Cleaning & Maintenance Management Online

Are You Due For A Wage And Hour Checkup?

October 11, 2011

If you''ve not yet endured a government audit or lawsuit relating to overtime or minimum wage violations, count yourself among the lucky.

And, get ready, because your luck could easily run out.

Last fall, the U.S. Department of Labor (DOL) released its Strategic Plan for Fiscal Years 2011-2016, which outlines the various enforcement priorities for the next several years.

According to the plan, the DOL''s Wage and Hour Division will be focusing its enforcement resources on three industries that the agency regards as "high risk" for wage and hour violations — including the janitorial industry.

Independently, plaintiffs'' lawyers have increasingly realized that wage and hour lawsuits represent a potentially huge source of revenue.

The number of lawsuits under the Fair Labor Standards Act — the federal law governing minimum wage and overtime — filed in federal courts has more than tripled over the last decade, from just 1,920 cases in 2000 to 6,864 cases in 2010.

These figures don''t include lawsuits filed in state court or complaints to state or federal administrative agencies.

The growth in government enforcement activity at the federal level is a product of politics — specifically, the transition from the Bush era to the Obama administration.

The growth in lawsuits, on the other hand, is a matter of simple economics.

While the amount at stake in any individual overtime or minimum wage claim may be small, employer mistakes in this area tend to affect not just individuals, but entire groups of employees.

That makes them ideal fodder for class action lawyers and potentially very expensive for employers.

So, what can you do to reduce your risk?

Ignorance of the law is not a defense, so it''s up to employers to educate themselves and to keep an eye out for the kinds of common mistakes that are likely to attract the attention of the DOL or plaintiffs'' lawyers.

The following outlines the most common mistakes made by employers in the cleaning and maintenance industry.

1. Treating employees as independent contractors

Why bother with payroll taxes, unemployment insurance, workers'' compensation insurance, minimum wage and overtime when you can simply classify your workers as independent contractors?

The short answer is that calling someone an independent contractor doesn''t make it so.

Generally speaking, if you retain the right to tell a worker where, when and how to do the job, there is a good chance that the worker is an employee, not an independent contractor.

Systematically misclassifying employees as independent contractors can lead not only to wage and hour investigations and lawsuits, but also to audits, fines and penalties from other government agencies such as the Internal Revenue Service (IRS) and state revenue departments.

The odds of an audit by multiple agencies are now higher than ever, as difficult economic times and the potential to mutually enhance their revenue streams have led agencies to start coordinating their efforts.

If you have independent contractors working for your company, you should talk to an experienced employment lawyer and find out if you are at risk for a misclassification claim.

2. Splitting work

One of the issues highlighted by the DOL in its fact sheet on the cleaning and maintenance industry is the practice of employing teams to perform work.

Often, this goes hand in hand with treating workers as independent contractors rather than employees.

Under the Fair Labor Standards Act, every employee must be listed on the payroll and paid individually.

Generally, a husband and wife, or other family members working together as a team, must each be compensated for all hours worked in compliance with state and federal law.

3. Poor recordkeeping

Do you have reliable records showing exactly how many hours each of your employees worked and how much they were paid over at least the last three years?

In wage and hour law, the notion of "innocent until proven guilty" does not apply.

Rather, the law places the burden on employers to keep records of each employee''s work hours and pay.

In the absence of any records, the employee''s estimate of his or her work hours is given a great deal of weight, and the employer is forced to prove that the employee''s claims are false which, in the absence of complete records, is often difficult or impossible.

Federal law doesn''t mandate any particular format or any specific method of tracking employee time so, unless your state has more specific requirements, you can generally use whatever method suits your organization.

The key is to make sure that the records are complete, accurate, contain all of the information required by law and can be produced on short notice should you need to respond to a lawsuit or government investigation.

4. Off the clock work

Even the most thorough time and payroll records won''t help if your employees can convince the DOL or a court that they have been working "off the clock."

Under federal law, employees are entitled to be paid for any time that they are "suffered or permitted" to work.

Work need not be requested or even authorized by the employer.

So long as management knows, or reasonably should know that work is being performed, the company is generally required to pay up.

Off the clock claims frequently arise when employees are given overly ambitious quotas to complete in a specified amount of time or where supervisors are overly aggressive in asserting a policy of no overtime.

Insisting on productivity and disciplining employees who fail to meet reasonable expectations is legal; refusing to pay employees for hours that they actually worked is not.

What can you do if your company is making any of these mistakes?

The good news is that recognizing the problem yourself puts you far ahead of the game in avoiding a worst-case scenario government investigation or lawsuit.

Remember, though, that wage and hour law is like dentistry: Consult someone who knows what they are doing rather than trying to fix the problem yourself.

And, address the situation promptly because your problems will only become more painful and expensive the longer you let them go untreated.


Bill Pokorny is a partner at the labor and employment law firm Franczek Radelet (www.Franczek.com) in Chicago. Pokorny concentrates his practice on litigation and counseling in areas including wage and hour law, discrimination, disabilities, ERISA and employee benefits, employment contracts, covenants not to compete, wrongful discharge, the Family and Medical Leave Act (FMLA) and labor relations. He is co-author of the firm''s Wage & Hour Insights at www.WageHourInsights.com. Pokorny can be reached at WRP@Franczek.com.