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The Fearful FLSA Audit

Guest post by: Jennifer Loftus

Article Overview: In this issue of Astronology, we take a look at the Department of Labor audit, and the steps you can take in order to avoid one.

The Fearful FLSA Audit

Wal-Martcouldn’t avoid it. In 2003, there was more than$200 million paidto individuals as a result of it. It’s one of human resources' biggest nightmares.

What is it?

Undergoing a Department of Labor audit.

In this issue ofAstronology, we take a look at theDepartment of Labor audit, and the steps you can take in order to avoid one.

What Can You Do?

If a retail giant such as Wal-Mart can be audited and found guilty of 63 class action lawsuits with respect to time and labor, and end uppaying more than $640 millionas a result of the audit findings, every organization should be concerned with FLSA compliance. A solid first step to preventing lawsuits is eliminating sources of concern that could ignite an audit, such as one employee complaint to the Department of Labor. Employees who believe they are owed overtime payments for hours worked, and have not received those payments, can become disgruntled and file with the Department of Labor. It is possible that one complaint can morph into a full audit, fines and damages, and class action lawsuits.

As the proverb says: “An ounce of prevention is worth a pound of cure.” Many organizations currently are proactively reviewing their position classifications under the Fair Labor Standards Act to ensure appropriateness. These organizations also are developing strategies for addressing the impacts of any resulting changes on misclassified positions and employees, and ensuring proper classifications moving forward.

Considering a self-audit as a first step towards FLSA compliance and peace of mind?BLRoffers these key steps for self-auditing your employee classifications and payroll practices.

1. Check your job descriptions:

Make sure your “exempt” and “non-exempt” employees truly belong in their corresponding categories.

2. Check what employees actually do:

Employees may actually perform more responsibilities over time than what was originally described on paper. Make sure the description matches the actual work of the employee. Update job descriptions if necessary.

3. Review your overtime calculations:

Discovered you owe some employees past overtime? Pay them immediately. It’s cheaper than a lawsuit settlement.

4. See if your state wage and hour law differ from the FLSA:

There may be a difference between the state and federal law…the tougher law between the two should be followed.

5. Be sure you have the latest versions of FLSA mandated posters:

The very first thing an auditor will look for are these posters. By law they are supposed to be displayed.

Determining Exempt from Non-Exempt

A challenge many employers face is distinguishing between exempt and non-exempt classifications. Marc. L Jacuzzi, partner in the law firm, Simpson, Garrity, Innes, Jacuzzi, provides thishelpful checklist for organizations starting a self-audit:

Exempt Employees:

· Salary Basis: Are employees paid a fixed amount per week, and not based on quality & quantity of work?

· Duties: Are the employees actually doing the work described in their job descriptions, or are they doing more? If you find that some employees need to reclassify as non-exempt, put a positive spin on the reclassification.

Non-Exempt Employees:

· Accurate Records: Are employees recording start, mealtime and end time? Make sure you have a reliable system to keep such accurate records.

· Breaks and Lunches: Many states have a requirement for such breaks. Are you complying with these laws?

· Overtime: Are these being accurately recorded?

The Department of Labor has a wealth of resourceson its websiteregarding the various tests employers can use to determine if a position is exempt or non-exempt under the law. Additionally, many states have their own versions of the Fair Labor Standards Act, many with exemption tests that differ from the federal law. Employers must be in compliance with both federal and state law with respect to overtime matters. If you are not sure how to apply this information in your workplace, seek outside counsel from a consultant or employment lawyer. It is better to spend some money ensuring legal compliance than risk paying much greater fines and penalties.

No More Fear!

Although many organizations across America are presently in the midst ofheavy FLSA lawsuits, now is not the time for fear. Rather, take this opportunity to educate yourself and your team, and make sound decisions based on that education. In order to avoid paying heavy fines in the future, do a self-audit now and correct any mistakes you find immediately. Keeping accurate records, seeking outside counsel as needed, and appointing a compliance manager to keep track of records and constant changing laws can assist in the long run. Although the task may seem daunting, the effort is well worth it for your organization’s reputation and overall success.

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Article Tags: appropriateness, audit findings, br 2, class action lawsuits, damages, department of labor, employee classifications, employee complaint, job descriptions, nightmares, ounce of prevention, overtime payments, payroll practices, peace of mind, position classifications, proper classifications, proverb, rsquo, self audit, wal mart



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