Employer Academy

Wage and Hour Division (WHD) Cases

This week shows how successful the Wage & Hour Division enforcement initiatives can be. Two of these initiatives, one targeting the California restaurant industry, the other focusing on the Los Angeles Fashion District, recovered almost $1 million in a very short period of time. If the DOL came knocking to review payroll records, go over employment practices, and interview employees, how confident are you that everything is in total compliance (and has been for the past three years)?

Another noteworthy case came against a painting company that changed the status of employees working on weekends to independent contractors. This weekend work happened to be the same work these employees performed for the company on weekdays. The employer used this classification to sharply cut down overtime costs and employment taxes. Might be a cunning fiscal move if this willful misclassification was not completely illegal.

 
Violators
San Francisco and Los Angeles Restaurants (part of ongoing enforcement initiatives on the California restaurant industry)

Violations

• Failed to pay workers for pre-shift and post-shift work
• Paid employees cash wages “off the books”
• Paid fixed salaries for all hours worked without regard to minimum wage and overtime requirements
• Missed payroll or failed to pay employees on scheduled pay days
• Failed to maintain accurate records of employees’ wages and work hours

Recovery
$672,333 in unpaid minimum wage and overtime compensation for 273 employees working as cooks, bussers, servers and other restaurant staff.


Violators
Ten Garment Contractors in the Los Angeles Fashion District

Violations

• Paid employees a piece rate (paid for each piece they sewed or cut) without regard to minimum wage or overtime pay requirements
• Failed to pay workers minimum wage of $7.25 per hour and the California minimum wage of $8 per hour
• Failed to pay overtime premium for hours worked over 40 in a week
• Significant record-keeping violations, including falsified time cards, under-reported actual hours worked and inaccurate time records

Settlement
$326,000 in back wages for 185 employees


Violator
Clark Cooper Painting LLC (Jacksonville, FL)

Violations

• Paid painters a piece-rate basis for work performed on weekends, without regard to the number of hours worked or to overtime obligations
• Improperly changed status of employees as “independent contractors” on the weekends for the same work they performed as employees Monday through Friday
• Failed to maintain accurate records of regular and overtime hours worked and regular and overtime pay

Settlement
$45,983 in back wages to 26 painters


Violator
Third Generation Electric (Tulsa, OK)

Violations

• Failed to pay employees the required wages and fringe benefits applicable to the classifications of work they performed while working as a subcontractor on an American Recovery and Reinvestment Act-funded contract (violations of the Davis-Bacon and Related Acts)

Settlement
$26,770 in back wages to 19 current and former electricians and equipment operators

Does your organization need help with proper timekeeping and FLSA compliance?
Time and attendance systems
Compliance audits

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Read more Wage & Hour Legal Updates.

Mike Starosciak is the editor of Employer Academy. He can be contacted at mike@datamaticsinc.com.

Due to Hurricane Sandy and Election Day, this week was a little light on cases coming out of the Wage and Hour Division (just one). We decided that was a good reason to also look at a recent decision by the Sixth Circuit and predictions of labor initiatives for Obama’s second term.

Wage and Hour Division (WHD) Case
Violator
Lexington Place Assisted Living Homes Inc. (Dallas, TX)

Violations (based on WHD investigation)

• Improper deductions from employees’ wages for lunch periods even when lunch breaks were not taken
• Several employees were paid “straight time” wages rather than time and one-half their regular rates for hours worked beyond 40 in a week
• Failure to maintain accurate records of employees’ wages and work hours

Lawsuit
$40,000 in unpaid overtime to 88 caregivers + $20,750 in civil money penalties

Unpaid Time Case Hits Sixth Circuit
The United States Court of Appeals for the Sixth Circuit provided a decision that provides excellent guidance to all employers that automatically deduct for meal breaks. The wisdom: maintain a policy that instructs employees to record and report all time worked during meal breaks. It is imperative that employers communicate this policy to their workers and quickly compensate for all unwarranted deductions.

This policy is what gave Baptist Memorial Hospital a summary judgment against a former nurse (a decision that was then confirmed by the Sixth Circuit). The Court explained: “Under the FLSA, if an employer establishes a reasonable process for an employee to report uncompensated work time the employer is not liable for non-payment if the employee fails to follow the established process.”

Election Impact
This week, many blogs were buzzing over the impact of President Obama’s reelection on HR and Employment Law. Paul Secunda, Associate Professor of Law at Marquette University Law School, says “expect much of the same in a second Obama term. Not much legislation, with most important developments happening through federal agency adjudications and rulemaking.” [link]

Specifically related to wage and hour litigation, Stephanie R. Thomas, Ph.D., puts it clearly: “Let’s face it, we have a staggering national debt. This, combined with the fact that nearly every employer – no matter how diligent – is exposed to wage and hour mistakes, is seen by some as an easy source of tax revenue for the IRS and penalty income for the Wage and Hour Division. Independent contractor misclasification, exempt/non-exempt classification, and other violations have been – and will remain – a big concern for employers.” [link]

We should also remember that the Department of Labor had previously suggested adding the “Right to Know” legislation to the FLSA. These regulations, which have been postponed, would require employers to inform workers of their rights under the FLSA, as well as mandate a classification analysis of exempt employees. BLR’s Patricia Trainor, JD, SPHR predicts that “the regulation will likely reemerge in 2013, but it may be amended in response to employer concerns before it is finalized.” [link]

There’s also the Affordable Care Act. We are currently looking into ways our software can be enhanced or specially configured to automate compliance with the law’s requirements. Much of the focus will be on determining if a worker is a full-time employee and required to be provided health insurance. The Act uses 30-hour work weeks as the threshold (here’s some government guidance on determining eligibility). Some employers are already “testing” how they can work around the Act.

Also interesting/good to know…
Is there really no law that requires employers to provide workers with bathrooms and bathroom breaks?! [Donna Ballman]
Story of boozy Facebook pics and a ruined FMLA claim [Eric B. Meyer]
Wage and Hour liabilities created by Hurricane Sandy [David Barron]

Does your organization need help with proper timekeeping and FLSA compliance?
Time and attendance systems
Compliance audits

Subscribe to the Employer Academy Newsletter
Follow Datamatics on Twitter or check out our Facebook page.
Read more Wage & Hour Legal Updates.

Mike Starosciak is the editor of Employer Academy. He can be contacted at mike@datamaticsinc.com.

Do you keep up on the news coming from the United States Department of Labor? You learn what new legislation is being introduced, changes in the enforcement of labor violations, work place and national labor trends, how employers are violating the FLSA and where the department is spending its money.

Here’s a look at Wage and Hour highlights from the DOL’s weekly newsletter from November 2, 2012:

Wage and Hour Division (WHD) Cases

Violators
NaBrasa Brazilian Steakhouse and Iron Abbey Gastro Pub (Restaurants, PA)

Violations

• Improper classification of FLSA-covered employees working as meat carvers, also known as “gauchos,” as exempt from overtime pay and consequently denied them proper compensation for hours worked beyond 40 in a week.
• Several employees including dishwashers, line cooks and other kitchen staff were required to work long hours – often in excess of 60 per week – and were paid a fixed salary that did not include overtime pay or yield at least the minimum wage of $7.25 per hour.
• Failure to maintain accurate records of employees’ wages and work hours.

Settlement
$110,000 in back wages to 42 workers

Violators
Kevin Corriveau Painting Inc., company owner and President Kevin Corriveau, Vice President Brian Corriveau and Treasurer Sharon Mercuri (Painting Contractor, NH)

Violations (based on WHD investigation)

• Willful and repeated violations of the FLSA
• Failure to compensate employees for all hours worked
• Failure to pay proper overtime rates for hours worked over 40 in a week
• Paid several employees on a “piece-rate” basis that amount to less than the required federal minimum wage of $7.25 per hour
• Failure to create and maintain records of workers’ wages, work hours and other conditions of employment.
• Required employees to alter and rewrite timecards to show only non-overtime hours worked (on at least one occasion)

Lawsuit
Suit filed in the U.S. District Court for the District of New Hampshire

Violators
Mehendra Raolii, owner of Swash Farms Inc and Jalaram Produce Inc (Vegetable Farm, FL)

Violations

• Failure to maintain accurate records of employees’ work hours and other required information, in violation of both the FLSA and MSPA (Migrant and Seasonal Agricultural Worker Protection Act)
• Paid hourly or “piece-rate” wages that fell below the federal minimum wage
• Employees were not paid overtime compensation for hours worked beyond 40 hours in a week
• MSPA Violations: failing to disclose employment conditions to workers, pay wages when due and provide requisite wage statements, obtain prescribed insurance coverage for transportation vehicles, and put a poster up in a conspicuous place at the job site explaining workers’ rights and protections under the MSPA.

Settlement
$221,000 in back wages, damages owed to 74 workers

Does your organization need help with proper timekeeping and FLSA compliance?
Time and attendance systems
Compliance audits

Subscribe to the Employer Academy Newsletter
Follow Datamatics on Twitter or check out our Facebook page.
Read more Wage & Hour Legal Updates.

Mike Starosciak is the editor of Employer Academy. He can be contacted at mike@datamaticsinc.com.

A recent case, Dinkel v. MedStar Health, Inc., decided by the District of Columbia (DC) Federal District Court provides insight into properly utilizing auto-deduct time policies for meal breaks. These policies deal with organizations using time and attendance software systems to make automatic deductions from an employee’s timesheet that correspond with a meal period during which the employee will not be performing any work duties.

In the case at hand, MedStar Health, a healthcare organization owning nine hospitals in the District of Columbia and Baltimore, was accused of meal break violations under the Fair Labor Standards Act (FLSA). Plaintiffs’ complaint was based on the MedStar policy of automatically deducting 30 minutes from associates’ total work time for each day to reflect a 30-minute unpaid meal break. Plaintiffs argued that the auto-deduct policy was “coupled with a common practice of imposing limitations on, discouraging, and ignoring efforts to recover pay for missed meal breaks” and as a result, the plaintiffs were under-compensated.

Employers should pay close attention and beware of these alleged violations, as many businesses have faced and continue to face similar lawsuits. Before going any further, let’s make clear that, as the court states, an auto-deduct policy is “not by itself the least bit unlawful.” It is actually a policy that is logical and makes life easier for employees, as they do not have to punch the clock before and after having lunch. That in turn makes HR and Payroll’s lives easier as the amount of possible missed punches is reduced dramatically.

Unfortunately, however, there have been some supervisors and employers who do not understand the law. Others may even go so far as to willfully disregard the law to save wages. This has resulted in some high dollar verdicts, leading many lawyers, like this guy, to actively court employees whose employers automatically deduct lunches.

This does not mean employers should abandon auto-deduct policies; rather employers need to understand the Act and ensure managers abide by it. Trouble will only arise if an organization fails to compensate or edits an employee’s timesheet resulting in the employee not being paid wages that are due (for example if the employee actually worked through lunch).

To minimize compliance risk associated with automatic time deductions for meal breaks, employers should:

1. Have a clear, written policy as to how missed meal breaks will be reported

2. Train managers on the company policy, FLSA requirements, and the ramifications of negligent and willful violations

3. Periodically review that managers consistently and accurately correct timesheets after missed meal breaks are reported

4. Conduct an annual audit on all timekeeping and HR practices to ensure FLSA compliance

On a side note, this case provided an interesting ruling on whether to certify a class for a collective action that would cover all non-exempt, hourly employees at all nine hospitals. The court limited the scope of the certification down to only two departments of one hospital. The DC court rejected the full class due to the fact that the employees were spread amongst many locations and have several managers they reported to. Therefore, the court found that the plaintiffs were not similarly situated enough to proceed as a class.

Does your organization need help with FLSA Compliance?
Datamatics provides expert legal and labor consultants that conduct unbiased FLSA Compliance audits, as well as advanced time and attendance software tp allow organizations to automate timekeeping policies and regulations.
Contact info@datamaticsinc.com or call 800.673.0366 for more information.

Subscribe to the Employer Academy Newsletter
Follow Datamatics on Twitter or check out our Facebook page.
Read more Wage & Hour Legal Updates.

Somer V. Jefferiss, Esq, PHR is a Legal & Labor Consultant. She can be contacted at svail@datamaticsinc.com.