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TREY DELLINGER: Employers, get a handle now on compliance

Trey Dellinger

Trey Dellinger

Under the Fair Labor Standards Act (FLSA), most employees in the United States must be paid the federal minimum wage or greater for all hours worked and overtime pay at time and one-half their regular rate of pay for all hours worked in excess of forty (40) hours in a workweek.

The FLSA provides an exemption from minimum wage and overtime pay requirements for employees that qualify for certain exemptions under the Department of Labor (DOL) regulations. There are exemptions for bona fide executive, administrative, professional and outside sales employees. There is also an exemption for certain computer employees. However, these exemptions are terms of art and should not be evaluated according to their customary meaning.  Qualifying for the exemptions is not merely a matter of job titles. To qualify for these exemptions, employees generally must meet certain multi-factor tests set forth in DOL regulations related to their job duties and their salary.

Wage and hour law compliance is an area of increased focus for federal regulators. In 2009 and 2010, DOL hired approximately 300 additional investigators. The Wage and Hour Division of DOL collected approximately a quarter of a billion dollars in back wage penalties from employers in fiscal year 2013.

In addition to the threat of DOL Wage and Hour investigations, employers must be concerned with the threat of private lawsuits. When the Wage and Hour division completes an investigation, it may file suit or, if it elects not to file suit, generally sends employees a letter, known as a “16(b) letter,” informing them of their right to file suit. The likelihood of a private lawsuit increased even further in December, 2010, when DOL began including in the 16(b) letters a toll-free number that employees can call to access a lawyer referral service.

This increased regulatory emphasis on wage and hour enforcement has produced an enormous boom in wage and hour litigation. Between 2001 and 2009, federal court wage and hour litigation filings increased nearly threefold. In recent years, total wage and hour settlements and judgments are estimated to exceed $1 billion annually.

An aggrieved employee may sue on his own behalf, or may sue on behalf of other similarly situated employees in what is known as a “collective action.” Other employees must “opt in” to the suit by filing a written consent with the court. An employee who is successful in bringing a FLSA claim can collect back wages, liquidated damages in an amount equal to the back wages, as well as interest and attorneys’ fees.

The overtime regulations are complicated and convoluted. President Obama acknowledged this in a March 13, 2014 memorandum to the DOL, ordering the Secretary of Labor to “simplify” and “streamline” the regulations. DOL is currently working on adopting final regulations.

Employers should not to attempt to analyze the overtime regulations on their own to determine whether their employees qualify for an exemption. Nor should employers wait to assess their compliance until after DOL begins an investigation or an employee makes a complaint. Fines, civil penalties and legal fees incurred in defending FLSA litigation can devastate a business. Employers should minimize this exposure by obtaining legal counsel to review their FLSA compliance and to develop a plan for remediating noncompliance.

 

» Trey C. Dellinger, an attorney and Member of Wells, Marble & Hurst, PLLC, lives in Madison.

 

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