How to Stay out of Trouble Powepoint (4)

How To Stay Out Of Wage Hour Trouble From A Former USDOL Insider’s View
July 15, 2008
The Fairmont Hotel
Washington, DC
Frank C. Morris, Esq.
(202) 861-1880
Douglas Weiner, Esq.
(212) 351-4770
© 2008 Epstein Becker & Green, P.C.
U.S. Department of Labor’s enforcement priorities,
and how to keep from attracting enforcement
The most expensive wage hour mistakes
employers make, and how to avoid them
What to expect in a Wage Hour audit, with tips for
handling the investigation to your best advantage.
To actively defend a wage hour class action
lawsuit, a view of tactics to limit and dismiss claims
If you have questions about these or other
subjects, I’ll be happy to address them.
What Are the USDOL’s
Enforcement Priorities?
USDOL’s Enforcement Priorities
The Secretary of Labor’s Top
Wage Hour Priority Is:
Investigating complaints from low wage,
unrepresented, economically vulnerable workers
where wage and hour violations have historically
existed. Substandard practices continue to
persist in the garment industry (piece workers),
restaurants (kitchen workers and wait staff), car
washes and gas stations (attendants).
USDOL’s Enforcement Priorities
The Secretary’s enforcement goals
in taking legal action are (1) to
secure the employers’ future
compliance through court order and
(2) to secure restitution of back
wages in accord with the
requirements of law.
USDOL’s Enforcement Priorities
All Federal Wage Hour offices,
investigators and supervisors are bursting
with complaints of violation and requests
for investigation. We established priorities
to dismiss the ones we could, direct further
investigation where appropriate, and
expedite further legal action where
Matrix of
Criteria for Litigation:
What Are the Facts?
Criteria for Litigation
1. Clear evidence of violation with intent to
Facts: For example, field records
that show overtime hours
worked are falsified to
reflect 40. Employee
interviews confirm field records.
Action: Expedite for immediate legal
filing, prepare for trial.
Criteria for Litigation
Clear evidence of no violation with evidence
intent to comply.
For example, managers supervise 2
or more full time employees and are
paid a salary in excess of $455/week.
(1) The employer conducted a self
initiated, without complaint or
investigation, compliance audit; or (2)
requested an opinion from the
Administrator of Wage Hour.
Action: Expedite for immediate closing
with no further investigative or
legal proceedings.
Criteria for Litigation
3. Ambiguous evidence of violation; but
clear evidence of intent to comply.
Facts: Incomplete payroll records but
evidence of a self audit to
implement compliance, or a
request for an opinion letter
from the Administrator.
Action: Close this case with no
further investigative or
legal proceedings.
Criteria for Litigation
4. Ambiguous evidence of violation,
ambiguous evidence of intent.
Facts: No self audit; no request for
DOL opinion. Incomplete
records, possible violation.
Action: Refer for further
Criteria for Litigation
There are actions you can take to improve
your chance of avoiding a DOL audit.
What are they?
Top Twelve Wage Hour
Mistakes Employers Make
And How To Avoid Them
Top Twelve Mistakes
1. Paying a salary to employees who perform
non-exempt duties without recording their
hours of work or paying overtime.
Facts: Employees must perform exempt
duties and be paid a fixed salary
in excess of $455/week to be
Action: Keep records; pay hourly, or pay
half time regular rate for hours
worked over 40.
Top Twelve Mistakes
2. Paying employees who perform exempt duties
an hourly rate for the number of hours they
work, without paying overtime.
Action: Paying a salary to these
employees will perfect the
Top Twelve Mistakes
Paying non-exempt employees for their scheduled
hours rather than their actual hours worked. Records
of hours worked must be accurate and the mere
recitation of the target hours “approved by accounting”
for the labor cost of the department will not satisfy the
requirements of the FLSA. Unrecorded overtime hours
worked would be computed at time and a half rather
than half time.
Action: Record and pay for hours actually worked.
Top Twelve Mistakes
No records of breaks or meals taken, but pay is
routinely docked for set amounts of time.
For example, the records show nonexempt employees starting work at
8:00 a.m. and stopping at 6:00 p.m.
Pay is for 8 hours with two ½ hour breaks
and 1 hour meal period deducted from pay.
Action: Record the breaks. Preserve the
evidence that breaks were taken.
Tips are mishandled.
No records of tips earned are maintained by employer
or notice to employees that tips will supplement the
minimum wage. Supervisors dip into the tip pool.
The FLSA permits tip eligible employees to be paid
less than the minimum wage.
Employees must report their tips and employers
must record them.
Employers must give notice to employees that tips
will supplement their wages.
Top Twelve Mistakes
“Service charge” misidentified. If an
administrative charge of 20% is added
to the bill and goes to the House rather
than the wait staff, customers must not
be advised that it is intended as a
gratuity for the wait staff rather than a
fee for overhead or executive service.
Top Twelve Mistakes
7. If there are no records, no one can prove
a violation.
Facts: No, the burden flips to the
employer to prove alleged
violations did not exist.
No records allows exaggerated
claims to flourish.
Action: Keep required records.
Top Twelve Mistakes
8. If the records prove a violation, why don’t we
just produce a set of “reconstructed” records of
what we should have recorded instead of what
was recorded at the time?
Facts: Those are falsified records, which give
rise to willful violations, which extends
the statute of limitations, with liquidated
damages and Civil Money Penalties.
Action: Don’t “retroactively reconstruct”
records differently than originally
Top Twelve Mistakes
9. Why don’t we just shred the records that prove
the violations existed?
Spoliation brings severe sanctions. See points
11 and 12.
Action: Better to produce evidence of
civil liability than risk severe
Top Twelve Mistakes
10. Fire the Whistleblower. Why don’t we
just give the Benedict Arnold his
walking papers?
It makes everything much more difficult
to resolve quickly, quietly, and
Action: Restrain the impulse to
Top Twelve Mistakes
Defending a lawsuit by trying to make a
silk purse out of a sow’s ear. Bluff and
bluster are poor litigation strategies. If
the facts are bad, take control to fix the
problem with prospective compliance.
Assess exposure, and use litigation
tactics to gain leverage while building a
negotiating environment where it will be
possible to negotiate the best possible
resolution. Do not take a bad case to
Court. If you’re going to take a case to
Court, make sure it’s one you are likely to
Top Twelve Mistakes
Abuse the investigator and trial attorney.
Do not try to get a better deal by
bullying, insulting, offending, or
provoking the agency officials who
are trying to do their job. You will not
get the benefit of the doubt on any
issue, often resulting in worse
consequences. When combined with
number 11, a bad case, provoking
hostility from the Government can have
devastating consequences.
Top Twelve Mistakes
However, this does not mean making
unwarranted concessions to an abusive
government official. Every official has a
supervisor. When appropriate, document
your complaint and take it to a higher
level. Be careful. Do not do this
What to Expect During
a Wage Hour Audit
Wage Hour Audit
You will be asked to produce for inspection all the payroll records
required to be kept by 29 CFR 516 and likely I-9’s
Employees are likely to be interviewed ex parte confidentially
If your records are in order, and your employees verify that, the
audit is likely to conclude on that basis
If there is a problem with the face of the records or employee
interviews do not confirm the accuracy of the records, further
inquiry is likely.
The goal is to keep as low a profile as possible. Do not attract
attention. Make the investigator’s job easy, not hard - for example,
putting the investigator in a cold, damp basement with random
boxes of time cards will not help the case. Giving the investigator a
hard time rarely results in leniency or getting the benefit of the
doubt. Often the reverse is true and a hard time is considered
evidence there is something to hide, and violations are likely to
exist, resulting in a broader, deeper investigation.
To Defend a 16(b) Class Action
Lawsuit Dispositive Motions and
Tactics to Limit Claims
Dispositive Motions
Summary judgment if facts are strong and
• Motions to dismiss Rule 23 class
– Opt in requirement of FLSA 16(b) is in
inherent conflict with opt out presumption
of FRP Rule 23.
Dispositive Motions
– Federal court may decline supplemental jurisdiction of
state law claims.
• Clogs federal docket with non federal questions.
• Requires adjudication of disputed facts regarding
complicated issues of “typicality” class
• Requires application of state law to facts.
• All of which is best suited for the state courts to
interpret state law in accord with the finding of fact
made in state court.
Dispositive Motions
– Oppose class certification – move to decertify
• Named plaintiff is not representative of the
putative class.
–Duties differ – no class wide liability
–Hours worked differ – no class wide
damage calculations
Dispositive Motions
Rule 68.
Pay the named plaintiffs their wages due,
if any, and dismiss all others in “class”.