'Explosive' growth in wage lawsuits; cases hit all-time high
U.S. employees filed a record 7,064 federal wage-and-hour lawsuits in the fiscal year ending June 30, "a continuation of the explosive growth in these suits that has marked the past decade,” according to attorney analysts at the Seyfarth Shaw law firm.
The three most common triggers: misclassification of employees, unpaid off-the-clock work and miscalculation of overtime pay. In its recent report, the firm said that class actions under the FLSA are dominating the legal scene. Another notable trend is the increase in back-wage suits on behalf of higher-income employees, such as those in financial services.
In both types of suits, the key is the time an employee puts in outside regular work hours. Companies should be particularly careful about hourly employees working extra time while off the clock. Even five or 10 minutes worked voluntarily off the clock can add up to a large verdict when multiplied out over a period of years.
Advice: Make it clear to all hourly employees that you prohibit any work over breaks, or before and after shifts.
In one recent lawsuit, a company allowed administrative staff to track their own hours on time sheets. It also allowed them to take comp time. It could only rely on handwritten time records when disputes arose over how much time employees had worked, how much the employer owed them and whether some of the comp time should have been overtime. In such cases, the employer loses because it's the employer's responsibility to keep proper records.
Record-keeping requirements for exempt employees differ from those for nonexempt workers.
Exempt
records to keep
Because you don't pay exempt employees by the hour, you shouldn't track the exact number of hours they work on a daily basis. Doing so might appear to a wage-hour auditor as if you are indeed basing pay on the number of hours worked, which might raise the question of whether the employee is truly exempt.
However, just because a worker is exempt doesn't mean your company is freed from keeping records on him. With exempt workers, you should keep records that describe the workweek and the wages paid for that period. Specifically, you should keep the following records concerning exempt staff:
- Personal
information, including name, home address, occupation, gender, birth date
for workers under age 19 and the person's workplace identification number
- Time
of day and day of the week when the workweek begins
- Total
wages paid each pay period
- Date
of payment and the pay period covered by each payment.
Your
records for exempt employees also can track the days employees use for sick,
vacation and personal leave.
Exempt
records to keep
Because you don't pay exempt employees by the hour, you shouldn't track the exact number of hours they work on a daily basis. Doing so might appear to a wage-hour auditor as if you are indeed basing pay on the number of hours worked, which might raise the question of whether the employee is truly exempt.
However, just because a worker is exempt doesn't mean your company is freed from keeping records on him. With exempt workers, you should keep records that describe the workweek and the wages paid for that period. Specifically, you should keep the following records concerning exempt staff:
- Personal
information, including name, home address, occupation, gender, birth date
for workers under age 19 and the person's workplace identification number
- Time
of day and day of the week when the workweek begins
- Total
wages paid each pay period
- Date
of payment and the pay period covered by each payment.
Your records for exempt employees also can track the days employees use for sick, vacation and personal leave.
Nonexempt
records to keep
With nonexempt, hourly employees, you need to collect more details:
- Personal
information, including name, home address, occupation, gender, birth date
for workers under age 19 and the person's workplace identification number
- Time
of day and day of the week when the workweek begins
- Regular
hourly pay rate for any week when overtime is due (include an explanation of
the way wages are paid—such as per hour, per day, per week, per
commission—plus the amount and nature of each payment that's excluded from
the regular rate)
- Hours
worked each day and week
- Total
daily or weekly straight-time earnings (not counting overtime)
- Total
weekly overtime earnings
- Total
additions to or deductions from the employee's wages each pay period, plus
an explanation of the nature and dates of those additions or deductions
- Total
wages paid each pay period
- Date
of payment and the pay period.
If employees are working under a special certificate that allows you to pay below minimum wage—such as a "training” wage for students—your records must note that fact, too.
And
for how long
The FLSA requires you to keep the following records for at least two years:
- Basic
employment and earnings records
- Work-time
schedules (timecards)
- Wage
rate tables
- Order,
shipping and billing records
- Records
of additions to or deductions from wages paid.
In addition, keep these records for at least three years:
- Payroll
records
- Employee
agreements, such as collective bargaining agreements and individual
contracts
- Sales
and purchase records.
Yes, Congress has tinkered with the FLSA over the years.
Yes, the Labor Department has issued pages of regulations, interpretations and examples.
Yes, these changes are often confusing for employers and workers alike.
Is that an excuse for misunderstanding the law? No.
The FLSA is complicated and full of traps for unwary employers. And attorneys who represent unhappy workers are ready to take advantage of any misstep you take. Your best protection is awareness. Make sure you understand the fine points of the law, and work to ensure that your business is in compliance.
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