NEW YORK (MainStreet) — The Department of Labor (DOL) will increasingly scrutinize employers based on working conditions and the types of staff they hire. “The issue [the DOL is] chasing is tied to improper pay practices, mostly around the failure to pay overtime to non-exempt workers,” said David Lewis, president and CEO with Operations Inc, a human resources outsourcing and consulting firm. “Many of the audits are driven by complaints filed by employees and job seekers.”
The Fair Labor Standard Act (FLSA) defines non-exempt workers as those who are eligible for overtime pay after working 40 hours per week or in some states 8 hours per day. However, the DOL does not inform employers why they are chosen to be audited.
“For employers who have properly classified their workforce, complied with all applicable wage-and-hour laws but who nevertheless find themselves the subject of a DOL inquiry, these evaluations can be costly both from a monetary and manpower perspective,” said Micah Prude, attorney with Thompson & Knight in Dallas.
Companies can ensure compliance with an unexpected DOL wage-and-hour investigation by ensuring that all time and payroll records and I-9 forms are organized and updated.
“They should confirm that all nonexempt employees are accurately recording hours and that exempt employees actually meet the legal criteria,” Prude told MainStreet.
U.S employers with at least ten employees have a 12.5% chance of having an employment liability charge filed against it, according to a recent Hiscox study.
“The continued rise of the independent workforce as well as the on-demand economy have sharpened the focus on the entire work landscape,” said Gene Zaino, president and CEO with MBO Partners. “Any company with employees should be aware of and adherent to the rules and regulations governing all types of work arrangements, including independent workers.”
The added attention on employers is due to a rise in requested funding and manpower.
The fiscal year 2015 budget for the DOL includes $11.8 billion in discretionary funding, which includes an increase of more than $41 million for the Wage and Hour Division and some $14 million to combat the misclassification of workers as independent contractors, which reportedly deprives them of benefits and protections to which they are legally entitled.
“This budget request works to ensure that Americans have the skills they need for the in-demand jobs of today and tomorrow and also protects the health, safety and retirement savings of workers," said Thomas Perez, the U.S. Secretary of Labor.
Surprise DOL evaluations can include private interviews by an investigator of company employees.
“Both the corporate employer and the individual managers responsible for wage-and-hour violations can be held liable for all unpaid overtime and minimum wage for the past three years, an equal amount in liquidated damages, and the plaintiffs’ attorney’s fees,” said Prude.
Employers cited with violations may be subject to fines of $10,000 and six months in prison.
“The DOL’s Employee Benefits Security Administration (EBSA) achieved more than $1.6 billion in total monetary results through enforcement activities in fiscal year 2013,” Zaino told MainStreet.
Particularly vulnerable industries include oil and gas, residential construction, restaurants, hotels, janitorial services, moving companies, retail stores and home health care services.
“The DOL is focusing its enforcement efforts on fissured industries, in which the use of franchising, independent contractors, subcontracting and third-party intermediaries such as temporary employment agencies or labor brokers has distanced employers from their workers,” said XpertHR’s Michael Cardman.