Worker Classification Scrutiny Intensifies for Employers

By: Karen Elliott. This was posted Friday, June 15th, 2012

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The news for employers hasn’t been pretty this week.

The Society of Human Resource Managers reports that the G-man, in the form of a Department of Labor (DOL) investigator, may show up unannounced at your door for a surprise inspection of your wage and hour records to make sure you have properly classified your employees.

A Virginia commission reports that the state legislature ought to make it illegal under state law for employers to misclassify independent contractors if their relationship is actually as employees.

Against these news items is the decision by the employee pharmaceutical representatives suing Novartis to settle now before the end of June because the law firm handling their class action case “was keenly aware that if the Supreme Court rules that pharmaceutical representatives are exempt outside salespersons, the plaintiffs in the Novartis case would not be able to recover any overtime pay, notwithstanding the Second Circuit‘s favorable ruling,” according to the firm’s website.

What the Novartis settlement keenly highlights, is that even if employers try to make the right classification determination, the law is often not clear, and it is easy, and not necessarily intentional, for a misclassification to occur.

With this increased scrutiny, employers should make conducting a yearly pay practices audit a priority. At least if the effort is made, damages may be limited. The news stories make it sound like the employer has a choice, to get classifications right, or wrong, and that simply is not the case. There is a lot of room for subjectivity under the wage and hour laws.

If you have done your audit, though, then you will be prepared, whether the visit is a surprise or a letter in the mail telling you the date of their arrival.

It goes without saying that we believe you ought to call your counsel, either in-house or private, when you receive a surprise visit or a letter. Be prepared and know the following answers about your business:

  • Do you have a gross income of $500,000.00 or more for the past three (3) years?
  • Do you travel out-of-state or receive supplies out-of-state, or make deliveries out-of-state?
  • Are there any pending wage and hour lawsuits?
  • How many employees?
  • How many employees paid on a salary basis? Can you justify their exempt classification if they are not paid overtime?
  • How many employees are paid on an hourly basis?
  • Do you have a listing by name of all employees?
  • What are the employees’ job descriptions and titles?
  • What is the lowest paying position?
  • What is the workweek – from what time to what time?
  • How do you calculate overtime?
  • Could there be any employees who qualify for the fluctuating workweek, if the overtime is not properly calculated?
  • Are there any break times?
  • Any union? If so, provide union contract.
  • Do employees attend meetings outside of normal work hours?
  • Do employees perform work at home?
  • Any independent contractors?
  • Anyone considered trainees? How about orientation – how paid?
  • Anyone paid on commissions?
  • Anyone paid on piece meal or per job?
  • Is there donning or doffing of equipment or special clothing?
  • Any bonuses?
  • Are there any deductions other than normal withholdings?
  • Any garnishments or firings because of garnishments?
  • Do employees punch their own time? Does the employer automatically record the time?
  • What was the last payroll period ending date?
  • Do you employ anyone eighteen (18) or under?
  • What are the paid holidays?
  • Does the payroll show the paid holidays?
  • Are there vacations and does the payroll show paid vacations?
  • Do you have the correct posters?
  • Are your I-9’s complete?
  • Have there been any disciplinary actions based on overtime, and if so is it recorded?

If you can’t answer each and every one of these questions fully, you are not prepared, and possibly out of compliance.

If you need assistance with your wage and hour compliance, we encourage you to call a Virginia employment lawyer for counsel and advice.

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