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Wage and Hour

Who Is That Knocking On My Door???

Who Is That Knocking On My Door???

By Walter J. Liszka of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Wage and Hour on Thursday, December 5, 2013.

For those of us over 50, “Who’s that knocking on my door?” reminds us of the three little pigs and the wolf who would huff and puff and blow your house down. Unfortunately, the child-like tale of the three little pigs and the wolf has had a difficult time transferring to the Internet, but is now being replaced – you guessed it – by our big brother, the United States Government. There are more and more investigations being conducted on a daily basis by the various agencies of the United States Government and one of the most active is the United States Department of Labor (USDOL).

Over the last few years, investigations by the USDOL primarily dealing with enforcement of Wage and Hour Laws have greatly increased due to “enhanced budgets” ($117 billion allocation in 2011/2012) and adding 250 additional investigators. It should be very clear to any employer that has been the recipient of a USDOL investigation that this has become a very protracted process and usually results in serious financial issues. The author suggests five (5) tips for dealing with a USDOL investigation.

1. Never underestimate the possible breadth of an investigation and understand that there may be problems with payroll practices.

In today’s complicated economy, problems have developed dealing with various facets of Wage and Hour Law (failure to pay overtime pay; tip credits; failure to pay an intern; failure to keep competent records). The findings of a Wage and Hour investigation may often result in a requirement that an employer pay additional wages to its employees, interest and/or liquidated damages, and, if serious enough, the potential of possible criminal liability. If an employer has the possibility of violating Wage and Hour Laws, it should engage in straightforward and honest discussions to resolve the investigation before it heads for an administrative hearing or court proceeding. Administrative Law Judges and the Courts will generally give deference to the USDOL findings against an employer with regard to any “alleged violation” unless there is actual proof of arbitrary behavior/investigative techniques; capriciousness; or lack of proof to substantiate the USDOL findings. An employer can achieve a much better and less costly result by working with the investigator directly and not letting the matter proceed to litigation. If a problem is found, work with the investigator to solve it, not fight about it!

2. Cooperate fully.

USDOL investigators have a great amount of discretion as to how they proceed through the investigative process. An employer who is uncooperative or attempts to aggravate and forestall the investigation will find itself in a costly nightmare if the investigator feels that the business is failing or refusing to cooperate. Consequences may be severe – subpoenas may be issued requiring the production of documents or subpoenas for actual questioning; court action may occur which will cost the employer substantially, and, as a last alternative, if an employer is truly refusing to cooperate, the USDOL may just accept the Complainant’s allegations at their face value and assess costs to the employer. Be cooperative, not just on liability issues, but also on a willingness to provide to the USDOL information that may lead to limiting the scope of the investigation and documents required.

3. Have competent counsel.

I am suggesting that an employer retain competent and able counsel to represent their interests in an investigation. Competent counsel can help in clarifying the investigation and in limiting the extent of the investigation. Competent counsel may be able to “short circuit” the process and get it over quickly. Competent counsel may also provide an ability to substantiate Tip No. 2: cooperation in the investigation. Please make absolutely certain that counsel has the right to speak to and get accurate information from accountants and/or other individuals who are typically entrusted with preparing or maintaining payroll records in the first place. This may help in providing counsel a basis to control or limit the investigation.

4. Make the investigation a positive – an opportunity to come to compliance.

Rather than resisting the investigation or continuing to deny that there is a problem, employers may use the efforts of the investigator to come into compliance and mitigate their damages – the day that an investigator concludes that an employer is in compliance, the liability is cut off. From a practical standpoint, using the investigation to come into compliance will condition the USDOL personnel to establish that the employer is trying to work with them rather than against them.

5. Control the process.

If an employer can gain control over an investigation, it will have the ability to limit the scope of records that will be provided and, therefore, limit its potential exposure. Treating the investigator with respect and dignity will help the employer gain control. Also, dependent on the case at hand, a self-assessment of the employer predicated on the initial scope of the investigation submitted to the USDOL based on its payroll records may not only limit the extent of the investigation, but the financial penalty.

Following the aforementioned five (5) tips may position the employer to have “no reason to be concerned as to who is knocking on the door.”

Questions? Contact Walter J. Liszka in the Chicago office at waliszka@wesselssherman.com or by phone at (312) 629-9300. 

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Wage and Hour

Illinois Employers Beware! Don’t Take Your Employee’s Tips! It is Illegal Under Illinois Law

Illinois Employers Beware! Don’t Take Your Employee’s Tips! It is Illegal Under Illinois Law

By Anthony J. Caruso Jr. of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Wage and Hour on Tuesday, February 25, 2020.

Effective January 1, 2020, the Illinois Wage Payment and Collection Act has been amended regarding employee tips/gratuities.

The provisions of the law states as follows:

Gratuities to the employees

  • Property of the employees – not the employer.
  • Gratuities must be paid to the employee not more than 13 days after the pay period; otherwise it is a violation of the law.

Exceptions under the law

  • Employer can withhold gratuities paid by credit card in a proportional amount of any credit card processing fee unless the fee exceeds the tip.
  • Employees are permitted by the law to do tip pooling.
  • The amendments do not change an employer’s allowance for gratuities to the extent permitted under minimum wage laws.

Based upon the above, Illinois employers should be careful in paying tips to their employees.

Questions? Contact Attorney Anthony J. Caruso, Jr., in our St. Charles office at (630) 377-1554 or by email at ancaruso@wesselsssherman.com

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Fair Labor Standards Act (FLSA)

Employers: Under Final DOL Rule, As Of January 1, 2020, Most Employees Earning Less Than $35,568 Annually Will No Longer Be Exempt From Overtime

Employers: Under Final DOL Rule, As Of January 1, 2020, Most Employees Earning Less Than $35,568 Annually Will No Longer Be Exempt From Overtime

By Jennifer Adams Murphy of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Fair Labor Standards Act (FLSA) on Wednesday, September 25, 2019.

As most of you will recall, in 2016, under the Obama administration, the Department of Labor (“DOL”) increased the salary level required for exemption under the Fair Labor Standards Act (“FLSA”) from $23,660 to $47,476. However, the Obama DOL rule was invalidated by federal courts (because the salary level was so high as to supplant the duties analysis in the FLSA exemption criteria). The final DOL rule released yesterday, increases the salary amount required for exemption under most of the FLSA exemptions — but by substantially less than the Obama rule provided.

Under the final DOL rule announced yesterday, the salary that employees must earn in order to qualify for most FLSA exemptions has jumped from $455 to $684, weekly, and from $23,660 to $35,568, annually. This salary level is based upon the 20th percentile earnings of full-time salaried workers in the lowest-wage region (the South) and the retail industry nation-wide.

The DOL estimates that under this rule approximately 1.2 million workers will now become eligible for overtime. Unlike the 2016 DOL rule, the rule does not provide for automatic adjustments. However, the DOL affirmed its intent to more regularly update the compensation threshold.

Additional significant points in new DOL rule:

  • Under the rule, employers will be able to use nondiscretionary bonuses and incentive payments, including commissions, paid at least annually, to satisfy up to 10 percent of the new standard salary level. If an employee does not earn enough in incentive payments to reach the salary threshold, the employer may make a catch up payment within one pay period from the end of the 52 week period;
  • The salary level required for the “highly compensated employee” exemption has also been raised, although less significantly, from $100,000 to $107,432 (this level equals 80% of full-time salaried workers nationally);
  • A higher salary threshold applies to the motion picture industry; and
  • Lower salary thresholds apply to U.S. Territories.

Remember: the salary test is only one component of the exemption analysis. Even if your employees meet this salary threshold for exemption, before classifying any employee as “exempt” be very careful to ensure that the job duties component of the applicable exemption is satisfied as well. I also suggest careful analysis before relying upon incentives to meet the salary threshold.

Questions? Contact attorney Jennifer Adams Murphy at 630.377.1554 or by email at jemurphy@wesselssherman.com

Related Posts: FLSA White-Collar Exemption Rule – Effective December 1, 2016

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Employment Policies and Procedures Wage and Hour

Chicago Fair Workweek Ordinance

Chicago Fair Workweek Ordinance

By Walter J. Liszka of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Wage and Hour on Wednesday, August 28, 2019.

After a two and one-half year span of time covering two (2) administrations and pitting business interests against those of labor, the City of Chicago on July 24, 2019 passed the Fair Workweek Ordinance. This legislation will require companies in the covered industries to give all of their covered workers ten (10) calendar days of Notice of Work Schedules beginning July 1, 2020 and fourteen (14) calendar days as of July 1, 2022.

Here are some of the highlights of the law:

  • Industries covered: Building services, Healthcare, Hotels, Manufacturing, Restaurants with at least thirty (30) locations and 250 Employees, Non-profit with more than 250 Employees, Retail and Warehousing.
  • Employers covered: Those with more than 100 employees global; or 250 employees for non-profits; and
  • Employees covered: Individuals with salaries of less than $50,000 a year or an hourly rate less than $26.00 an hour.
  • Advance notice of scheduled changes: At least ten (10) calendar days prior to implementation beginning July 1, 2020 and fourteen (14) calendar days beginning July 1, 2022.
  • Extra Pay: If a shift is changed after the deadline for advanced notice, the involved employee gets one (1) extra hour of pay in addition to their regular compensation. Also, Employee gets at least fifty (50%) of pay for scheduled hours if shift is canceled or reduced with less than twenty-four (24) hours’ notice.
  • Right to Rest: Employee can decline a shift with less than a ten (10) hour break from the last shift worked but, if they chose to work it, they get paid one and one-quarter times their regular rate.
  • Exceptions: Schedules may be changed by mutual agreement in writing OR changes that are forced by civil unrest or threats; OR utility outages; OR acts of nature; OR canceled banquet; OR hours lost because of discipline for just cause.
  • Offer of More Hours: A covered Employer must first make offer of more hours to qualified Employees who are covered by the Ordinance and if those Employees choose not to perform the work, then the work may be offered to temporary or seasonal workers.
  • Penalty for Non-Compliance: Not less than a Three Hundred Dollar ($300) nor more than Five Hundred Dollar ($500) fine for any offense.
  • Litigation: An Employee can sue his/her Employer only after documenting a Complaint with the City of Chicago Department of Business Affairs and Consumer Protection.
  • Effective Date of the Law: July 1, 2020 except for safety net hospitals which must comply by January 1, 2021.

This Ordinance was passed unanimously on Wednesday, July 24, 2019 through the staunch efforts of Mayor Lori Lightfoot. She acknowledged that the Ordinance was a difficult one for both business and labor, and was the result of hard work between business and labor groups and the City Council. This Ordinance is the most expansive scheduling Ordinance in the Nation.

Questions? Contact attorney Walter Liszka in our Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com

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Wage and Hour

Summer Interns Still an Option?

Summer Interns Still an Option?

By Walter J. Liszka of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Wage and Hour on Thursday, May 30, 2019.

As we approach the summer months with temperatures rising and days getting longer, the issue of summer interns gains more interest for both employers and the interns alike. For the interns, they gain experience, training and exposure to the employment industries and real work life. For employers, they gain new help, new ideas and hopefully development of a pipeline for future employees. But one of the biggest problems with regard to summer interns for employers is whether or not the summer intern is a paid or unpaid position. This year, the United States Department of Labor has rejected its old six (6) factor test and replaced it with a new seven (7) factor test which is known as the “Primary Beneficiary Test“.

While the new Primary Beneficiary Test is considered as more flexible than the prior test, it also focuses on what can be identified as “economic realities” — in essence is the employer the primary beneficiary of the work? If so, the intern must be compensated. If, on the other hand, the intern is the primary beneficiary of the relationship, the internship may be unpaid. The following are the seven (7) factors used in the analysis:

  1. Extent to which the intern and the employer clearly understand that there is no expectation of compensation. If, for example, there is any promise of compensation, (i.e., salary or bonus) either express or implied, the intern will be an employee.
  2. Extent to which the internship provides training that is similar or comparable to training that would be given in an educational environment.
  3. Extent to which the internship is tied to the intern’s formal educational program by receipt of academic credit for the internship or integrated as part of coursework.
  4. Extent to which the internship accommodates the internship’s academic commitments by corresponding to the academic calendar.
  5. Extent to which the internship’s duration is limited to a defined period of time and which provides the intern with a beneficial learning experience.
  6. Extent to which the intern work complements, rather than displaces, the work of other paid employees while providing educational benefit to the intern.
  7. 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.

While the new seven (7) Primary Beneficiary Test is somewhat more flexible than the old six (6) factor test, every internship must be evaluated to assure compliance with Department of Labor rules prior to its commencement.

It is also important that there is an understanding if there may be various state laws or rules that may impact the internship concept. As an aside, there are a number of states that are considering State Legislation aimed at curbing sexual harassment in the workplace. Do these laws impact, in any way, the internship’s status? Is intern training required under these laws?

Internships are extremely valuable with regard to “expanding the horizon” of the knowledge of the intern and allowing them a clear understanding of what day-to-day work and obligations are. They are also extremely beneficial to employers because it gives the employer a chance to view the intern not only in the work environment and their work dedication, but also how that intern would fit within the corporate culture if brought on as an employee. Internships are extremely beneficial to both the intern and the employer if handled the right way. It is very important that the relationship with the intern is completely and accurately documented to avoid future problems.

Questions? Contact Attorney Walter Liszka in our Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com.

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Overtime Wage and Hour

DOL Rolls Out Proposed Overtime Revisions

DOL Rolls Out Proposed Overtime Revisions

By Alan E. Seneczko of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Wage and Hour on Friday, March 8, 2019.

In May 2016, the Department of Labor issued its controversial revisions to the white collar exemptions of the overtime regulations, more than doubling the minimum salary required for exemption; going from $455/wk. ($23,680/yr.) to $913/wk. ($47,476/yr.). A court in Texas subsequently found the rule invalid, and employers have been awaiting the Trump administration’s position on the issue ever since. The wait is now over, at least at the moment.

The DOL just issued a Notice of Proposed Rulemaking, proposing to set the minimum salary requirement at $679/wk. ($35,308/yr.) – essentially the midpoint between the current requirement and the 2016 rule, up to 10% of which may be satisfied by non-discretionary bonuses and incentive payments (including commissions). The rule also raises the minimum salary requirement for highly compensated employees (who need only perform one or more exempt duties) from a total annual compensation of $100,000 to $147,414. Lastly, the rule proposes to review the minimum salary levels every four years.

Recognize that the NPRM is not final. It simply seeks comments on the proposal, after which a final rule will be issued. It does, however, give employers a better idea of what will likely be coming in the not so distant future.

Questions? Contact attorney Alan Seneczko in our Wisconsin office at (262) 560-9696 or by email at alseneczko@wesselssherman.com

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Wage and Hour

Illinois Legislature Fast-Tracks Minimum Wage

Illinois Legislature Fast-Tracks Minimum Wage

By Walter J. Liszka of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Wage and Hour on Wednesday, February 20, 2019.

Certainly the beginning of the Legislative Session in the State of Illinois during calendar 2019 is attempting to move quickly on the campaign promises of J.B. Pritzker. As everyone will recall, the recently elected Governor’s campaign pledge to increase the state’s minimum wage has been fast-tracked with the passing, by the Illinois Senate of the “Lifting Up Illinois Working Family’s Act” and sending the bill to the State House of Representatives. The Illinois House of Representatives passed the bill on Valentine’s Day, February 14, 2019, by a vote of 69-47-1. The bill was signed with extensive media coverage by Governor Pritzker on February 19, 2019.

Under the bill, the hourly minimum wage would be increased to $9.25 per hour as of January 1, 2020; $10.00 per hour as of July 1, 2020; $11.00 an hour as of January 1, 2021 and an additional $1.00 per hour each January 1st thereafter until reaching $15.00 an hour effective January 1, 2025. The bill will permit employers to play a slightly lower wage rate to employees under the age of 18 provided that those employees work less than 650 hours per year that would “top out” at $13.00, and allow employers to pay tipped employees sixty (60%) percent of the minimum wage if tips made up the remaining forty (40%) percent of the required Minimum Wage. As well, to have a tax credit for employers that employ less than Fifty (50) full-time equivalent employees.

In addition to increasing the Minimum Wage, the law would impose additional remedies for employees who are not paid the correct minimum wage. Employees would now be able to recover triple the amount of any underpayment and reasonable attorneys’ fees and costs As well, an additional payment effectively interest of 5% of the amount of underpayment for each month would be tacked on as additional damages. Employers would also have to pay a statutory penalty of $1,500 to the Illinois Department of Labor Wage Theft Enforcement Fund and would have imposed on them a $100 fine/penalty for each affected employee if an employer fails to maintain proper payroll records.

If this bill becomes law (i.e. is signed by Governor Pritzker) Illinois would become the third (3rd) largest state (i.e. “based on employment statistics,” behind California and New York) to pass a $15.00 per hour minimum wage bill. As an aside, there are two (2) localities within the State of Illinois which have previously passed Minimum Wage Ordinances that are higher than the proposed state rate. Chicago currently at $12.00 per hour and going to $13.00 in July 1, 2019 and Cook County currently at $11.00 per hour and going to $12.00 per hour on July 1, 2019. These rates, which would be higher than the State of Illinois Minimum Wage Rate, would control until those rates were exceeded by the State of Illinois Minimum Wage.

Obviously, the “cost of doing business” in the State of Illinois is increasing and the affect, if any, on business growth within Illinois is subject to question.

Questions? Contact Attorney Walter Liszka in our Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com.

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Wage and Hour

Breaking News: Minimum Wage in Illinois set to Increase to $15 by 2025

Breaking News: Minimum Wage in Illinois set to Increase to $15 by 2025

By Richard H. Wessels of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Wage and Hour on Friday, February 15, 2019.

Last week we reported that a new Illinois Minimum Wage law is all but certain to pass before the end of February. A $15 per hour minimum wage bill was introduced and had the support of newly elected governor J.B. Pritzker.

The Illinois General Assembly has now passed the bill. Governor Pritzker is expected to sign it in a matter of days.

Here are the details:

Graduated Increase

  • $8.25 per hour to $9.25 per hour on 1/1/2020
  • $9.25 per hour to $10.00 per hour on 7/1/2020
  • $10.00 per hour to $11.00 per hour on 1/1/2021
  • $11.00 per hour to $12.00 per hour on 1/1/2022
  • $12.00 per hour to $13.00 per hour on 1/1/2023
  • $13.00 per hour to $14.00 per hour on 1/1/2024
  • $14.00 per hour to $15.00 per hour on 1/1/2025

Tips Count Towards Minimum Wage

Restaurants and other employers with tipped workers count gratuities towards wages.

Tip Tax Credit For Employers

Tax credit to help businesses with 50 or fewer employees to offset some of the cost of the wage increases.

Workers Younger Than 18

If they work fewer than 650 hours in a year, the current $7.25 per hour would increase on 1/1/2020 to $8.00 per hour and peak at $13.00 per hour in 2025.

Minimum wage laws can be monumentally confusing. The usual principle is supremacy of federal law. The federal law calls for a $7.25 minimum wage. However, the federal Fair Labor Standards Act has a specific provision that more employee-friendly laws by state or local governments will trump federal law. That is why such a confusing patchwork has been created. Below is a summary.

1. US Law – $ 7.25 per hour – Bills are routinely pending in Congress to increase this, but with the current administration, no changes appear likely.

2. Illinois Law – $8.25 per hour. The new law will gradually hike it to $15.

3. City of Chicago – $12 per hour. The City of Chicago ordinance automatically increases to $13 per hour on July 1, 2019.

4. Cook County – $11 per hour. This increases to $12 per hour July 1, 2019.

The Cook County ordinance provides that municipalities can opt out, and most have. The reality, however, is that where there is a high minimum wage law in geographic proximity to an employer’s place of business, wages will be dramatically impacted. Employers will find hiring of new employees to be difficult, if not impossible, if they are paying lower than a minimum wage law in that particular area even though that law doesn’t apply to them.

Anthony J. Caruso, Jr., in our St. Charles office is monitoring the situation closely. If you have any questions, please contact Tony at (630) 377-1554 or by email at ancaruso@wesselssherman.com

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Wage and Hour

Patchwork of Illinois Minimum Wage Laws

Patchwork of Illinois Minimum Wage Laws

By Richard H. Wessels of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Wage and Hour on Wednesday, February 6, 2019.

Media outlets are reporting that a new Illinois Minimum Wage law is all but certain to pass before the end of February. A $15 per hour minimum wage bill has been introduced and has the support of newly elected governor J.B. Pritzker. Minimum wage laws can be monumentally confusing. The usual principle is supremacy of federal law. The federal law calls for a $7.25 minimum wage. However, the federal Fair Labor Standards Act has a specific provision that more employee-friendly laws by state or local governments will trump federal law. That is why such a confusing patchwork has been created. Below is a bare-bones summary.

  1. US Law – $ 7.25 per hour – Bills are routinely pending in Congress to increase this, but with the current administration, no changes appear likely.
  2. Illinois Law – $8.25 per hour. But, a huge increase is a priority for the Pritzker administration. A $15 per hour minimum wage is on the horizon.
  3. City of Chicago – $12 per hour. The City of Chicago ordinance automatically increases to $13 per hour on July 1, 2019.
  4. Cook County – $11 per hour. This increases to $12 per hour July 1, 2019.

The Cook County ordinance provides that municipalities can opt out, and most have. The reality, however, is that where there is a high minimum wage law in geographic proximity to an employer’s place of business, wages will be dramatically impacted. Employers will find hiring of new employees to be difficult, if not impossible, if they are paying lower than a minimum wage law in that particular area even though that law doesn’t apply to them. We will keep you posted on the status of the Illinois law. If any of you would like a list of the Cook County municipalities which have opted out, let me know and we will e-mail it to you. Contact me at riwessels@wesselssherman.com

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Wage and Hour

A NEW YEAR’S RESOLUTION TO AVOID EXTREMELY EXPENSIVE WAGE CLAIMS

A NEW YEAR’S RESOLUTION TO AVOID EXTREMELY EXPENSIVE WAGE CLAIMS

By Jennifer Adams Murphy of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Arbitration on Monday, January 14, 2019.

Audit compensation classifications and policies

√ Implement arbitration agreements

The New Year is a time for fresh starts – diets, exercise programs and wonderful sounding self-improvement programs. This is great – but in your quest for improvement, don’t forget about your business! While resolutions to audit employee classifications and compensation policies and to adopt an arbitration policy may not carry the exciting vision of a new you, they may be the most significant (and long-lasting) of your resolutions this year.

To that end, you should consider:

A SELF-AUDIT OF EMPLOYEE CLASSIFICATION AND COMPENSATION PRACTICES.

Wage and hour claims under the Fair Labor Standards Act (“FLSA”) (and usually under state wage laws piggybacked onto FLSA claims) continue to rise and the claims, which are usually filed as collective or class actions, carry enormous liability exposure. These claims are generally extremely expensive to litigate and settle due to the fact that employees can seek damages for up to three years of unpaid wages or overtime for him/herself and for other similarly situated employees. In most cases, the amount owed will be doubled due to a “liquidated damages” provision of the FLSA. And, to make matters worse, you will likely have to pay not only your defense attorney but the plaintiffs’ class/collective action attorney under a fee-shifting provision of the FLSA.

Small mistakes in employee classification or compensation policies add up quickly when the claim involves many current and former employees and may quickly reach tens or hundreds of thousands of dollars if a collective or class action is certified and after liquidated (doubled) damages and the plaintiff’s attorney’s fees are taken into account.

To minimize these risks consider the following:

1.  Are you incorrectly classifying non-exempt (hourly) employees as exempt (paid salary without overtime)?

Remember: An employee is not exempt simply because you pay them by salary and the salary meets the minimum Department of Labor threshold; the employee must also meet the duties tests. The duties test requires analysis of the employee’s job and whether it fits within one of the overtime exemptions.

Example: Even if you have an employee who you pay a substantial salary, if the employee is primarily performing “blue-collar” work or is an administrator performing routine tasks with no supervisory authority, the employee is likely non-exempt despite the high salary. There are general and specific overtime exemptions under the FLSA. It is worth your time to evaluate each job. If in doubt, non-exempt is always the safest classification.

2.  Do you have an agreement with an employee that seems a “win-win” but violates compensation laws?

Remember: An employee cannot waive their rights to be lawfully compensated under the FLSA. The employee may agree to your arrangement today, but tomorrow could file a wage claim or you might find yourself under a DOL audit. Neither the DOL not the courts will care that the employee agreed or even requested the illegal pay arrangement.

Example: If you have a non-exempt employee who wants to work more hours but you can’t afford to pay overtime, don’t agree to pay the weekly hours over 40 under the table. This practice (very common in certain industries) is not only illegal but can result in an extension of the FLSA statute of limitations from 2 to 3 years.

3. Do you pay overtime wages to employees who work overtime without authorization?

Remember: If your non-exempt employee works overtime, you have to pay overtime compensation whether the work was authorized or not. If you have a problem with unauthorized overtime, you should discipline (or terminate if the problem continues) the offending employees but you still have to pay them overtime.

4. Do you require employees to keep accurate account of their time?

Remember: If you have employees who refuse to sign in or out, or sign in too early or sign out too late, you need to discipline (or terminate if the problem continues) the offending employees. It is your obligation as the employer to ensure that time is accurately tracked. If you fail to ensure accurate timekeeping, you may have a very expensive lawsuit to defend, even if the problem was created by employees failing to properly follow your timekeeping rules. Additionally, consider having employees sign off on their timesheets – on paper or electronically. You might consider added language above their signature affirming that the time records reflect all hours worked.

5. Do you allow employees to be interrupted with work tasks while on an unpaid break?

Remember: If your employees are sometimes interrupted to address work questions or tasks during an unpaid break, such as a meal break, if you do not pay for their time during the break, you may be susceptible to substantial liability. This may seem trivial but consider all of your past and current employees over the last 2 -3 years and all of their lunch breaks. Then, consider that if all of those hours should have been compensated, you would not only owe the employees for the unpaid break time but also overtime pay if the additional time puts the employees over 40 hours for the week — plus liquidated damages and attorney’s fees, of course.

6. Are you incorrectly classifying employees as independent contractors?

Remember: Even if your employee doesn’t want to be treated as an employee, if that is what the worker is, you can’t agree to pay them as an independent contractor. An agreement to call an apple an orange, even if in a signed document, will not make the apple an orange and will be no defense in a lawsuit.

Also, the costs of transitioning “independent contractors” to employees may not be as high as you think – careful review and modification of schedules and pay rates may result in minimal additional costs.

ADOPTION OF ARBITRATION AGREEMENT WITH A CLASS/COLLECTIVE ACTION WAIVER?

There is no way to completely avoid a wage claim. However, with a well-drafted arbitration agreement you can avoid having to litigate in court and, most importantly, can avoid a class or collective action. This validity of a class/collective action waiver in an arbitration agreement was solidified in May, 2018 in three consolidated cases. See Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018). While the cost savings of arbitrating a single employee claim vs. court litigation are debatable, the benefits of a class/collective action bar are clear.

However, those of you in the transportation industry will not be able to enjoy the benefits of an arbitration clause as to your employees because employment contracts of workers in interstate commerce are expressly exempted from coverage under the Federal Arbitration Act. However, the United States Supreme Court is expected to issue a decision this year in New Prime Inc. v. Oliveira, U.S., No. 17-340, as to whether drivers that classified as independent contractors may be bound by an arbitration (and class/collective action waiver) agreement. Transportation employers should keep their eyes open for this decision.

In short, careful consideration of compensation policies and procedures may avoid costly litigation. But, to further buttress your business against wage and hour litigation, consideration should be given to the adoption of an arbitration agreement including a class/collective action waiver.

Questions? Need help reviewing employee classification or drafting an arbitration agreement? Contact Attorney Jennifer Adams Murphy in our St. Charles office at jemurphy@wesselssherman.com or (630) 377-1554

Related Posts: Illinois Workplace Transparency Act, Arbitration Agreements and Class Action Litigation, New Prime Loses In Its Attempt To Compel Arbitration In Interstate Trucking Case, Yes, Have Your Independent Contractors (Or Employees) Sign An Agreement To Arbitrate Disputes And Waive Their Rights To Class Action Suits!!

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