Federal Fair Labor Standards Act (FLSA) lawsuits numbered over 7,000 in 2012 alone. Companies such as Walmart, Staples, Merrill Lynch, JPMorgan Chase, Oracle, CVS, Tyson Foods, Lowe’s and AT&T have been subject to significant FLSA penalties. And, investigations are not limited to big business; small business owners are targets as well.
FLSA lawsuits don’t target specific types of companies; every company could be faced with this challenge and the ensuing penalties. This article examines the five areas investigators generally look at to determine violations.
1. Earnings codes
Your company’s earnings codes may be the easiest way to identify compensation being improperly excluded from the regular rate. In an FLSA lawsuit investigation, investigators tend to first look at safety, incentive, bonus, auto allowance, operator incentive and per diem.
2. Deduction codes
Looking at your list of deductions codes can also reveal existing issues such as appropriate deductions or if the deductions reduce wages below minimum wage. Investigators will pay special attention to advances, laundry, safety glasses, tools, uniform fees and shoes and union dues.
It’s important to remember to document anything that requires employee authorization and to avoid deductions that cause pay to go below minimum wage.
3. Your time system
Your time and attendance rules and the resulting employee time punches can be one wage and hour issue, but there are several causes:
- Rounding rules – make sure rounding is fair
- Automatic meal period deductions – single largest reason for litigation; if you require employees to punch out/in rather than auto deduct, you have no proof of meal periods
- Time clock rules treat clocking in early or late the same for everyone
- Shift hours overlaps work weeks; this may cause underpay one week and overpay the next week
4. Time card dangers
There are a few areas which investigators focus on as possible clues to inappropriate time clock management.
- Identical in/out and meal period times for almost every day – is the employee actually punching?
- No out/in and meal time punched – hard to prove if nothing is documented
- Exact time punches when shift begins
- Employee time punches are almost the same exact time – possibly buddy punching
5. Pay stub issues
- Paid for fewer hours than shown on time record
- Deductions for work are required equipment (e.g., uniforms, tools)
- Employee was paid a shift differential or bonus instead of overtime pay
How to Avoid FLSA Violations
Avoiding difficult, expensive and time-consuming business problems are now a part of our reality with FLSA lawsuits. Proper record keeping and documentation is vital, along with a time and attendance system that integrates with payroll and other business functions. Your systems should have consistent rules across the board, maintain documentation, have easy data management and reports to prove your compliance.