The sad part was that they found 35 establishments in violation, owing a total of $2.3 million in back wages to 578 employees. A really sad part was when Irv Miljoner, the US DOL Long Island district director, estimated that 75% of all restaurants on Long Island are violating one or more provisions of federal wage and hour law.

But the really really sad part was when Mr. Miljoner noted about 40% of FLSA violators will make the same or similar errors again. And it will cost them. In the case of the Long Island restaurants, in addition to the $2.3 million, some of the establishments were assessed an additional $202,315 in civil penalties for willful and repeat violations.

Meanwhile, over in nearby New Jersey, the feds are in the midst of a multi-year initiative targeting gas stations. So far in 2011, in 74 investigations they’ve recovered over $1 million in back wages for 295 employees.

Some of the violations in both states included: paying employees off-the-books cash wages “under the table” to avoid payroll taxes, failing to pay overtime, failing to pay minimum wage and falsifying employee time and payroll records.

None of this is rocket science. The policies and procedures cited are clear violations. And yet, the DOL estimates the majority of employers are in violation of one or more provisions of wage and hour law. And worse than that, once they find out they’re in violation, 40% of them will go back and do it again.

I really, honestly don’t get it. Do they think because they got caught once, they’re “immune” from getting caught again? Are violations just so lucrative they can afford to pay the back wages, legal fees and civil penalties and still make a profit? Or are they just that dumb?

Oh, and a head’s up to diners on Long Island. The DOL says you’re going to be under their microscope in 2012. Let’s see if diner owners are any smarter than Long Island pizzaria owers…

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According to the Muscatine Journal, the Muscatine, Iowa County Board of Supervisors, along with several county department heads and elected officials, met to hear a two-hour presentation by J.R. Schemmel, from the U.S. Department of Labor (DOL) Wage and Hour Division, and ask him questions about employee classification.

The Board wanted to learn more about the overtime exemption criteria under the Fair Labor Standards Act (FLSA).

According to Dave Watkins, chairman of the Board of Supervisors, “Our emphasis is to treat our employees right and make sure we’re not breaking the law.”

Next, Nancy Schreiber, the county’s director of administrative services, along with County Auditor Leslie Soule will evaluate every county position to determine whether they should be considered exempt or non-exempt. They’ll bring their recommendations back to the Board for review.

Now this is the kind of news I like to report — an employer who proactively seeks out information from the DOL, evaluates their policies in light of the information received, and takes steps to correct any problems uncovered.

How about you? When was the last time your organization reviewed your employee classification or other payroll policies?

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They (deservedly) won the Nucleus Research 2011 Technology ROI Award for their achievement.

I’ve been telling people for years that an automated time and attendance system can save their organizations money. Significant money. Still, a 3500% return is pretty mind-blowing.

So how did they achieve this feat?

• The school system was able to use more accurate data collection methods, such as biometric terminals and telephone clock-in, to capture more accurate employee work hours.
• Automated calculations and uploading of employee time data to payroll eliminated clerical errors from manual addition and keypunching.
• By eliminating manual steps, they were able to streamline their processes, requiring fewer people and less time to process payroll.

In other words, all the same stuff I’ve been touting all along as the benefits of automated employee time tracking.

So, what do you think about their reported ROI? Are you more inclined to consider automated time tracking now?

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1. No Records, No Problem? No Way!
2. Go Virtual, Save a Tree

Seems lawyer Thomas Puccio won a Fair Labor Standards Act (FLSA) case against New York City on behalf of 16,000 city police officers. Mr. Puccio had originally sought $2 million; the officers were eventually awarded $900,000.

For his work on the case, Mr. Puccio was awarded $515,000 in legal fees by U.S. District Judge Shira Scheindlin. But on appeal, the Second Circuit vacated that award. Why? (You’re going to love this. Really.)

The $515,000 award was vacated because the lawyer apparently failed to keep accurate records of the time he, himself, spent working on that FLSA case.

Yep, you heard that right. The legal eagle at the heart of a wage and hour lawsuit lost his fee because of his own bad time tracking.

Oh, the irony…

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The U.S. Department of Labor recently announced a new smartphone app. It’s a timesheet employees can use to track the hours they work and calculate the wages they’re due. There are versions for the iPhone, iPad and iPod Touch, in English and Spanish. For moonlighters and workaholics, the app can even track their time and pay for multiple employers.

Why should you, as an employer, care? Well, for starters, I suspect it may increase the number of questions your payroll department has to field. If there’s any discrepancy between the work hours your employees have tracked and what you pay them for, they’ll know right away. (Evidence of ongoing discrepancies could also increase the chances of someone filing a lawsuit or opening a case with the Department of Labor.)

Beyond that, it makes it even more imperative you have accurate, complete time records. The DOL Wage and Hour Division announcement says records your employees maintain using this app “…could prove invaluable during a Wage and Hour Division investigation when an employer has failed to maintain accurate employment records.”

In other words, if you don’t have the records to show you paid all the overtime you owed, the DOL may rely on your employees’ records instead. You could find yourself on the hook for back wages, fines and penalties — not necessarily because you didn’t pay people correctly, but simply because you didn’t have adequate records to prove it. (Remember, in a wage and hour cases, the burden of proof almost always rests on the employer.)

The feds haven’t forgotten about those employees (like me) who haven’t attained smartphone Nirvana just yet. They have downloadable, printable Work Hours Calendars in PDF format. Like the app, they’re available in English and Spanish. Employees can use them to track arrival and departure times, actual work start and stop times and breaks.

And there may be more to come. The DOL says they’re looking at making the app compatible with Android, Blackberry and other smartphone platforms, and adding features such as tip tracking, shift differentials and holiday pay.

Time to make sure your time-and-attendance house is in order!

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What I find gratifying is that the very first thing on the list of stuff they’d like to spend the money on is a new time and attendance system. Excellent choice, folks!

Apparently the system they’re considering will cost something like $1.5 million. Sounds like a lot, but for a city the size of Tulsa with all the different city departments in various locations around the town — and probably the installation of data-collection terminals in most of them — the price doesn’t seem too out of line.

They estimate it will save the city $500,000 a year by reducing the number of people required to process payroll and increasing their accuracy. That would be a payback of three years (which ain’t too shabby), but based on my experience in the industry I suspect once they get past the initial adjustment period, they’d find their actual savings are even greater.

Unfortunately, they have a wish list of about $30 million queued up for this $10 million windfall, so the time and attendance system might not make the cut. I hope the city council decides to go through with this project, though. It won’t be easy to make the transition from their old manual “system” but the results will be well worth it — and it’s a project that will continue to generate both monetary and non-monetary benefits for them for years to come.

What about you? If you found yourself with some unexpected cash left over in the budget, would you consider investing a bit of it in upgrading your time and attendance tracking?

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1. S.F. Minimum Wage Hike

• The U.S. Department of Labor says in fiscal year 2008 their investigations resulted in the collection of over $123 million in overtime and $16 million in minimum wage back pay. Update: according to the recently published 2012 Department of Labor budget, in fiscal year 2010, the Wage & Hour division recovered $176 million in back wages in the course of almost 26,500 cases covering 210,000 workers.
• Wage and Hour Division inspectors found Fair Labor Standards Act violations in 78% of the cases they resolved in 2008.
• Wage and hour lawsuits comprise over 80% of all employment class actions filed. In 2009, there was at least one wage and hour class action filed in every state.
• Beginning in 2009, the Wage and Hour Division of the U.S. Department of Labor hired an additional 250 field investigators, a staff increase of one-third.
• According to law firm Littler Medelson, there were 1,844 wage and hour class actions filed in just the first quarter of 2010. Such lawsuits increased 40% between 2008 and 2009.
• The Department of Labor plans to continue to hire additional investigators, primarily to focus on misclassification of employees as independent contractors. Target industries include construction, child care, home health care, grocery stores, janitorial, business services, meat processing and landscaping.

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If you run a hotel, motel or resort in the U.S., better listen up! I hear the Department of Labor (DOL) is focusing on the hospitality industry for their next round of compliance reviews to begin in October.

Reportedly, the DOL considers hospitality to be another “high risk” industry for violations of the Fair Labor Standards Act (FLSA), like other industries such as food service, car washes and retail. In addition to reviewing businesses for compliance with minimum wage, overtime and employee classification, the DOL will also reportedly be checking immigration compliance, such as documentation and pay for H-2B temporary workers.

A Reprieve? Don’t Count On It.

Apparently, the American Hotel & Lodging Association is urging its members to contact their Congressional representatives in an attempt to thwart the DOL’s plans. Personally, in light of the National Employment Law Project‘s January 2010 report Broken Laws, Unprotected Workers, revealing substantial numbers of workers in low-wage jobs — like many of those in the hospitality industry — are cheated out of pay by employers who fail to pay minimum wage and/or proper overtime… and in light of DOL chief Hilda Solis’s declaration of a renewed DOL focus on compliance after the relative lax enforcement of the Bush years… and the fact that those 250 new Wage & Hour Division examiners need to have something to work on… well, let’s just say if I were a hotel manager, I wouldn’t be holding my breath waiting for the AHLA effort to work.

What To Do… What To Do?

So, assuming you’re a conscientious manager / owner, you could start by reviewing the DOL’s Fact Sheet #45: Hotel and Motel Establishments Under the Fair Labor Standards Act (FLSA). Make sure your business is complying with all the points outlined.

If you or your overtime-eligible employees have gotten slack about the use of your time and attendance system, or — worse — you don’t have a good time and attendance system in place to start with, now’s the time to remedy that situation.

Handwritten timesheets are better than nothing and traditional punch clocks are still a good option in many situations, but for the best accuracy and bonus cost savings I recommend an automated system. You can find badge-based or biometric time tracking systems for very reasonable prices… depending on how big your facility is and how many employees you need to track, you could set up a workable employee time system for as little as around $500.

Since any good automated time and attendance system will export employee time records to popular payroll software and services, with an automated system you’ll end up saving a lot of time and money on payroll preparation. Some time and attendance vendors say you can save enough to pay for the system in just a matter of months. For instance, Acroprint Time Recorder has posted an easy savings calculator you can use to figure up how much money you could save with the more accurate time records and more efficient processing of an automated system.

You should also consider contacting your employment law attorney and having him or her conduct a wage and hour audit, to make sure your operations are in compliance with all applicable local, state and federal wage and hour laws. Among other things, you’ll want to make sure you’re paying people correctly (including overtime), that you’ve got proper documentation for any foreign nationals in your employ and that you’re following applicable child labor laws. (Having your attorney conduct the review may allow attorney-client privilege to protect their findings from “prying eyes” in the event of a subsequent DOL audit.)

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1. 3478% ROI? Wow.

What’s the motivation?

Well, for businesses, labor costs are much lower for a contractor than for an employee. No withholdings, no unemployment insurance, no benefits… there are powerful incentives for businesses to classify everyone possible as an “independent contractor.”

On the other hand, the government would prefer as many people as possible be classified as employees. It’s a lot easier (and less paperwork) to collect tax withholdings from one employer than to rely on potentially hundreds or thousands of individuals to make estimated tax payments.

So in order to classify someone as an independent contractor, the job they’re doing must meet certain criteria.

Thus, the crackdown.

Conflicting Criteria

The problem is, everybody seems to have their own ideas about what makes someone an independent contractor. The federal Department of Labor (DOL), the states, the IRS… and the criteria they use aren’t necessarily the same. Or even compatible with each other.

It’s possible, for instance, for somebody to be an independent contractor for the purposes of paying state unemployment tax, but an employee for the purpose of federal income tax withholdings.

Stepping Up Enforcement

These days, with our current economic issues, government agencies at all levels are trying to maximize their revenue. Many states and the IRS seem to be convinced they’re losing money from employers improperly classifying employees as contractors.

So they’re doing something about it.

Beginning in February 2010, the IRS launched a three-year audit initiatve, targeting small businesses for (among other things) compliance with the employee vs. independent contractor rules. They’ll be sharing information with several states and with the DOL.

The DOL has likewise targeted the classification of contractors as part of their Semiannual Regulatory Agenda for 2010. They propose to expand the recordkeeping requirements when you classify someone as a contractor. Under the new rules, which could go into effect as early as August, you’ll have to perform a formal classification review, document the results, share them with the worker and keep everything on file in case a DOL inspector wants to see them.

At the state level, Colorado, Illinois, Maryland, Massachusetts, New Jersey and New Mexico have passed laws targeting misclassification in designated industries. Iowa, Michigan, New York, Washington and Wisconsin have announced enforcement initiatives or created task forces charged with uncovering employee misclassification. Connecticut, Illinois, Maryland, Minnesota, Nebraska and New Jersey have enacted statutes increasing both civil and criminal penalties on employers for misclassifying employees as contractors.

So what’s a small business to do?

While each agency and government body seems to have somewhat different criteria, there are some general guidelines to keep in mind.

• Independent contractors are intended to be temporary workers. The longer someone works for you, the more likely it is that they will be classified as a common-law employee in an audit.
• Independent contractors generally are hired because of their specialized knowledge or skill to help you out with a particular issue. The more their work corresponds to the core function of your company, the more likely it is they’re an employee.
• Independent contractors are supposed to be, well… independent. (Duh!) The more control you exert over when, where and how they do their work, the more likely it is they’ll be considered an employee.

Federal legislation has been introduced that is intended to help standardize the classification critiera. That would be a good thing, because it would make it easier for businesses to get it right when it comes to worker clasification.

On the other hand, the downside is that the proposed legislation would also increase the penalties for businesses that get it wrong.

In the meantime, if you have any contractors working for you now, and before you hire any additional contractors, consult with your labor law advisor. Make sure you thoroughly document all the factors that went into your classification decision so you have backup in case of an audit.

What about you? Do you employ contractors now? Has any of the news recently scared you away from hiring a contractor?

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1. Cleaning Up Their Act

Rant warning – read at your own risk

I just came across an article over at Human Resources Executive Online, quoting some employer-side attorneys about the new DOL announcement where they’re going to discontinue issuing specific Opinion Letters in favor of broader Administrator Interpretations.

To hear these guys carry on, this signals the end of civilization as we know it.

Malarky. Pure, unadulterated malarky.

Look, I understand plaintiff attorneys have been trolling for clients among disgruntled employees (and, in this time of massive layoffs, ex-employees) for some time now — and winning some high-profile cases, much to the chagrin of both the employers and their legal teams. And now these guys on the employer side are also trying to generate more business for themselves. Bully for them. Sauce for the goose, sauce for the gander and all that. But in my opinion, their extreme level of fear-mongering hyperbole is uncalled for.

It’s just Tea Party Lawyering. Don’t let pesky details like facts stand in your way; the important thing is to stir up unreasoning, hysterical panic by any means necessary.

For Pete’s Sake, Man, Get a Grip

For instance, James M. Coleman, a partner with Constangy, Brooks and Smith, when commenting on the discontinuation of Opinion Letters, is quoted as saying, “It’s a big move to end a practice that HR has engaged in for as long as the ages.”

Oh, really? As long as the ages?

Yeah, OK, so the DOL has been issuing Opinion Letters for awhile, but honestly, get a grip. It isn’t as though the first Opinion Letter was issued by the Founding Fathers or anything.

Look, as far as I know I’m about the same age as the practice of issuing Opinion Letters. And if anybody tries to claim I’ve been around “as long as the ages,” this vintage babe is fully prepared to go all medieval on them.

Besides, the DOL are not ending the practice of providing specific advice to employers. They’re just shifting it to the local Wage & Hour Division (WHD) offices — where it probably should have been all along. In fact, the announcement from the DOL specifically says:

Of course individuals with questions about the application of wage and hour laws to their particular situation may also talk to a Wage and Hour Division representative by contacting the office nearest them listed at http://www.dol.gov/whd/america2.htm or by calling the Division’s toll-free help line at 1-866-4USWAGE (1-866-487-9243) Monday-Friday 8 a.m. to 8 p.m. Eastern Time.

Hardly sounds as though they’re (in the words of the same lawyer) “slamming the door shut” on employers, does it?

Just Doin’ Their Job, Sir

Paul DeCamp, head of Jackson Lewis’ wage-and-hour practice group, is quoted in the same article as warning this “breaks with more than half a century of practice and amounts to an enormous power grab” on the part of the DOL.

[Aside: I should probably note Mr. DeCamp was a 2006 recess appointment of former President Bush as administrator of the WHD of the DOL. He was in charge of the Division during pretty much the same time period the Government Accountability Office says the Division mishandled many overtime and minimum-wage complaints and delayed investigating hundreds of cases for a year or more. But I digress.]

Breaking with practice? Sure, they absolutely are. And the point is…?

Look, when a practice is no longer workable, breaking with that practice is a wise move, not an “enormous power grab.”

I’m told the DOL had a backlog of something like 400 opinion letter requests. While I’m sure these attorneys would love to see the DOL tie up resources answering through a formal Opinion Letter every nit-picky question they or their clients sent over, regardless of whether it was actually a point of contention or (as often happened) simply a CYA maneuver on the part of the employer… the fact is, spending that kind of time and resources at the national level on answering a single employer’s query is not a good use of taxpayer dollars.

Besides, to the best of my understanding, Opinion Letters were simply a courtesy extended to employers, not codified into law — and, like any free courtesy practice, subject to discontinuation at any time. Just as, oh say for instance, offering a free initial consultation to prospects now wouldn’t obligate a law firm to offer free consultations to all prospects, now and forever more, right?

Or is this guy seriously claiming a procedure, once set in motion, can never be changed or stopped?

As to an “enormous power grab”? Puh-leeze.

The DOL’s job is to enforce labor laws. During the Bush administration, according to the GAO report, resources were actually being actively directed away from that task. Redirecting resources back toward enforcement is hardly a “power grab” on the part of the DOL. It just means they’re finally getting back to doing their job.

Again, as the DOL announcement itself says, this change offers “a much more efficient and productive use of resources than attempting to provide definitive opinion letters in response to fact-specific requests.” Efficient? Productive? Doesn’t sound like such a bad thing to me.

And Maybe Opinion Letters Weren’t So All That After All

The WHD’s acting administrator during the final years of the Bush administration, Alexander J. Passantin, is now an attorney with employer-side law firm Seyfarth Shaw. According to the article, he’s posted an alert on the firm’s website, suggesting lawyers and their clients flood the DOL with Freedom of Information Act requests related to these new Interpretations.

I’m not sure how wasting taxpayers’ money on frivolous FIA requests just because you’re pissed off is supposed to be a good thing. Speaking as the mom of an elementary-aged child, this sounds to me more like a kindergarten temper tantrum than a reasoned, mature response. Sort of a grownup version of lying down on the floor in the breakfast foods aisle and screaming until Mom buys the Glazed Sugar Bombs cereal you want.

Reportedly, he notes (one assumes “with approval,” as he’s advocating using the same tactic now) this tactic was used against some Opinion Letters, back in the day, whenever employers didn’t like the Opinion expressed. Yep, hold your breath until you turn blue. Good one.

Now, waitaminnit.

I thought Opinion Letters were the best thing since sliced bread, the cat’s pyjama’s, the bee’s knees, all that jazz. Isn’t that why we’re supposed to be incensed, all up in arms and ready to storm the castle — because the DOL dared to discontinue them?

But now it turns out these legal eagles used spurious FIA requests against Opinion Letters, too?

Hmm. Could it be it’s not the format in which the information is communicated, but rather the content that’s the problem? One cannot help but wonder if the reaction would have been this hysterical had the first Interpretation come down in favor of the employers’ point of view.

I’m just saying.

A Foolish Consistency is the Hobgoblin of Little Minds

Some employer-side lawyers complain this particular Interpretation appears to overturn an Opinion Letter issued back in 2006. Which might be a valid complaint… if it were not for the fact that in the past Opinion Letters sometimes contradicted each other without raising these sorts of dire warnings of the imminent collapse of free enterprise, capitalism and the whole of modern society.

I mean, that’s the whole point of (and problem with) Opinion Letters. They’re so specific to the individual situation, they can’t necessarily be applied to any other situation except in the most general sense. With even minor differences in the specifics, two Opinion Letters might reach what seem to be contradictory conclusions.

As a result, it’s entirely possible the Opinion Letter in 2006 was appropriate for the specific situation described, and the 2010 Interpretation is correct for a broader, more general audience. In other words, maybe they don’t actually contradict each other. (Or maybe the 2006 Opinion Letter was wrong to start with — after all, let’s not forget that was squarely during the time the GAO says the department was busy falling down on the job. Your call.)

This has always been true: because of their specificity, Opinion Letters written for others should never be relied upon as a guarantee what you’re doing is acceptable. Even these lawyers know that, despite their apparent reverence for the suddenly-sacred Opinion Letters.

In an age when many seem to be up in arms about what they see as wasteful government spending, it seems to me more than just a little disingenuous for anyone to excoriate the DOL for taking steps to make better, more efficient use of taxpayer dollars. Even if you’re just doing it to try to scare more people into becoming your clients.

Thus endeth the rant for the day.

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