How to Avoid Fair Labor Standards Act (FLSA) Claims: Part Two

In part one of this series, I informed you of mistakes employers commonly make and the things they really need to understand about FLSA claims. 

More about Wage Claims

Employees claiming to be owed wages under the FLSA can make a complaint to the Wage and Hour Division of the United States Department of Labor (DOL) or file a lawsuit without going to the DOL. Either way, the employee can recover back wages for two years prior to the claim being filed, unless they can show the employer acted “willfully,” in which case it is three years. And when I say something was done “willfully,” I mean the Supreme Court’s definition that the employer either knew or showed reckless disregard as to whether its conduct is prohibited by the statute. 

In addition to back wages and overtime pay for unpaid hours worked in excess of 40 hours in a workweek, an employee may also recover “liquidated damages,” which means the unpaid wages may be doubled. 

While some wage and hour records must be kept only two years, others are required to be retained for three years under the federal law. Since employees can, in some cases, recover up to three years back wages, employers need to keep pay records for up to three years. In fact, other regulations may require even longer retention. For example, the Texas unemployment tax rules require a four-year retention period for payroll records, so it is a good idea to keep all wage and hour records for at least four years. 

Steps to Avoiding Claims

The best way to avoid claims is to consult with your HR team and legal counsel, who can explain the FLSA to you and will ask the right questions to ensure that you are properly classifying your employees. Since exemption classification is based on fact-specific tests that are difficult to apply, where exempt status is not clear, the best practice is to treat the employee as nonexempt, track hours and pay overtime. Employers should take care to ensure nonexempt employees’ time sheets reflect actual hours worked, avoiding claims for “off-the-clock” work, which are common. Employers should also consult with their HR Team and legal counsel to ensure they are calculating overtime correctly, which is also an area many employers do not fully understand. 

HR professionals are trained to understand the nuances of overtime pay requirements and guide employers in the right direction. They also have a number of resources available to them that will help with questions you may have. 

If you don’t have HR support, I would suggest you consult the Wage and Hour Division Web site or the Department of Labor Web site. Both Web sites provide extensive information to assist employers and employees in FLSA-type situations. 

Another option is to consult an attorney. Preferably one who has knowledge of employment laws and is well-versed in FLSA, as this is a highly specialized area. 

Example

A couple of years ago I worked with a customer that asked me to review job descriptions for two of their administrative support employees. I reviewed the job descriptions and after I looked at them, I felt that the client had improperly classified the two employees as exempt. And they should have been classified as non-exempt because the work they were doing was clerical/administrative-type work. 

In this particular situation, it was a significant challenge to convince the client that the employees needed to be reclassified as non-exempt. And one of the things that I think helped change the company’s mind about this is when I started showing them how much money was being awarded to employees in similar cases, and that’s when they became convinced that the change needed to be made. 

So even though it was a challenge to resolve this particular situation, I feel like it was worth the time and effort. I feel like it was the right decision and that the client felt the reclassification was really in their best interest.

There are things you can do to help you avoid FLSA claims against your company.