Department of Labor increases wage, hour audits

Employment attorney Patricia Nemeth of Detroit-based employment law firm Nemeth Burwell PC encourages employers to pay close attention to employee classifications this year as the Department of Labor increases its focus on wage and hour audits to ensure proper payment of employees.

"Proper classification of employees as non-exempt (hourly) or exempt (salaried) should always be a priority for employers, but with the Department of Labor cracking down on employers who misclassify employees or pay true employees as contractors, there is a greater sense of urgency now to ensure compliance with federal laws," says Nemeth.

Nemeth notes that wage and hour audits may occur with or without notice and include compliance checks with the Fair Labor Standards Act (FLSA), Family Medical Leave Act (FMLA) and the Occupational Safety and Health Act (OSHA), as well as lesser known acts such as the Davis-Bacon and Related Acts, which applies to contractors and subcontractors working on federally funded or assisted contracts for construction-related public buildings or public works and guides wage standards for workers on such projects.

Wage and hour audits typically include examination of records to establish dollar volume, interstate commerce and government contracts as well as examination of payroll, time clocks, job descriptions and 1099 details for independent contractors.

"Audits can result in fines not only for wage and hour discrepancies but also for simple errors like not posting required wage and hour law posters in prominent areas," explains Nemeth.

She offers the following best practices for maintaining compliance with wage and hour regulations.

* Review contractor/employee designations regularly and put appropriate documentation in place to monitor any changes.

* Audit exempt/non-exempt designations once a year.

* Review job descriptions annually and compare them to actual job duties performed.

* Review payroll policies and procedures, including overtime and payroll deductions.

* Make sure wage and hour posters are current and placed in high traffic areas where employees gather.

* Maintain industry contracts with peer organizations for indications of a targeted, industry specific initiative by the Department of Labor.

Nemeth adds that employers who use a Professional Employer Organization (PEO) to run their personnel function still need to pay attention to Department of Labor regulations.

"Employers who use a PEO need to be aware that in some circumstances they could be considered a joint employer with the PEO under the FLSA and therefore could be jointly and severally liable for unpaid wages."

Published: Wed, Jul 18, 2012