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Why Even Good Employers Need to Examine Their Pay Practices — Now

Wage-and-hour cases are big business.  The number of wage-and-hour cases in federal court has more than tripled over the last decade.  These cases are in addition to the rising number of agency actions at both the state and federal levels, as wage-and-hour enforcement becomes a cash cow for strained government budgets.  Agencies are imposing larger penalties for unintentional offenses, even by first-time offenders.  We have seen this trend in our own practice, and the strain it puts on employers is immense.  In addition to steeper penalties, increased coordination among agencies puts employers at greater risk for an agency audit.

Most employers mean well when it comes to wage-and-hour laws, but the state and federal laws are extremely complicated.  An employer who pays “overtime,” but does not do so in accordance with statutory parameters, can be subject to huge penalties and total liabilities.  An employer using an “independent contractor” that does not meet the relevant agency’s definition is liable for the tax consequences as well as minimum wage and overtime violations.  An employer not paying its “intern” minimum wage better comply with the Department of Labor’s six-part test.  In most cases, we find the employer out of compliance!  An employer complying with a widely used industry practice of treating certain employees as “exempt” may be racking up overtime violations even while “everyone else” does the same thing.

The first step for employers is to recognize the complexity of these issues.  Merely labeling someone an “intern” or an “independent contractor” or an “exempt employee” is never sufficient.  Taking a proactive approach to identify and resolve the tough legal questions can avoid major headaches down the road.  An attorney can help you conduct an internal “HR Audit” to evaluate your pay practices and correct any errors without alerting your employees to what may have been mistaken pay practices.  Given the dramatic increase in wage-and-hour litigation and agency enforcement actions, it is only a matter of time before your unlawful pay practices come to light.  A tough look in the mirror now can save your business bankruptcy down the road.

Brody and Associates regularly advises management on complying with state and federal employment laws including wage-and-hour laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.