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EPL: New DOL Interpretations, FSLA and Wage & Hour Claims


EPL New DOL Interpretations, FSLA and Wage & Hour ClaimsThe Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, record-keeping, and youth employment standards affecting employees in the private sector and in federal, state, and local governments. Over the last two years we have seen a rise in wage-and-hour claims brought under the FLSA and state law for overtime compensation and minimum wage violations. In 2014, in fact, some states FLSA cases encompass nearly half of all employment practices liability cases filed. The combination of the complexity of the FLSA and at times unsettled law leads many employers to violate the FLSA without even realizing it.

Why the confusion among employers when it comes to FLSA compliance? Businesses for years operated with a certain understanding of which employee positions were exempt from the FLSA. However, this has been changing, as a result of the Department of Labor (DOL) revising regulations and the plaintiff’s bar challenging what is considered an exempt employee. For example, the loan officer in the mortgage industry, the home companion who works for a third-party home care company, and certain assistant managers at retail establishments are just some of the many positions that used to be considered exempt and are now considered non-exempt.

Moreover, the workplace environment may now become even more confusing and riddled with lawsuits. Earlier this month, the DOL issued an aggressive interpretation of the FLSA test for classification on employee vs. independent contractors. Basically, the DOL considers most workers to be employees under the Fair Labor Standards Act, with many seeing the agency applying a very broad definition when investigating a company’s practices. Factors to be considered under the DOL’s interpretation of the FLSA test include: the extent to which the work performance is an integral part of the employer’s business; the worker’s opportunity for profit or loss depending on his or her managerial skill; the extent of the relative investments of the employer and the worker; whether the work performed requires special skills and initiatives; the permanency of the relationship; and the degree of control exercised or retained by the employee.

Misclassifying exempt employees is not the only FLSA issue for companies. In 2014, many companies were also being sued under the FLSA for failing to pay employees for hours worked. Companies are being sued for having employees who work on occasion while they are on a non-paid lunch breaks; hourly employees using a PDA to e-mail and talk to clients or vendors after work; and hourly employees who are required to arrive to work 15 minutes early prior to clock-in time. In many of these cases, the company was unaware that their own policies were unintentionally creating lawsuits. But unlike a wrongful termination and discrimination claims, the company’s intent is irrelevant in a wage and hour claim.

Best Practices to Stem FLSA Claims

Given the significant risks and exposure of wage and hour litigation, companies should be looking at taking proactive steps to limit these claims, including:

  • Abiding by salary rules.
  • Ensuring proper payroll record-keeping,
  • Implementing clear policies and procedures for overtime and other issues.
  • Training managers and human resources personnel to not only understand the rules, but also company policy on how to deal with issues such as unauthorized overtime, breaks, meal times, travel time, etc.
  • Educating employees on written policies and procedures to help avoid mistakes that could lead to bigger issues down the road.
  • Conducting annual classification reviews, including performing an annual review of employees’ job descriptions and actual duties.

In addition, be sure to review your Employment Practices Liability Insurance (EPLI) for wage-and-hour coverage. EPLI policies do not always cover wage-and-hour claims and some that do will only cover legal defense costs. The professionals at Axis Insurance Services will be happy to review your EPLI policy to determine the extent of your coverage in the event of a FLSA claim. We will also help you review the classification of your employees to see if you are in compliance. Give us a call at (877) 787-5258.

Sources: PC360, CNN, Business Insurance

 

 

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Blogged on: July 29, 2015 by Mike Smith
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