Be Prepared for Tougher Enforcement of Wage and Hour Laws

 -  7/28/08

Employers could be in for some legal headaches as Democrats toughen up on the enforcement of wage and hour laws.

Employers could be in for some legal headaches down the road as Democrats recently vowed to toughen up on the enforcement of wage and hour laws, which might require talent managers to brush up on compensation procedures.

Two reports released July 15 by the Government Accountability Office and commissioned by Chairman George Miller, D-Calif., found the Department of Labor (DOL) is failing to adequately enforce federal wage and hour laws dictated by the Fair Labor Standards Act (FLSA).

The number of actions initiated by the DOL in response to potential violations fell from approximately 47,000 in 1997 to fewer than 30,000 in 2007, while the use of fines to punish repeat or egregious offenders dropped by nearly 50 percent from 2001 to 2007, the reports showed.

On the other hand, the amount of back wages recovered by the DOL has increased from nearly $97 million in fiscal 1997 to nearly $221 million in fiscal 2007, possibly because employee-initiated efforts — in the form of FLSA lawsuits — have increased, said Jennifer Blum Feldman, a partner at WolfBlock LLP.

“It’s not that employees’ rights are going unvindicated or employees are sitting quietly while employers are taking advantage of them,” she said. “I think the idea is that the Democrats want to put some pressure on the Department of Labor to step up their effort.”

With the DOL taking more initiative to investigate and audit companies, employers will be more accountable on two fronts, and ultimately, they might have to change their policies to avoid hefty fines.

What Are the Laws?
Under FSLA, employees categorized as nonexempt must be paid at least minimum wage for all hours worked up to 40 in a workweek, and they must be compensated for any additional hours at one-and-a-half times the regular rate.

But it gets a lot more complicated than that, Feldman said.

“Overtime is defined as one-and-a-half times an employee’s regular rate — not their hourly rate,” Feldman explained. “So for example, if an employee is paid commissions on top of his or her hourly rate, those commissions need to be included in determining what the regular rate is for the workweek.”

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