For a practical example, recently Power Line Services was sued in federal court in Texas (Thurmon, et al. v. Power Line Services Inc., et al.) under the terms of the Fair Labor Standards Act, alleging the company took improper deductions from the paychecks of exempt employees, thereby proving those employees were actually non-exempt.

Apparently, the company’s policy was to deduct from employee’s paychecks any amounts they charged on their company credit card but for which they failed to provide an itemized receipt. The lawsuit claims these deductions ranged from $3.44 for a lost receipt from a convenience store to $2,500 for repairs to a company issued truck.

The company moved for a dismissal, but their motion was denied.

The problem is, back in 2006, the US DOL issued an opinion letter that declared “any employer policy that requires deductions from the salaries of its exempt employees to pay for the costs of lost or damaged tools or equipment” results in improper deductions that invalidate the employees’ classification as exempt. While the opinion letter addressed a specific situation related to lost or damaged tools, many legal experts expect the DOL to invalidate any exempt employee payroll deductions that could be viewed as a penalty for violating company policy.

Does this mean you have to just “let it go” when your exempt employees commit an infraction? Not at all. You are permitted to discipline employees for violating your policies. You just can’t dock their pay. (At least, not if they’re classified as exempt and you’d like them to stay that way.)

Otherwise, you risk having not only the employee you docked, but all similarly-situated exempt employees reclassified as non-exempt… and you potentially being on the hook for overtime pay. As satisfying as it might be on one level to dock their pay and recoup money you might think they’ve cost you, the docking will cost you a lot more in the long run.

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Some unscrupulous employers use their leverage to try to get their employees to bargain away statutory rights. The problem is, it doesn’t matter what kinds of “work agreements” the employer gets employees to sign… there are certain rights that the law says employees can’t bargain away.

For instance, as an employer, you can’t negotiate with your non-exempt employees about overtime. Federal law says you have to pay them time-and-a-half if they work more than 40 hours in a week. Even if you’d prefer to offer comp time or some other alternative. In this case, the law is the law, and it says you have to pay them time-and-a-half. Period.

Likewise, some miscreant employers might be tempted to try to save money by convincing employees to give up their worker’s compensation coverage. Or they might (wrongly) think they can cover themselves legally despite wrongdoing by forcing workers to sign waivers, promising not to sue and releasing the employer for all liability, before they can receive their paychecks.

Sadly, employees who are desperate for a job or who are scared they’re going to lose their job if they refuse, may well sign these agreements. Only thing is, such agreements are not only automatically void, they may also constitute grounds for a civil lawsuit or possible criminal penalties.

Bottom line, employees are entitled to their pay and other legally-mandated benefits (such as worker’s comp). Any sort of agreement that attempts to compromise employees’ ability to receive their wages and mandated benefits is illegal.

I know some employers ask workers to sign their timesheets or time cards to indicate their acceptance of the hours recorded thereon. It’s often used as a way of making sure employees have reviewed the hours and of getting their approval for the time being submitted for payroll processing.

However, something to keep in mind: in California, it may be a criminal offense to make an employee sign a time record you know to be inaccurate. It doesn’t matter if the records are inaccurate because you’ve “edited” them to avoid having to pay overtime… or if it’s because your employee filled out a handwritten timesheet with the wrong hours… or if it’s just because your busted old time clock can’t keep steady time to save its life… If you know your time records aren’t accurate for whatever reason and you make employees sign them anyway before you’ll process their paychecks, you could land in trouble.

(As an aside: if you’ve been wondering why and whether you should invest in a newer, more accurate time and attendance system — particularly a biometric system that eliminates the possibility of buddy punching — I’d say this should be all the justification you need.)

No matter where you’re located, asking (or forcing) employees to indicate acceptance of time records you know to be inaccurate is a bad idea. Especially now that the DOL has issued smartphone apps that make it easy for employees to independently track their time, compare their records to what you pay them, and report violations to the DOL.

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Knights Facilities Management, a Michigan company that provides grounds maintenance and janitorial services at Ralph Wilson Stadium in Buffalo, NY had to pay $22,000 in back wages and damages to 26 employees following a a U.S. Department of Labor investigation.

The DOL’s Wage and Hour Division found the company avoided paying overtime by maintaining multiple payrolls and switching workers to different payrolls when their hours went beyond 40 for the week. It also failed to calculate all the hours employees worked and didn’t combine hours from different duties when computing overtime.

This is actually something I’ve seen before from sweatshop operators in the garment industry. They would create separate “companies,” and have employees clock out from one, then clock in to the other after eight hours of work. This way, the employer could force the workers to put in 16-hour days without paying them any overtime. (Most didn’t even pay minimum wage, either, but that’s another issue.)

I’ve also seen similar stories from various school districts around the country, only in their case the problem was ignorance, not malice. The school officials often didn’t realize that when calculating overtime they had to combine the hours employees spent on different duties (such as coaching a sports team and teaching class, or providing administrative/secretarial support and driving a school bus). As a result, employees might put in more than 40 hours a week, but because the hours were spread among multiple duties, they would not receive overtime.

No matter what the motivation, the end result is generally the same. The employer gets found out, and they have to pay big bucks to their workers for the overtime they should have been paying all along.

Many (most!) companies are looking for ways to control their labor costs, but this is not the way to go about it. In the end, when you factor in the hassle and expense of a DOL investigation and the additional penalties that will almost certainly be imposed — especially if the violation is found to be willful — plus the cost of the overtime payments… well, it’s probably cheaper and easier to just pay the overtime in the first place.

If you’re concerned about paying time-and-a-half overtime, then either hire enough workers or structure the workload so no overtime hours are required. If you’re not willing to do that, then suck it up and pay your people according to the law.

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Arizona — went to $7.65, $4.65 for tipped employees.

Colorado — went to $7.64, $4.62 for tipped employees.

Florida — went to $7.67, $4.65 for tipped employees.

Montana — went to $7.65.

Oregon — went to $8.80.

Vermont — went to $8.46, $4.10 for tipped employees.

Washington — went to $9.04.

Ohio — the minimum wage increased to $7.70. On the other hand, the minimum wage under the tip credit decreased to $3.70 (down from $3.85). However, note if the business’s annual gross revenue is $283,000 or less, you can choose to pay the federal minimum wage instead, to adults and minors aged 14-15.

New Poster Requirements

Now, for a few other changes you might want to make note of.

In the state of Connecticut, there’s a posting requirement for a new paid sick leave poster. If you’re a Connecticut employer, be sure you’ve got the new poster up.

There’s another new poster requirement in Georgia. Employers with over 500 workers now have to post E-Verify “Right to Work” posters. You’ll want to be sure you’re in compliance.

And while you’re at it, don’t forget the new NLRB organizing rights poster. It was supposed to be posted last year, but they delayed the posting requirement until April 30, 2012. I’ll let you know if there are any more changes in the meantime, but for now, you can download the poster for free from the NLRB website so you’ll be ready.

Jury Duty Changes in Oregon

There are also a few changes related to employees on jury duty in Oregon. Now, companies with more than 10 employees must give those employees the choice of continuing insurance coverage while they’re on jury duty. Further, employers cannot require employees to use accrued leave (such as vacation, paid time off or sick leave) to cover their jury service time.

If your employee chooses to continue insurance and doesn’t use paid leave, you can recoup the insurance premiums you paid on their behalf while they were on jury duty. deduct up to 10% of their gross pay in each pay period after the employee returns to work until the amount you paid for premiums to continue their coverage has been covered.

In case you’re thinking you’re small or insignificant enough you can get away with ignoring these rules, with little chance the state will come after you… the new law now allows employees to file a lawsuit for penalties and other damages.

Paid Sick Leave in Seattle

With a little more advance notice, starting September 1, 2012, the City of Seattle, Washington will require employers with at least five full-time employees to provide sick and safe leave to their employees. The law also explicitly prohibits employers from retaliating against employees who take advantage of this leave.

Employees who work more than 240 hours a year in Seattle must allow their employees to use paid sick leave for their own or a family members’ illness or preventive care. “Safe leave” refers to paid leave related to domestic violence, sexual assault or stalking. It also allows for paid time off when the business is closed by public officials or when the employee has to care for their child because the child’s school or daycare are closed by public officials, due to the presence of hazardous waste.

The amount of paid leave you have to provide varies according to how many employees your busines has. You’re exempt if your business is less than two years old. Employees are allowed to carry over unused hours; the amount of carryover likewise varies depending on the business size.

If you’re a Seattle employer, I strongly advise you to check with your employment law advisor, as this is a complicated law and you could find yourself on the hook for penalties if you’re not careful.

New Rules in California

Wage Theft Protection Act

Finally, turning to California. First, there’s a enw Wage Theft Protection Act that requires employers to provide a written notice to every new employee hired after January 1, 2012. The notice must include the employer’s name, physical address (and mailing address, if different) and telephone number, as well as the name, address and phone number of the employer’s workers comp insurance carrier. It must specify the employee’s rate of pay including their overtime rate(s), and whether they’re paid by the hour, shift, day, week, piece, on commission, etc, and note the regularly scheduled payday. The notice must also list any allowances the employer plans to take, such as meal or lodging. In addition, if you change any of the information included on this notice, you must inform employees who previously received the notice within seven calendar days, either in a separate document or on their paystub.

You may find helpful this FAQ page from the Division of Labor Standards Enforcement.

Employee Misclassification

And lest you think you can avoid the Wage Theft Act notification requirements by classifying new hires as independent contractors… effective January 1, the state of California will also be imposing significant additional penalties on businesses that willfully misclassify employees as independent contractors.

You should check with your wage and hour law advisor to make sure you’re in compliance with these new laws. Penalties for non-compliance with either of these statues can range from $5,000 to $25,000, depending on the severity of the infraction and whether the business has a history of non-compliance. Licensed contractors may also lose their licence if they’re guity of misclassification of employees. In addition, if you’re found guilty of violating the misclassification statute, you will be required to post a notice for a period of one year on your website or in your office advising your employees and the public about the violation. (Oh, the shame of it all!)

Wage Theft Prevention Act in New York

Similar to California, the state of New York has also passed a Wage Theft Prevention Act that requires notifications to employees. However, in New York, in addition to providing a notification to new hires, businesses must also provide an annual notice to all employees. The first of these annual notices must be provided before February 1, 2012.

You can find sample forms at the NYSDOL website.

New York employers should verify with your wage and hour advisor that you’re in compliance. Violations carry a penalty of $50 per employee per week that the violations occur, plus other possible penalties. For a large employer, this can really add up quickly!

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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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Here’s an example:

Inlet Harbor Restaurant, Marina and Gift Shop in Ponce Inlet, Florida, has agreed to pay back wages following an investigation by the US Department of Labor’s Wage and Hour Division.

It was fairly routine stuff: the employer’s time tracking system was set to automatically deduct a half hour lunch break from every shift longer than six hours, even though employees weren’t relieved of duty (as is required for a legitimate lunch break). Some kitchen staff worked as much as 90 hours a week but were only paid straight time, no overtime.

What makes this worth noting is that the back wages only average out to just a little over $20 a month per employee. That’s not much for any individual, but because there are 192 employees involved and the case covers two years (could have been three if the DOL had decided the violations were “willful”), the total is over $82,000. To be precise, $82,665.

The message is: big penalties can arise from relatively minor violations. If you needed any further motivation schedule a wage and hour audit with your labor law advisor, here it is.

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You may think it sounds like a marriage made in heaven — you need assistance, and people are in the mood to help. Except when it turns out the “volunteers” are considered employees under the terms of the Fair Labor Standards Act (FLSA). In that event, could find yourself on the hook for back wages, possible overtime and other penalties.

So, how can you be sure those volunteers helping you out will be considered volunteers by the Department of Labor, and won’t be reclassified as employees?

The Criteria

Well, first off, if you’re not a not-for-profit organization, it’s doubtful they’ll be considered volunteers. According to the DOL, except for rare situtions they limit volunteer status to “qualifying activities” for non-profit entities.

Likewise if you’re their employer and they’re volunteering for activities that are substantially similar to their normal duties. Even if the duties are of a charitable nature and totally unrelated to the employee’s regular job, you’re on shaky ground if the volunteer work is done at your request, takes place during normal work hours, or is performed under your direction or control.

Bottom line, you can’t get free labor out of your employees just by saying they’re “volunteers.”

So what are “qualifying activities”?

Typically, they:

• Are done for altruistic motives.
• Are activities typically associated with volunteer work.
• Are less than a full-time occupation for the person.
• Do not displace employees or enable the organization to avoid hiring employees.
• Are only minimally controlled by the recipient of the services.
• Generally occur at times convienent for the volunteer.

By all means, encourage your employees to volunteer their time to local charities. Just keep in mind, if you accept volunteer labor at your own company, and it later turns out the volunteers should have been treated as employees, you (not the volunteers) will be the one on the hook for back wages and penalties.

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According to their release, in the past five years or so the Wage and Hour Division’s Raleigh District Office has conducted 120 investigations of residential care facilities, recovering over $980,600 in back pay for 1,077 employees. Things they suspect they’ll find this time around include:

• Failure to pay for work time outside an employee’s scheduled shift,
• Failure to pay for time spent attending staff meetings and employer-mandated training sessions,
• Deducting 8 hours for sleep time from their pay for people working less than a 24-hour shift,
• Failure to pay overtime at a time-and-a-half rate,
• Taking improper deductions for uniforms and other items that cause employee pay to fall below the federal minimum wage,
• And probably a whole bunch of other crazy things that would curl the average person’s hair and cause a plaintiffs’ lawyer to positively drool with delight.

So, if you’re running this kind of facility in North Carolina and have more than two employees (meaning you’re covered by the Fair Labor Standards Act – FLSA), first check out this fact sheeet on FLSA compliance for the health care industry for more information. Then get on the horn with your employment law advisor to make sure all your payroll policies and procedures are on the up-and-up.

Even if you’re not in North Carolina, if you’re in the residential care business, you’d do well to check your wage and hour policies against the law. These compliance audit sweeps have a way of spreading to other regions. (Not to mention that paying your people properly is simply the Right Thing To Do Anyway.)

After all, as the saying goes, forewarned is forearmed.

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You know, I’ve seen time and attendance software that will automatically calculate hours worked and export time records directly to your payroll software or service… starting at less than $100.

One wonders how little DCP is devoting by way of resources for payroll processing for it to take them over two months to pay the stagehands.

Do they really think it’s better to pay the legal fees of defending against a lawsuit like this? Wouldn’t it have been smarter to just ante up for some decent time tracking software, and pay your people on time?

I’m just sayin’…

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