Why Conduct a Wage Hour Audit?
Simply put, to identify whether your business has improperly classified any employee as being exempt under the Fair Labor Standards Act of 1938’s (“FLSA”) provisions regarding the payment of overtime. In 2016 alone, the U.S. Department of Labor collected more than $266 million in back wages. The U.S. Department of Labor’s statistics do not include back wage recoveries procured by private attorneys.
Does Payment of a Salary Determine Exempt Status?
No. Paying an employee a salary does not make an otherwise nonexempt employee exempt from the overtime provisions of the FLSA. There is a minimum salary requirement of at least $455 per week, but there is also the requirement that the employee’s job must satisfy the duties test for any overtime exemption that is relied upon under the FLSA.
Financial Liability Associated with Misclassification
In addition to the unpaid overtime that can arise as a result of an employee being misclassified, the employee is entitled to liquidated damages in an amount equal to the unpaid overtime plus the recovery of attorney’s fees if the employee retained an attorney. Additionally, the U.S. Department of Labor has the authority to impose civil penalties.
Look Back Period
The look back period under the FLSA is two years unless the violation is intentional. If the violation was intentional, then the look back period is three years. In this context, an intentional violation can arise as a result of an employee questioning the employee’s employer about whether the employee is entitled to overtime. Once the question about overtime is raised, an employer has a duty to investigate. Failing to investigate whether the employee is entitled to overtime can be the basis upon which the U.S. Department of Labor could find an intentional violation.
The Benefit of Conducting a Voluntary Audit
Voluntarily conducting a wage hour audit can reduce an employer’s exposure to liquidated damages, attorney fees and civil penalties.
Documenting the Audit
When conducting an audit, it is both important to document the steps taken during the audit and to identify what information was reviewed. It is also important to remember to analyze whether the employee’s job duties qualify as exempt under the FLSA. If during the audit a misclassification is discovered, the employer is wise to reclassify the employee(s) as nonexempt and to pay any overtime at one and one-half the employee’s regular hourly rate for all hours worked over 40 and to have the employee acknowledge receipt of payment for payment of the overtime.
An employer that has questions about whether one of the employer’s employees qualifies as exempt from the FLSA’s overtime provisions should consult with an employment lawyer and request an opinion letter. The opinion letter will insulate the employer that requested the legal opinion from liquidated damages should it later be determined by a court that the exemption does not apply from being tagged for liquidated damages.
A note to the reader: This article is intended to provide general information and is not intended to be a substitute for competent legal advice. Competent legal counsel should be consulted if you have questions regarding compliance with the law.
Questions regarding this article or past articles may be e-mailed to Christina Harris Schwinn at firstname.lastname@example.org. To view past articles written by Ms. Schwinn please click here. Ms. Schwinn is a partner and an experienced employment and real estate attorney with the Pavese Law Firm, 1833 Hendry Street, Fort Myers, FL 33901; Telephone: (239) 336-6228; Telecopier: (239) 332-2243.