The DOL’s Payroll Audit Independent Determination program

Too often, employers take advantage of their employees, with the employer typically leveraging its superior knowledge of the law. Employees forced to resort to legal action against their employers often face powerful and sometimes obstructive employers, but also benefit by representation from fierce attorney advocates who have the employee’s best interests in mind. Unfortunately, a recently announced U.S. Department of Labor’s (“DOL”) program may end up hindering employees’ ability to have their day in court with the aid of their chosen advocate.

On March 6, 2018, the DOL’s Wage and Hour Division announced a six-month pilot initiative referred to as the Payroll Audit Independent Determination (“PAID”) program. The PAID program will allow an employer to conduct self-audits of their payroll practices and voluntarily report underpayments to the DOL which, in turn, will supervise the back wage payments. Yet to be tested, the new program is touted as a way for employees to receive the wages they are owed faster without having to wait for litigation and as a means of correcting an employer’s underpayment of wages to employees.

However, the PAID program potentially harms employees more than it will help them. The settlements that the DOL supervises do not mandate liquidated damages. Liquidated damages are an amount paid in addition to unpaid wages. The purpose of liquidated damages is to discourage employers from unlawfully withholding wages, only to pay them if they get caught; in which case the employer essentially enjoys a consequence-immune interest-free loan. Under the apparently employer-friendly PAID program, employers may be able to do a low cost review, and have the DOL approve repayment of back wages without further liability, and without the fierce legal advocate acting on behalf of the employee. Further, employees who submit to this route for reimbursement of their owed wages will give up their right to bring a lawsuit against their employer for the payment of unpaid minimum wages or unpaid overtime compensation.

The National Employment Law Project, a worker advocacy group, said it opposed the program. Judy Conti, a federal advocacy coordinator for the National Employment Law Project, said the PAID program is an effort to “stack the deck in favor of employers” and acts as a “get out of jail free card” for them.

Note that the program cannot be invoked when the violation is already at issue in litigation, in arbitration, or already under investigation by the DOL/WHD. Also, remember that wage and hour claims under the FLSA are typically subject to a two year statute of limitations, which can only be extended to three years under certain circumstances.

If you feel that you are not being properly paid wages you have earned, call Barkan Meizlish, LLP for a free consultation at 800-274-5927. You may have a viable claim and we can help you determine the best course of action.
(Advertising Material: This Notice is for informational purposes and should not be construed as legal advice).

Pizza Chain Owes

A pizza restaurant chain in Manchester, Connecticut was held liable for violating the Fair Labor Standards Act (FLSA). An investigation conducted by the U.S. Department of Labor’s Wage and Hour Division found that the pizza restaurant chain had violated the FLSA’s minimum wage, overtime, and record-keeping requirements between February 2013 and November 2015. The restaurant did not pay one-and-one-half their regular rates of pay to three employees who worked overtime hours up to seventy-five hours per week. Additionally, the restaurant took payroll deductions for cash register shortages that resulted in one employee receiving less than minimum wage. The investigation also found that the restaurant maintained and supplied false time and payroll records and statements to investigators during the current investigation and a prior investigation in 2015.

Additionally, the investigation found that between December 2015 and April 2016, the owner of the restaurant continually pressured one employee to make false statements to investigators, leading the employee to believe he had no choice but to resign. The Department of Labor charged that the owner’s behavior resulted in the worker’s constructive discharge, in violation of the FLSA’s anti-retaliation provisions.

Therefore, on November 16, 2017, a United States District Court in Connecticut issued a judgment against Chemro LLC d/b/a People’s Choice, and Defendant Robert Y. Mercier II for back pay in the amount of $67,151.14, which includes minimum wage and overtime payments due, as well as liquidated damages, compensatory damages, punitive damages, civil money penalties, and interest. The Court also ordered that the company and its owner comply with the FLSA and “refrain from discharging or discriminating against employees who initiate or cooperate with an FLSA investigation.”

The FLSA requires that most employees receive one-and-one-half times their regular rate of pay when they work more than 40 hours in a work week and that employers maintain adequate and accurate records of employees’ wages and work hours. If you feel that you are not being properly paid wages you have earned, you should call our unpaid wages lawyer for a free consultation. You may have a viable claim and we can help you determine the best course of action after thorough consideration of your situation. We can be reached at 800-274-5927.

(Advertising Material: This Notice is for informational purposes and should not be construed as legal advice).

Hears Argument on Agency Rulemaking

Today, the Supreme Court of the United States will hear oral arguments in Perez v. Mortgage Bankers Association regarding whether a federal agency must engage in advance notice and public comment rulemaking when issuing an Administrative Interpretation.  Here is some background as to what the Court will address:

The Administrative Procedure Act (APA) requires that an agency give notice and allow an opportunity for regulated parties to comment on the rulemaking process before the agency significantly alters an agency’s rule.  This “notice-and-comment” requirement only applies to rules having “significant, far-reaching effects,” which gives agencies flexibility in issuing “interpretative” rules designed to clarify regulations without going through the formal notice-and-comment process.

In 2010, the DOL issued an “Administrator’s Interpretation” reiterating that mortgage loan officers (MLOs) are not exempt from the FLSA because the primary job duty of a typical MLO—the sale of financial products—did not meet one of the qualifications under the administrative exemption.  The DOL sought to clarify the mortgage industry’s widespread misinterpretation of a 2006 DOL Opinion letter that opined that MLOs who performed specific tasks (tasks that most MLOs do not perform) might qualify for the administrative exemption.

Thus, the issue framed for the Court is whether the DOL’s interpretative statement required the DOL to set forth formal notice and take public comments regarding its 2010 Administrative Interpretation.  The Mortgage Bankers Association (MBA) contends that the DOL’s 2010 Administrative Interpretation established a substantive rule, therefore subjecting it to the notice-and-comment requirement of the APA.  The Solicitor General argues that the APA’s “interpretative rules” exemption from the notice-and-comment requirement applies to the DOL’s 2010 Administrative Interpretation.

This case could have a significant effect on the rulemaking power of federal agencies.

Executive Order Establishes New Minimum Wage For Government Contractors

Last month, the Department of Labor (DOL) announced a Final Rule that is expected to affect nearly 200,000 workers.  Under the Final Rule, which implements President Obama’s Executive Order 13658, the minimum wage for workers on government contracts will be raised to $10.10 an hour beginning on January 1, 2015.  Beginning January 1, 2016, the Secretary of Labor will determine the minimum wage amount in accordance with the Executive Order. The new minimum wage will extend to certain employees working on or “in connection with” covered federal construction and service contracts, with the expectation that the raise will increase overall productivity by boosting morale and reducing turnover.

What contracts are covered?

The new minimum wage applies to service contracts covered by the Service Contract Act (SCA), construction contracts covered by the Davis-Bacon Act (DBA), contracts for services on federal property for federal employees or the general public, and concessions contracts (contracts to provide food, lodging, and souvenirs).

Which workers are affected?

Workers who work directly on the contracts described above that are not exempt under the FLSA, the SCA, or the DBA will be entitled to the new minimum wage, as well as workers performing “in connection with” the covered contracts (for example, workers that perform duties necessary to the performance of the contract).

Source: Bennet Alsher, Department of Labor Publishes Final Rule to Raise Minimum Wage for Certain Federal Contractors and Subcontractors, Oct. 29, 2014  http://www.jdsupra.com/legalnews/department-of-labor-publishes-final-rule-73632/
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Wage and Hour Violations: The Oil and Gas Industry

In the rapidly growing oil and gas industry, wage and hour violations have become more common as companies seek ways to lower their labor costs.  In response, the Wage and Hour division of the Department of Labor (“DOL”) has focused its investigations and enforcement initiatives on oil and gas employers to address one violation in particular: misclassifying workers as independent contractors.  This practice is especially pervasive in the oil and gas industry, where much of the work is sub-contracted out to smaller companies.

Under the Fair Labor Standards Act (“FLSA”), nonexempt employees must be paid at least the minimum wage for all hours worked, plus overtime pay at a rate of one and one half times the regular rate for hours worked in excess of 40 in a workweek.  Some employers try to sidestep these obligations by classifying workers as independent contractors, rather than employees.  Of course, hiring independent contractors, when done correctly, certainly eliminates many costs and workplace restrictions.  Independent contractors are not subject to the overtime provisions of the FLSA, and employers can also avoid tax obligations otherwise owed to employees.

But it is the actual employment relationship—not the label—that controls whether an individual is an employee or an independent contractor for the purposes of the FLSA.  Although there is no single way to make this determination, the bottom line is that defining employee status can be complex, and simply handing a worker a 1099 rather than a W-2 will not suffice.  It all depends on the circumstances surrounding the employment relationship as a whole.  Workers are employees if they are economically dependent upon the employer, rather than in the business for himself or herself.  One of the various tests applied by the courts, the “economic reality test,” considers the following factors: (1) the permanency of the relationship; (2) the degree of skill required; (3) whether the worker contributes services that are an integral part of the business; (4) the employer’s control over the worker; (5) the worker’s opportunity for profit or loss; and (6) the worker’s investment in materials and equipment.

When undetected, worker misclassification denies individuals crucial benefits and protections such as family and medical leave, unemployment insurance, workers’ compensation, and the minimum wage and overtime pay.  Additionally, it exposes employers to serious liability—back wages, liquidated damages, and attorneys fees—when violations are found.  For example, an oil and gas equipment manufacturer paid nearly $700,000 in back wages to misclassified employees following an investigation by the DOL’s Wage and Hour Division.  Another company, Morco Geological Services, Inc., recently agreed to pay $595,000 in back wages to employees for minimum wage, overtime, and record-keeping violations.  Specifically, the investigation reported that the employees, new mud logging technicians, were only paid $75 per day for working 24-hours shifts.

Over the past decade, this industry has faced a 71% increase in employment, leaving much room for wage and hour violations.  The DOL has stepped up its enforcement initiatives by signing memoranda of understanding with state government agencies to organize investigations, providing compliance assistance information to employers, and reaching out to employees to increase awareness of worker misclassification.

Source: Naveena Sadasivam, Oil and Gas Companies Are Rigging Wages and Cheating Their Workers (September 27, 2014), http://www.truthdig.com/report/item/oil_and_gas_companies_are_rigging_wages_and_cheating_their_workers_20140927.

DOL Delays Enforcement of “Final Rule”

Last year, the Department of Labor (DOL) published its “Final Rule,” which revised the “companionship exemption” under the Fair Labor Standards Act (FLSA) to extend minimum wage and overtime pay protections to nearly two million domestic service workers.  Although the Final Rule’s January 1, 2015 effective date remains, the DOL announced last week that it will adopt a “time-limited non-enforcement policy” for these new changes to the FLSA.

Once the Final Rule takes effect, home health care employers will now have at least six months (and potentially up to a year) to comply with the new regulations.  From January 1, 2015 to June 30, 2015, the DOL will refrain from taking any enforcement action against employers.  For the remainder of 2015, the DOL will “exercise prosecutorial discretion in determining whether to bring enforcement actions.”  The DOL will consider a variety of factors in making enforcement decisions during this six-month period, including “the Department’s limited resources, the extent of the violations at issue, and the impact of a particular enforcement action on compliance.”  The decision to delay enforcement was brought on, in part, by state governments and other organizations expressing the need for more time to implement the necessary changes.  It is important to keep in mind, however, that the Final Rule’s effective date has not changed, and employers in this industry should make every attempt to comply with the new regulations by January 1, 2015. The DOL’s decision will not prevent employees from bringing FLSA minimum wage or overtime claims in 2015.

Source: Ted Boehm, USDOL Defers Enforcement Action on “Companionship” Changes (October 9, 2014) http://www.jdsupra.com/legalnews/usdol-defers-enforcement-action-on-comp-52675/.

Incentive to settle FLSA claims with the DOL

The Fair Labor Standards Act (FLSA) authorizes the Department of Labor (DOL) Wage and Hour Division to initiate an investigation to determine whether an employer is in compliance with the Act’s requirements.  If any violations are found upon investigation, the investigator will meet with the employer to discuss corrective actions and request any back wages owed to employees for minimum wage and overtime violations.  A settlement demand will often follow the investigation or audit, leaving employers to decide whether to settle with the DOL or take the claims to court.

The law favors acceptance of settlement offers with the DOL.  The penalties section of the FLSA contains a waiver provision, which was added by Congress as an incentive to employers to settle wage and hour claims with DOL supervision.  Under the waiver provision to 29 U.S.C. § 216(c), the DOL is authorized to supervise the payment of back wages to individual employees, as well as the agreement of any employee to accept such payment.  If the employee accepts the payment after the DOL-supervised settlement, the employee thereby waives his or her right to sue for wages, overtime, and liquidated damages, so long as the employer pays in full.
Source:  Allison Oasis Kahn, The Employer ‘Discount’ of Settling Employee Wage Claims Through the Department of Labor, Jan. 9, 2015 https://www.jdsupra.com/.

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