misclassification issues and to ensure your recordkeeping and pay practices are consistent with the law;
  • To avoid donning and duffing claims (claims involving changing into and out of uniforms, costumes, and protective equipment for example), employers must take care to distinguish between non-compensable time when changing into and out of the uniform is merely for the employees’ convenience as opposed to compensable time when the job cannot be accomplished without wearing the designated uniform or costume or safety equipment and it is impractical to arrive at work wearing same.

If you have any questions or would like to discuss best practices in complying with federal wage regulations, please contact John R. Vreeland, Esq., Partner & Chair of the  Wage and Hour Compliance Practice Group at jvreeland@nullgenovaburns.com or call 973-533-0777 or Harris S. Freier, Esq., a Partner in the Employment Law and Appellate practice groups, at hfreier@nullgenovaburns.com, or call 973-533-0777.  Mr. Vreeland and Mr. Freier routinely work together in defending wage and hour class actions.  Please visit our free Labor & Employment Blog at www.labor-law-blog.com to stay up-to-date on the latest news and legal developments affecting your workforce.

Meet Trump’s Pick for the U.S. Department of Labor – CEO Andrew Puzder

President-elect Donald Trump tapped Andrew Puzder to lead the U.S. Department of Labor (“USDOL”) in his administration, an appointment that could have important implications for employers in terms of the USDOL’s recent hardline enforcement policies on joint employer relationships and independent contractor status. It also may signal how vigorously the USDOL will defend certain regulatory changes made under the current administration, such as the revised Persuader Rules (which significantly hinder an employer’s ability to use law firms during a union organizing campaign) and the amendment to the Fair Labor Standard Act’s “White Collar” exemptions (which more than doubles the minimum salary an employee must be paid in order to qualify for an overtime exemption). Both of these regulatory changes were blocked by federal courts last month and remain unenforceable unless the USDOL successfully appeals the federal courts’ injunctions.

Mr. Puzder has been CEO of CKE, which owns fast food chains Hardee’s and Carl’s Jr., since September 2000. CKE has 75,000 employees in the U.S. and nearly 100,000 worldwide. Mr. Puzder was an outspoken critic of the Labor Department under the Obama administration. He wrote multiple Wall Street Journal op-eds against any increase in the minimum wage or changes in overtime rules. Mr. Puzder has advocated for employers to consider automation in the face of rising employee costs.  Concerning automation, Mr. Puzder commented, “[machines are] always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall, or an age, sex, or race discrimination case.” Mr. Puzder has written about how overregulation from Obamacare has held back the restaurant industry and has made the case for less regulation in the labor market.  In 2010, Mr. Puzder released a book with professor David Newton entitled “Job Creation: How it Really Works and Why Government Doesn’t Understand It.” Leading up to the 2012 election, Mr. Puzder was an economic advisor and spokesman for the Romney Campaign for President. This election cycle, Mr. Puzder was an advisor and fundraiser for the Trump campaign.

If you have any questions or would like to discuss how the change in the administration could affect your business, please contact John Vreeland, Esq., Chair of the firm’s Wage and Hour Compliance Group, at (973) 535-7118 or jvreeland@nullgenovaburns.com, or Aaron C. Carter, Esq. at (973) 646-3275 or acarter@nullgenovaburns.com.

Regulations Require Paid Sick Leave for Federal Contractors

On September 29, 2016, the Department of Labor (DOL) issued a final rule requiring federal contractors to provide employees with at least seven days of paid sick leave each year. This requirement applies to all new contracts.

What contracts must comply with the paid sick leave requirement?  Four types of contracts fall within the new sick leave requirement.  They are: 1) procurement contracts for construction covered by the Davis-Bacon Act; 2) service contracts covered by the Service Contract Act; 3) concession contracts; and 4) contracts in connection with Federal property or lands related to services for Federal employees and the general public.

What is a new contract?  The rule applies to new contracts, which is defined as a contract awarded or resulting from solicitations on or after January 1, 2017.  A contract prior to January 1, 2017 will also be considered a new contract if: 1) the contract is renewed; 2) the contract is extended, unless the extension arises from a term for a short term extension in the original contract; or 3) the contract is amended as a result of a modification outside the scope of the original contract.

How much paid sick leave must a federal contractor provide?  Employees working on covered, new contracts accrue one hour of paid sick leave for every thirty hours worked. Employers may also limit paid sick leave to 56 hours per year.  For administrative ease, an employer may “front-load” or provide the 56 hours at the beginning of the accrual year.  Special rules apply for carrying-over any unused paid sick leave to the following year.  The regulations also allow employers to implement a policy allowing forfeiture of any accrued, unused paid sick leave upon separation from employment.  However, if an employee is rehired within 12 months, the employer must reinstate accrued, unused paid sick leave.

What uses of paid sick leave are permitted?  The regulations provide that an employee may use paid sick leave for the following reasons:

  1. for the employee’s own physical or mental injury, injury, or condition
  2. for the employee to obtain diagnosis, care, or preventative care
  3. for the employee to care for a child, parent, spouse, domestic partner, or person in a family relationship for reasons relating to that person’s medical condition
  4. for reasons related to domestic violence, stalking, or sexual assault

For more information on the Final Rule and implementing best practices with these regulations, please contact Brigette N. Eagan, Esq., Counsel in the firm’s Human Resources Practice Group at beagan@nullgenovaburns.com or 973-533-0777.

Supreme Court Punts on Whether Service Advisors Are Exempt from FLSA Overtime Premium Pay

The United States Supreme Court recently issued its long awaited decision in Encino Motorcars, LLC v. Navarro. At issue in the case was whether “service advisors” employed by car dealerships are exempt from the Fair Labor Standards Act’s overtime premium pay requirement, as well as the validity of a related 2011 United States Department of Labor regulation. Unfortunately, the Court did not decide whether service advisors are exempt. Instead, the Court remanded the case to the Ninth Circuit Court of Appeals with the instruction that the Ninth Circuit decide the issue “without placing controlling weight” on the DOL’s 2011 regulation.

The issues in Encino Motorcars were rooted in a provision of the FLSA that expressly provides that “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” is exempt from the FLSA’s overtime premium pay requirement. The FLSA is silent as to whether service advisors qualify for this exemption. In 1970, the DOL issued an interpretive regulation in which it concluded that service advisors do not fall within the exemption. Several courts rejected the DOL’s interpretation, and in a 1978 Opinion Letter the DOL changed course and took the position that service advisors are exempt. The DOL maintained this position until 2011, when it issued a regulation that, without explanation, excluded service advisors from the exemption.

The Supreme Court’s opinion in Encino Motorcars arose from a Ninth Circuit decision in which the Ninth Circuit relied on the DOL’s 2011 regulation to hold that a group of service advisors were eligible for overtime premium pay. The service advisors at issue would meet with a customer, evaluate the customer’s car, suggest repairs and dealership service plans, and then send the car to a mechanic who repaired and/or serviced the car. In remanding the case, the Supreme Court found that the DOL failed to follow basic procedural requirements of administrative rulemaking, which require administrative agencies to explain their rules. The Supreme Court found this especially important here, where the DOL issued a rule contrary to its prior position. The Supreme Court was critical of the DOL for its failure to explain adequately its rationale for changing its position, and its failure to consider the public’s reliance on the DOL’s longstanding policy. Car dealerships will have to wait for the Ninth Circuit’s subsequent decision, and possibly another Supreme Court decision, before the issue of whether service advisors are exempt from the FLSA’s overtime premium pay requirement is resolved.

For more information regarding the potential impact of the Supreme Court’s decision, or regarding any other wage and hour issues, please contact John R. Vreeland, Esq. Director of the Firm’s Wage & Hour Compliance Practice Group, at 973-535-7118 or jvreeland@nullgenovaburns.com, or Joseph V. Manney, Esq. at 973-646-3297 or jmanney@nullgenovaburns.com.

$15 Minimum Wage Bill Heads to Governor Christie’s Desk

In a close 21-18 vote the New Jersey State Senate passed bill S15, the $15 Minimum Wage Bill. The bill will now head to Governor Christie’s desk after its previous stamp of approval from the New Jersey State Assembly.  The vote proceeded along party lines with the 18 Republican legislators raising objections to the increased costs on businesses and the 21 Democratic legislators fighting to provide a living wage.

Governor Christie has not commented on whether he will veto the bill but it is highly unlikely he accepts the $15 wage increase. State Democratic leaders have promised to submit the $15 minimum wage to the voters in a constitutional referendum if Governor Christie vetoes the bill.

$15 minimum wage bills have already been signed into law in New York and California.  Massachusetts, Vermont and Connecticut are currently considering similar bills. In addition to the $15 minimum wage there are potential costs for insurance and payroll taxes.  Employers should continue to stay informed on the movement of this legislation with an eye on implementation in early 2018.

For more information regarding the potential impacts of Bill S15, or regarding any other wage and hour issues, please contact John R. Vreeland, Esq. Director of the Firm’s Wage & Hour Compliance Practice Group, at 973-535-7118 or jvreeland@nullgenovaburns.com, or Aaron C. Carter, Esq. at 973-646-3275 or acarter@nullgenovaburns.com.

Major Changes to Federal Overtime Regulations Take Effect December 1. Are You Prepared?

This week, President Obama and Secretary of Labor Thomas Perez announced the publication of a final rule to take effect December 1 that will overhaul the Fair Labor Standard Act’s overtime regulations. The U.S. Department of Labor (USDOL) estimates that these changes will add more than four million employees to the overtime rolls.

Right now, in general, an employee is exempt from overtime pay if the employee satisfies three tests:

  • Duties Test: The employee’s primary job duties qualify as executive, administrative, or professional in nature, as these terms are defined in the regulations.
  • Salary Basis Test: The employee is paid on a salary basis, meaning the employee receives a predetermined and fixed salary that is not reduced because of variations in the quality or quantity of the work performed (i.e., no docking).
  • Salary Level Test: The employee’s weekly salary meets the minimum amount specified in the regulations.

The most significant change in the USDOL’s new rule is to the Salary Level Test. Today, the minimum salary needed to qualify for exempt status is $455 per week, or $23,600 annually. On December 1, 2016, this minimum will increase to $913 per week! This means in order to be exempt, an employee must be paid an annual salary of at least $47,476.

By more than doubling the minimum salary amount, many salaried employees who work long hours and currently qualify for an overtime exemption will on December 1 become eligible for overtime pay unless their salaries are increased. An employee whose weekly salary is below $913 will become overtime-eligible and you will have to track the employee’s hours of work through a verifiable timekeeping method and pay time-and-a-half for each hour worked over 40 in a workweek.

Employers need to start preparing now. First, you must identify your exempt employees whose salaries are below the new salary threshold. Then perform a business analysis to determine whether it is more cost effective to increase employee salaries to the minimum threshold, or treat these employees as overtime-eligible. We also recommend that you take this opportunity to evaluate whether your exempt employees are satisfying the other two tests. Many times we find that an employee’s exempt status is based on a job description that no longer accurately reflects the employee’s actual job duties. We recommend that employers self-audit their job classifications at least every two years to ensure employees classified as exempt currently satisfy a duties test and that pay practices for exempt employees meet the Salary Basis Test. Periodic self-audits are especially important now because the USDOL’s new rule establishes a mechanism for automatically updating the salary level every three years.

Employers cannot afford to be out of compliance with the FLSA. The Departments of Labor at both the federal and state levels have already signaled that they intend to aggressively enforce wage and hour laws. In addition, plaintiffs’ lawyers have become focused on wage and hour claims. Wage and hour litigation is by far the fastest growing type of employment litigation. Last year, more than 9,000 FLSA lawsuits were filed in the United States; many of them were filed as “collective actions” – the FLSA’s version of a class action. That is a 450% increase since 2000. This trend will almost certainly continue as plaintiffs’ lawyers hope to catch employers flat-footed and out of compliance with the new overtime regulations.

Wage and hour litigation can be expensive for employers. The FLSA provides for 100% liquidated damages – or double damages. It also shifts the plaintiff’s legal costs to the employer, meaning if the plaintiff proves a single violation of the law, the employer pays the plaintiff’s attorneys’ fees. This typically makes it difficult to resolve these types of suits early as the FLSA creates an incentive for a plaintiff’s lawyer to work the case and then recover attorneys’ fees when the lawsuit finally ends.

Again, the time to prepare is now, not when you receive the lawyer’s demand letter or the Department of Labor’s enforcement notice. A thorough self-audit, especially with the assistance of counsel, is an employer’s best protection against costly wage and hour enforcement actions and lawsuits.

For more information regarding these recent developments, please contact John R. Vreeland, Esq. Director of the firm’s Wage & Hour Compliance Practice Group, at jvreeland@nullgenovaburns.com or 973-533-0777.

EEOC to Require Pay Data From Employers Starting in 2017

In an on-going effort to close the pay gap for women and minorities, on January 29, 2016, the Obama Administration announced that the U.S. Equal Employment Opportunity Commission (EEOC) will now require federal contractors and employers with 100 or more workers to provide data related to pay practices. Starting in September 2017, the EEOC will request data on pay ranges and hours worked for all employees in addition to the information collected on employer EEO-1 reports. The EEO-1 report, also known as the “Employer Information Report,” is a compliance survey mandated by federal statute and regulations which must be submitted and certified no later than September 30th, annually. The report currently requires federal government contractors and companies with 100 or more employees to disclose employment data to be categorized by race, ethnicity, gender and job category.  In addition, employers will must report job categories and pay bands but will not be required to report specific salaries of each individual employee.  Employers will also be required to report on the total W-2 earnings as the measure of pay.

The new requirement will provide the EEOC and the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) with more insight into pay disparities across different industries and occupations as well as assist the agencies in investigating those employers who appear to be engaged in wage discrimination.  The EEOC’s announcement was made on the seventh anniversary of the Lilly Ledbetter Fair Pay Act which provides employees with a 180-day statute of limitations for filing an equal-pay lawsuit regarding pay discrimination after each paycheck.

The Obama Administration estimates that compliance with the new EEO-1 reporting requirements will cost less than $400 per employer the first year and a few hundred dollars per year after that.  The EEOC’s proposed revisions to the EEO-1 report were published as of February 1, 2016. Public Comment on the proposed changes will be open until April 1, 2016.

What This Means For Employers:

  • For the 2016 EEO-1 reporting cycle, all employers will submit information that is identical to the information collected by the currently approved EEO-1 report.
  • Starting in 2017, federal contractors and employers with 100 or more employees will submit the EEO-1 report with pay and related information before September 30th. These employers must report all W-2 earned income.
  • Although EEO-1 reporting is due on or before September 30th each year, the EEOC guidelines suggested that W-2 data can be imported into a human resources information system (HRIS), and a data field can be established to accumulate W-2 data for the EEO-1. Alternatively, employers could obtain this pay information by utilizing quarterly payroll reports for the previous four quarters. Employers that do their payroll in-house will be able to report this data utilizing most major payroll software systems or by using off-the-shelf payroll software that is preprogrammed to compile data for generating W-2s. For employers that outsource their payroll, there would be a one-time burden of writing custom programs to import the data from their payroll companies into their HRIS systems. Employers then must count and report the number of employees in each pay band. During the comment period, the EEOC seeks employer input with respect to how to report hours worked for salaried employees.
  • Beginning in 2017, all filers will be required to submit the proposed EEO-1 report electronically.

Given the EEOC’s new requirement, employers should start to audit their pay policies and practices as those employers who are engaging in pay disparity can expect an increase in pay discrimination cases based on the data collected as a result of the revised EEO-1 reports.

For more information regarding compliance with EEO-1 reporting obligations and how the new rule will affect your business, please contact Dina M. Mastellone, Esq., Director of the firm’s Human Resources Practice Group, at dmastellone@nullgenovaburns.com or 973-533-0777.

Second Circuit Outlines The Way for Employers to Hire Unpaid Interns

On July 2, 2015, in a matter of first impression, the Second Circuit issued a ruling in Glatt v. Fox Searchlight Pictures, Inc., Nos. 13-4478, 13-4481 (2d Cir. July 2, 2015), and provided a new test for whether a worker can be classified as an unpaid intern under the Fair Labor Standards Act (“FLSA”) and the New York Labor Law (“NYLL”). and thus entitled to compensation, including minimum wage and overtime.  The ruling by the Second Circuit rejected both the Department of Labor (“DOL”)’s six-factor test to determine whether or not an intern should be classified as an employee, and the U.S. District Court for the Southern District of New York’s previous reliance on the DOL’s test.

In 2013, the U.S. District Court for the Southern District of New York followed the DOL’s 2010 guidance for whether unpaid interns working in the for-profit private sector should be classified as employees.  The DOL test lays out six factors, including, for example, whether the internship experience is for the benefit of the intern, whether the intern displaces regular employees, and whether the employer derives an immediate advantage from the intern’s work. The DOL test requires that each and every factor must apply in order for a position to be an unpaid internship.  The District Court held that since not all of the DOL’s six factors applied, the plaintiffs in Glatt should have been classified as employees under the FLSA and the NYLL.

The Second Circuit, however, held that a “primary beneficiary test” should be utilized when determining whether or not employers need to pay their interns.  In other words, it must be determined whether the employer, rather than the intern, is the primary beneficiary of the relationship.  The Second Circuit found that the DOL six factor test was “too rigid” and unpersuasive, and was not entitled to deference.

To aid in determining whether the worker or the employer is the primary beneficiary, the Second Circuit articulated a “non-exhaustive” list of seven factors that should be considered and balanced when deciding whether the employer or intern is the primary beneficiary of the relationship:

  • The extent to which the intern and the employer clearly understand that there is no expectation of compensation;
  • The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutes;
  • The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
  • The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar;
  • The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;
  • The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and
  • The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship

The Second Circuit made clear that no one factor is dispositive and that every factor need not point in the same direction to conclude that the intern is not an employee. Thus, Courts are free to look to other factors, and the failure to satisfy any one factor is not dispositive.  While the Second Circuit’s list of factors only adopted three of the DOL’s factors, it retained the DOL’s requirement that the position provide an educational value, suggesting that it is crucial to include an educational aspect in an unpaid internship.  The Second Circuit opined that this new test takes into account the “relationship between the internship and the intern’s formal education…by focusing on the educational aspects of the internship our approach better reflects the role of internships in today’s economy.”

The Glatt decision signals positive news for employers in New York, Connecticut and Vermont when determining whether or not they need to pay interns.  Private sector for-profit companies with internship programs should evaluate their programs to ensure that they are in compliance with all state and federal laws.  As the Second Circuit explained, a bona fide internship must “integrate classroom learning with practical skill development in a real-world setting.” It will be interesting to see whether or not other Circuit Courts find this ruling persuasive.

For more information regarding this decision and to learn how your business can implement best practices when implementing internship programs, please contact John C. Petrella, Director of the firm’s Employment Litigation Practice Group at jpeteralla@nullgenovaburns.com or Dina M. Mastellone, Esq., Director of the firm’s Human Resources Practice Group, at dmastellone@nullgenovaburns.com or 973-533-0777.

Wage and Hour Issues in the Summer Camp Industry

Summer camps, typically a go-to option for many parents to send their kids when school lets out, are now faced with a myriad of other non-traditional competitors.  Specialty camps, teen tours, and other options have affected the entire industry and forced some traditional camps out of business.  To compensate for revenue losses, many camps have turned to alternative sources of income, such as bringing in outside groups and renting out their facilities during off-season months.  Camp administrators must be mindful, however, that their expanded operating season can have severe implications under federal wage and hour law.

Section 13(a)(3) of the Fair Labor Standards Act (“FLSA”) exempts “organized camps,” such as summer camps, from most of the FLSA’s minimum wage and overtime requirements.  However, to qualify for such exemptions, the camp must meet one of the following criteria:  (1) the camp must not operate for more than seven months in any calendar year, or (2) in the previous calendar year, the average receipts for any six months must not have been greater than one-third of the camp’s average receipts for the other six months of the year.  Determining whether the camp satisfies one of these criteria is not always clear.

In determining whether the camp has operated for more than seven months in the calendar year, not all activities count.  Maintenance completed in the offseason, for example, is not considered operations. Construction to build new facilities would be analyzed similarly.  However, renting the facility during the offseason may need to be counted in the equation, especially if the camp provides staff such as cooks, waiters, lifeguards, and maintenance workers.

Even if a camp does “operate” for more than seven months in a calendar year, it could still qualify for the FLSA exemptions if, in the previous calendar year, the average receipts for any six months were not greater than one-third of the average receipts for the other six months.  This calculation can be based on any six months in the year, which need not be consecutive.  For example, the six months with the highest average receipts might include the following:  (1) January:  $10,000; (2) May:  $10,000; (3) June:  $25,000; (4) July:  $50,000; (5) August: $50,000; (6) September:  $20,000.  The total revenue is $165,000 which averages $27,500 per month.  The six months with the lowest monthly receipts might include the following:  (1) February:  $5,000; (2) March:  $5,000; (3) April:  $5,000; (4) October:  $5,000; (5) November:  $5,000; (6) December:  $5,000.  The total revenue is $30,000, which averages $5,000 per month.  Because the average revenue for the lowest six revenue months ($5,000) is not greater than one-third of the average revenue of the other six months of the year (one-third of $27,500 is $9,167), this hypothetical camp would be exempt.  Obviously, camps with extended summer seasons and/or winterized facilities must be particularly mindful of this calculation.

Determining what constitutes a “receipt” and when it is received can also present challenges.  Certainly revenue from tuition, camp fees, and the camp store, would clearly be included in the average monthly receipt calculation.  Yet, for other types of revenue, such as vendor incentives and donations to the camp, the line is not as clear.  Similarly, if money is paid in January for a camper to attend in July, to which month should this “receipt” be applied?

The answers to these questions are not always clear; the analyses are fact-sensitive and require close attention to the particular details of each camp.  What is clear, however, is that camps forced to rely more heavily on outside income must be aware of these issues. The loss of the exemption in any given year requires full compliance with the FLSA’s minimum wage and overtime requirements and can lead to significant exposure for unpaid wages, including liquidated damages and fines in the event of a Department of Labor audit.

For more information, please contact John R. Vreeland, Esq., Director of the firm’s Wage & Hour Compliance Practice Group, jvreeland@nullgenovaburns.com, or Brett M. Pugach, Esq., bpugach@nullgenovaburns.com.

Addressing Wage & Hour Issues Before the Department of Labor Arrives

The U.S. and State Divisions of Wage & Hour have increased their enforcement efforts in recent years. While many investigations are the result of an employee complaint, a happy staff does not guarantee the Division will never knock on your door. Sometimes employers are just randomly selected because the Division has targeted a particular industry or geographic region. And it takes only one former, disgruntled employee in need of cash to start a federal or state investigation of your business.

In terms of things most people would like to avoid, a visit from the Division of Wage & Hour ranks up there with going to the dentist. Often employers view these visits as an intrusion and an unnecessary interference with their business. What employers often do not realize is that while the Division may use words like “visit” and “inspection,” they are conducting a formal investigation that has legal implications and they have the authority to subpoena your business and payroll records, to assess the company for any wages determined to be owing to your employees, to fine you and to take you to court to collect unpaid wages and fines. What sometimes starts as a one hour visit can turn into an ordeal lasting months, maybe years, requiring trips to the Division’s offices and even a courtroom.

Sticking with the dentist visit analogy, think of your wage policies and records as your teeth and gums. Neglecting them makes that inevitable visit more painful than it needs to be. But preventive care, like regularly reviewing and revising your payroll policies and conducting periodic self-audits, will make the visit more tolerable and certainly less expensive. A good self-audit pinpoints the same issues DOL investigators look for – are employees being paid for all compensable time, are employees improperly classified as exempt or independent contractors, is overtime being calculated correctly, are there improper deductions from employee paychecks, and is the employer maintaining the right records.

The prudent employer identifies issues and addresses them before they become problems. We frequently assist our clients in self-audits and can tell you that it is the rare employer that is in complete compliance with the FLSA and State wage and hour laws. Identifying issues on your own gives you the opportunity to self-correct, which immediately begins reducing your exposure in the event of a future audit. Self-audits are also looked upon favorably by the Division and can save your company tens of thousands of dollars when negotiating a reduction in the inevitable fines that flow from a Division citation.

For more questions about self-audits or the Wage & Hour investigation process, contact John R. Vreeland, Esq. or Patrick McGovern, Esq. in our Labor Law Practice Group.