Wage and Hour Claims and Classification Audits On the Rise
A survey released this month by Littler Mendelson claims that an “explosion” of wage and hour cases are causing many C-suite execs and their HR managers to lose sleep at night. According to their research, roughly half the businesses surveyed are worried about a DOL classification audit and almost 60% under audit have encountered employees who misrepresented their job duties.
Should they be worried? Absolutely.
DOL Wage and Hour Cases
4204 wage and hour class actions were filed in 2012. That is an 11% increase over 2010. Remember, these are class actions and don’t cover the tens of thousands of claims filed by individual employees. If Littler’s figures are correct, over the last 5 years businesses have shelled out $2.7 billion to settle these claims.
Who are the workers most likely to file a misclassification complaint? Supervisors.
The survey suggests that many businesses are planning on performing internal audits to insure workers are properly classified. That sounds good on paper but many businesses never get around to doing it.
Department of Labor wage and hour cases arise when a business misclassifies a worker as exempt from overtime laws. Some workers are truly exempt but many others are misclassified. Businesses don’t like to pay overtime but the courts are siding more with workers these days.
A Littler attorney claims that businesses can defeat many overtime claims by simply having workers sign off on their job description each year. A simple step to be sure but we find few businesses doing so. Even that practice won’t defeat legitimate wage and hour claims, however.
If you are a worker and are not receiving minimum wage or time and a half and feel that you are misclassified, you may have a case under state and federal fair labor standards laws.
The Fair Labor Standards Act dates back to 1938. Although many people have not heard of the law, they are familiar with its terms. Non management and non administrative employees are entitled to overtime pay for work in excess of 40 hours.
As a law firm that often represents financial professionals, we often see cases involving mortgage brokers and stockbrokers. Many of these folks work long hours trying to meet sales quotas. Sometimes single broker branch offices are required to be open a certain number of hours while other work long hours simply hoping to make a modest living. Either way, qualified employees are entitled to both minimum wage and overtime.
Believe it or not, factory workers are better versed in the overtime laws than financial services employees. White collar workers mistakenly believe that because they wear a suit and tie, they are exempt from overtime laws. They are wrong.
IRS Classification Audits
The Department of Labor looks at whether workers were improperly classified for overtime purposes. They are not the only classification audits keeping managers up at night. The IRS has increased its surveillance of workers improperly classified as independent contractors. Employees are subject to withholding and much easier to monitor since most receive a W-2 statement and have taxes withheld by the employer. Independent contractors, however, are much harder to keep in compliance.
Between the two agencies and their respective classification audit programs, businesses need to insure that workers are properly classified for both IRS and the Department of Labor.
If you believe you are improperly denied overtime or minimum wage, we want to speak with you. If you are an employer and want to make sure that your workers are properly classified, we can help their too. Performing an internal self-audit can spare thousands of dollars of claims and penalties later. For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct). All inquiries are protected by the attorney – client privilege and kept in strict confidence.
Post by Brian Mahany