During 2009 and 2010, the Wage and Hour Division (“WHD”) of the U.S. Department of Labor saw significant growth in staff, budget, and investigations. While the budget for the 2012 fiscal year looks to trim most government agency budgets, employers should remember that agencies will continue to investigate complaints. Understanding the anatomy of an investigation can help an employer calmly prepare and deal with a wage and hour investigation.
Initial Conference:
The wage and hour investigation begins with an initial conference. The investigator usually sets up an appointment with the owner or upper-level manager to ask questions about the business, including the nature of the business, the employees, the wages, and other general questions.
Records Review:
After collecting basic information, the wage and hour investigator will review payroll and other relevant records. The investigator will look for signs of inaccurate recordkeeping, incorrect payment of overtime, alterations to records, and other red flags indicating that there may be violations. If the investigator finds these red flags, the investigator will conduct a thorough review of at least two years of records.
Employee Interviews:
Wage and hour investigators interview employees regarding their duties, hours, wages, other employees, and other relevant topics. Most interviews are confidential and are conducted without the presence of the employer or the employer’s representative. However, upper-level managers should never be interviewed without representation as their comments bind the company.
Back Wages:
After collecting data, the wage and hour investigator will calculate back wages. Employers should be aware that the WHD and Circuit Courts may have different interpretations of the FLSA. These differences may have significant impacts on the amount of back wages owed.
Final Conference:
After computing back wages, the wage and hour investigator will meet with the owner or upper-level manager again to discuss the findings of the investigation. The employer will be invited to come into compliance with the law. If the employer agrees, the investigator will disclose the back wages owed as well as if there are possible civil money penalties (CMPs). If an employer disagrees with the findings, they employer may refuse to pay back wages resulting from the alleged violation. If this happens, the employer will likely be referred to the investigator’s manager for further discussions and negotiations.
Industry Violations:
Employers should know that certain industries have a history of violations. For example, nursing homes often fail to compensate employees for all hours worked; construction companies often pay overtime incorrectly; and restaurants rarely calculate overtime and tip credit correctly. Wage and hour investigators will generally focus on common industry violations when approaching different industries.
Action Items:
Moving forward, employers should:
- Carefully review their current payroll practices;
- Review the requirements of wage and hour laws, including the FLSA, FMLA, SCA, and others; and
- Take proactive steps to ensure compliance to avoid potential future liability and possible CMPs.
Please contact us with any questions or concerns you may have regarding these issues.