Are you ready for a wage-and-hour audit? One may be on the horizon
You’ve no doubt heard about the recent surge in wage-and-hour lawsuits filed by employees who feel they’ve been cheated by their employer’s allegedly improper pay practices. A growing number of companies are taking steps to protect themselves from these potentially disastrous claims.
According to employment law giant Littler Mendelson, roughly half (49%) of the respondents in a national survey said they’re concerned about the threat of misclassification litigation or a DOL audit in the near future.
In response to these concerns, many of the responding organizations have either conducted their own audits to assess exempt classifications (54%) or intend to do so in the next year (14%). They’re also keeping a close eye on current wage-and-hour cases: More than than half say they’re are monitoring trends in exempt misclassification litigation to some degree, and 43% say they’re monitoring these lawsuits closely.
He said, we said: Hard game for employers to play
The Littler survey pinpointed one key component in many wage-and-hour suits that poses a real dilemma for employers: Employees who misrepresent their exempt job duties.
“Employers often lose or settle exemption cases not because the position was misclassified, but because the employer cannot marshal sufficient evidence to counter the plaintiff’s self-serving efforts to downplay decision-making responsibilities,” said Littler’s Lee Schreter, in a press release. “Employers can effectively counter ‘job deflation’ by creating contemporaneous business records of exempt duties as those tasks are performed rather than attempting to reconstruct those activities after a lawsuit is filed.”
Translation: Keep a current, detailed record of the day-to-day activities of exempt employees.
One of the more effective means for tracking exempt duties can be performance evaluations that ask employees to describe and assess their own performance. (The survey indicated that 33% of respondents using such employee self-assessments.) This kind of evidence provides a written affirmation of job responsibilities in the employee’s own words and can be used to impeach any contradictory testimony.
Other preventive measures: The majority of respondents indicated having up-to-date job descriptions (82%) and employee performance reviews (73%).
When you can deduct from exempts’ pay
Another hot-button issue in FLSA lawsuits: Deductions from exempt employees’ pay.
Lawrence McGoldrick, writing on the Fisher & Phillips blog, explains that generally speaking, exempt workers that are paid on a salary basis receive a pre-determined compensation each pay period — and that amount is not subject to reduction due variations in hours or the quality of the employee’s work.
There are specific rules covering whether and under what circumstances the employer can deduct from an exempt employee’s salary based on the quantity or quality of his or her work.
McGoldrick runs down the situations in which employers are allowed to make deductions from exempt’s paychecks:
- Proportional deductions for whole-day absences due to personal reasons other than sickness or disability.
- Proportional deductions for whole-day absences due to sickness or disability (including work-related accidents) if this is done in accordance with a bona fide plan, policy or practice providing compensation for salary loss due to such sickness or disability.
- Offsets against the salary for any amounts received by the employee as jury fees, witness fees or military pay for the particular workweek.
- Salary deductions made as penalties imposed in good faith for infractions of safety rules of major significance.
- Salary deductions made for unpaid disciplinary suspensions of one or more full days imposed in good faith for infractions of workplace conduct rules. This encompasses suspensions imposed under written policies applicable to all employees regarding serious work-related misconduct such as sexual harassment, violence, drug or alcohol violations or violations of the law.
- Paying a proportionate part of the employee’s full salary for the time actually worked in the first workweek of employment or in the last workweek of employment.
- Paying a proportionate part of the employee’s full salary for the time actually worked in the workweek when the employee takes unpaid leave under the federal Family and Medical Leave Act.
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