When DOL Knocks on Company Doors: Open with an Action Plan
By Jill Weinberg, Board Certified in Labor and Employment Law
Published: November 2009 Dallas Bar Headnotes
Texas State Bar Publication Award: Best Series of Articles (Substantive Law), Labor & Employment Law Focus

As current headlines have shown, many companies have paid out millions of dollars in judgments or settlements for overtime violations under the Fair Labor Standards Act (FLSA) 29 USC 201 et seq.  Such lawsuits are very lucrative for Plaintiffs. In addition to recovering unpaid overtime for up to three years, they often can recover liquidated damages for willful violations. Further, the FLSA mandates that the employer pay the prevailing plaintiffs’ attorneys’ fees.

Often such lawsuits are triggered with a U.S. Department of Labor (DOL) investigation. The DOL’s Wage and Hour Division interprets and enforces the FLSA’s requirements concerning overtime, minimum wage and child labor in the private and public sectors. The possibility of an investigation will only increase given Labor Secretary Solis’s recent announcement that the DOL is hiring 150 additional investigators to ramp up enforcement of the FLSA.

A clear action plan before a DOL investigation can avoid protracted litigation and expensive damage awards. As further explained below, an action plan   should include: 1. Strategy sessions and a self-audit with an attorney; 2. Review of I-9 forms, payroll and timekeeping records, personnel policies and job descriptions; 3. Management meetings on how to approach the DOL investigation; and 4. Implementing damage control.

How the DOL chooses a company for an Investigation

The DOL may knock on a company’s door due to a specific complaint or a general audit of a targeted industry.

If disgruntled workers filed a complaint, by law, their identities are protected during the DOL’s investigation.  Often, however, an employer can, through the process of elimination identify the complainant. Such sleuthing efforts may help determine the specific violation the DOL is investigating. For instance, if a cable company recently fired an installer who was contract labor and he worked 60 hours each week, that worker may have been misclassified. The DOL may be investigating to see if he should have been treated as an employee under the FLSA and been paid overtime.

The Action Plan

Generally, a DOL letter will set a specific meeting time and will list various records for review. The DOL may also want to interview employees. The meeting date, however, may be rescheduled by company request. Doing so will allow time for an action plan to begin.

First, before meeting with the DOL, a management strategy session should occur with an attorney who is experienced with FLSA compliance.  During the self-audit, the attorney may decide to interview employees who are responsible for processing time records and paychecks.  The attorney will need to know how work time is recorded, how hourly rates and overtime are calculated and why certain employees are classified as exempt from overtime. Also, the job duties of salaried employees will need to be examined to determine if they were properly classified as exempt.  Further inquiry may be needed to assess if workers have been properly classified as independent contractors not entitled to overtime. 

Second,  various documents such as I-9 forms, payroll and timekeeping records, personnel policies and job descriptions will need to be reviewed  for accuracy and completeness. 

Third, management meetings should occur on how to proceed before and during the investigation.  Among other issues, management needs to understand what the DOL investigator  may be investigating (such as employees being  forced to work off the clock).  They  will need to be advised not to retaliate against any  employees who participate in the investigation or who they suspect may have complained to the DOL. Management will need  to  also understand  the company’s payroll practices and timekeeping procedures.  Since managers/supervisors act as agents of the company, their statements to the DOL investigator may create liability exposure.  For this reason, the company’s attorney should prepare them and be present for any DOL interviews.

Finally, a company should  assess potential liability  and implement damage control.  After the self- audit, certain exemptions under the FLSA may apply to minimize or completely bar back pay liability.  It is imperative to know before the DOL investigation that such exemptions apply so that they can be raised during the DOL investigation. If violations are uncovered in the self-audit, the employer should calculate back pay exposure and consider resolving the problems after the DOL audit is concluded. Frequently, due to legitimate offsets ( i.e., paid lunch breaks),  an employer’s calcultions may be lower  than the DOL’s calculations. In such cases, there may be room for reducing back wages paid in a DOL settlement.  Beware that Under the FLSA, only DOL supervised or court approved settlements and releases are valid.

Jill J. Weinberg is Board Certified in Labor and Employment Law and   focuses her practice exclusively on employment, business and FLSA matters. She established the Weinberg Law Firm in North Texas. Ms. Weinberg  can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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Top 5 Handbook Updates for 2010
By Jill Weinberg, Board Certified in Labor and Employment Law

Now is a great time for companies to update their employment handbooks. In 2010 there have been several changes to existing employment laws. Additionally, new challenges such as texting and social networking among employees may need to be addressed in company handbooks.

1. Family Medical Leave Act: The FMLA was amended in 2009, and new regulations were also issued late in 2009. For this reason, FMLA policies and FMLA posters should be updated to address the expanded availability of qualifying exigency leave and expanded definitions of “covered service member” and “serious illness or injury.”

2. Text messaging, social networking, blogging: Text messaging or internet social networking between employees may create claims of discrimination, harassment and retaliation. Employers should include a provision on text messaging in their anti-discrimination, anti-harassment/retaliation policies, or create a separate policy to deal with these issues. Additionally, Employers should alert employees that “misuse” of texting or social networking relating to offensive/discriminatory remarks or photos may violate company policies.

3. Conflict resolution to defuse workplace violence: In 2009, incidents of workplace violence increased by 18%. Workplace violence may trigger claims for negligent hiring or workers’ compensation, or create an OSHA violation for an unsafe workplace. Handbook policies on conflict resolution may help deter violence at work if they provide employees with reporting and counseling options, or general guidelines of how to react when violence is threatened or suspected.

4. Genetic Information Nondiscrimination Act: GINA prohibits discrimination based on genetic information. It went into effect in November 2009. Accordingly, employers should add Genetic Information to the list of protected classes in non-discrimination and anti-harassment policies, as well as updating all Wellness Programs to avoid collecting any genetic information from employees.

5. Overtime pay to non-exempt employees: Some employers are improperly classifying employees as exempt from receiving overtime based on improper policies. For example, just because an employee is paid a weekly salary does not automatically exempt the employee from receiving overtime pay. The duties of each employee must also be examined to determine the employee’s status as exempt or not exempt from receiving overtime pay. A yearly internal audit should also be performed to determine compliance with wage and hour laws.

The above list is not exhaustive and is not intended as legal advice for a specific situation. It is essential that employers seek legal counsel before making changes to their handbooks. Further, when adopting new policies, employers should alert employees of such changes, by circulating and obtaining signed or electronic acknowledgement forms from employees.

www.wlfirm.com Copyright 2010

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COSTLY MISTAKES UNDER OVERTIME LAWS

Now is a good time for companies to assess their compliance with the new overtime regulations under the federal Fair Labor and Standards Act (FLSA). Failing to catch overtime violations can expose the company to double actual damages (liquidated damages) for unpaid overtime for up to three years. It adds up fast!

For example, if 20 nonexempt employees are each owed 10 hours a week of overtime for three years, and their overtime rate is $20.00 an hour, then each employee is owed $200 a week OT or $200 x 20 = $4000. $4000 multiplied by 150 weeks (excluding 2 weeks paid vacation for each of the 3 years ) equals $600,000 actual unpaid overtime. Liquidated damages would double that amount to $ 1.2 million.

Additionally, the FLSA provides for mandatory payment of attorneys’ fees for plaintiffs who sue and prevail. In certain situations, criminal violations may also apply.

Top 10 most common mistakes involving non-exempt employees:

1. SET SALARY FOR ALL: Paying a set salary to an employee who performs non-exempt duties and not keeping track of hours worked (including overtime).
Such employees are entitled to be paid for overtime if they work
more than 40 hours in a workweek.

2. UNPAID BREAKS: Not paying for breaks or meal time that are 20 minutes or less.
Such breaks must be paid.

3. INSIDE SALES: Treating inside sales people as exempt employees.
Only outside sales has a specific exemption from overtime.

4. COMP TIME: Allowing private sector employees to take “comp time” (in a different workweek) in lieu of receiving overtime pay.
Generally, only federal, state or local government employees may receive comp time.

5. TEMP AGENCIES: Using temporary agencies who fail to pay non-exempt employees over- time.
Contracting out such labor may still expose companies to overtime violations.

6. UNAPPROVED OVERTIME: Failing to pay overtime when an employee does not obtain prior approval to work the overtime.
Although an employee may be disciplined for failing to receive approval, the employee must still be paid.

7. EXCLUDING BONUSES/COMMISSIONS FROM REGULAR RATE: Failing to calculate commissions and bonuses into a regular rate of pay before calculating the overtime rates.
Some exceptions apply for holiday/special occasion bonuses.

8. AVERAGING OVERTIME: Averaging hours worked over two or more weeks to avoid paying overtime.
Some exceptions exist e.g., nurses, fire fighters and law enforcement.

9. UNPAID TIME RELATED TO PROTECTIVE GEAR: Not paying for time related to “donning and doffing” protective gear or clothing while at a worksite.
A recent U.S. Supreme Court case has held that the time spent walking to work stations from the place where employees put on protective items must be paid and the day ends only after they take off the clothing.

10. UNPAID TRAINING MEETINGS: Not paying for required training programs, lectures and meetings.
The meetings must be included in hours worked. The additional meeting time may also trigger overtime. Buying lunch for non-exempt employees during a lunch meeting does not eliminate the requirement of paying them for the lunch meeting.

Keep in mind that the above top 10 violations are only the tip of the iceberg. If you have any concerns or questions about whether overtime is being properly calculated and paid, you should seek legal counsel who is familiar with the complex FLSA laws.