Wage and hour lawsuits, government investigations, and Fair Labor Standards Act (FLSA) enforcement actions now represent the single largest threat to U.S. employers, with the number of FLSA lawsuits filed nationally jumping by 432 percent over the past 20 years, according to the Huffington Post.
These issues are a growing drain on employers and the federal government alike. The Department of Labor (DOL) estimates that more than 70 percent of employers aren’t fully complying with the FLSA, creating huge financial losses for many federal and state agencies. For employers, many of these lawsuits result in multimillion dollar settlements, leaving them to foot the bill for unpaid compensation, legal costs, and other damages and penalties.
That’s why the IRS and Department of Labor (DOL) have started cracking down on compliance in recent years – and with the regulatory changes now on the agenda at the DOL’s Wage and Hour Division (WHD), the stakes are about to get even higher for employers.
More than a year ago, President Obama signed a Presidential Memorandum calling for changes to minimum wage and overtime regulations to update existing protections, address the changing nature of America’s workforce, and simplify the overtime rules for employees and employers. In particular, the DOL appears to be considering:
- Increased salary obligations that could make it difficult for employers to maintain part-time exempt positions, which would impact many flexible workplace arrangements.
- Stricter requirements for establishing an exempt employee’s primary duty role, which could limit opportunities for exempt employees to do non-exempt work for training purposes, and potentially limit the application of many exemptions to corporate office employees and managers of large facilities;
- Limiting or eliminating the ability of managers to engage in management and non-exempt work at the same time concurrently, or reintroducing the requirement that an administrative employee’s work be related to management policies.
It’s clear these changes have the potential to make a significant impact on your operations. But there’s more.
Independent Contractor definition. Adding to its already busy agenda, the WHD will soon be issuing updated guidance on the FLSA’s definition of “independent contractor,” clarifying who qualifies and who doesn’t. The DOL estimates that as many as 10 to 30 percent of all independent contractors are misclassified, and new regulations could impact contractors, volunteers, franchisees, and state law definitions of “employees.”
Are you vulnerable?
With summer work in full swing, it’s prime time for wage and hour violations. Industries especially at risk are those with high concentrations of immigrant or unskilled workers such as food service and construction. In fact, restaurant owners and construction business owners are increasingly being targeted. The new laws can also affect summer internships.
How can you protect your business?
Before any new regulations are finalized, employers need to consider how these proposed changes might impact their operations and their bottom line. Now is a good time to:
- Thoroughly review your employment, payroll, and recordkeeping practices
- Make sure you’re performing regular audits of employee job descriptions and classifications
- Take advantage of the Department of Labor resources at http://www.dol.gov/compliance/ rel="nofollow" and http://www.dol.gov/whd.
- Consult your insurance carrier to review coverage options for wage and hour violations
Need help getting a handle on the coming changes in wage and hour laws? Talk to the business insurance experts at Heffernan Insurance Brokers. Don’t forget to ask if employment practices liability insurance would be a smart choice for your business.