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Wage and Hour Investigations – Are You Prepared?

Compliance with wage and hour laws can be difficult for employers in the construction industry.  With work hours fluctuating due to weather, availability of materials and employee turnover, maintaining proper time records and pay practices is a challenge.

The U.S. Department of Labor (DOL) is responsible for enforcing the Fair Labor Standards Act (FLSA), the source of most federal wage and hour requirements.  During the last fiscal year, the DOL conducted thousands of investigations and collected more than $280 million in back wages from employers.

Thomas Perez, the newly confirmed Secretary of Labor, has listed wage and hour enforcement as one of his top priorities, and the construction industry is among the DOL’s targeted industries.  So it makes sense to be prepared.  Look out for these common FLSA compliance problems:

  1. Improperly treating employees as exempt – Most employees are “non-exempt,” meaning they are entitled to overtime pay.  The regulations governing exempt employees are strict and generally apply to high-level professional, administrative and executive employees.  A working foreman, crew chief or lead person will not qualify.  Your HR director or legal counsel should periodically review the status of all employees who are not eligible for overtime, to make sure they qualify as exempt under FLSA regulations.
  2. Counting overtime on a pay period basis – The FLSA regulations are clear: nonexempt employees are entitled to be paid overtime, at time and a half their regular rate of pay, for all hours worked over 40 in a work week.  If an employee works 44 hours in one work week and then 36 hours in the next work week, it is illegal to pay the employee for two 40 hour work weeks.  Each work week stands alone.
  3. Comp time – There is no such thing as “comp time” in the private sector (only government employers can substitute time off for overtime pay).  If you are trying to avoid overtime, you can track working hours and send employees home when they reach the 40 hour mark in any work week.  You cannot legally “bank” overtime hours and use them to provide time off in a different work week.
  4. Miscalculating the regular rate – Overtime pay is one and a half times the employee’s “regular rate” of pay.  The “regular rate” is not necessarily the same as the employee’s hourly rate, since it includes almost all forms of compensation.  If the employee receives shift differential, safety bonuses, attendance bonuses or any other promised compensation, that compensation is included in calculating the “regular rate.”  Truly discretionary bonuses, like a holiday bonus that management decides upon each year, can be excluded.
  5. Meal break violations – In order for a meal break to be excluded from hours worked, it must be at least 30 minutes long, and the employee must be relieved of all duties.  If a meal break is less than 30 minutes long, or is interrupted by phone calls or other work, it must be counted as working time.
  6. Pre- and post-shift violations – Work that takes place before or after a scheduled work shift must be recorded as working time.  This includes time spent cleaning up, loading or unloading equipment, and attending meetings.  Beware of potential problems with your best employees – the ones who show up early and stay late – the extra time must be recorded on their time records.  If you don’t want to pay for those extra hours, explain that start and stop times are mandatory, and have supervisors make sure that no one works “off the clock.”
  7. Missing or inaccurate time records – The FLSA requires employers to keep accurate time records for all non-exempt employees.  You should keep time records for a minimum of three years, since DOL investigators can request the last three years of time records in an investigation.  Investigators will interview your employees to verify that the time records are accurate, so make sure that the records reflect reality.  If time clocks are not being used, a good practice is to have employees sign their time sheets, and then have a supervisor review and sign.

Employers who make the extra effort to prepare and maintain these important records will be ready when the Department of Labor calls.

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