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Employers Should Assess Potential Wage and Hour Compliance Issues Now

Volume 11, Issue 1
January 13, 2012

The start of any new year is usually a good time for employers to undertake an annual critical self-assessment of any potential labor and employment law compliance issues and to address any identified vulnerabilities.  As President Obama's U.S. Department of Labor (DOL) continues to increase its level of aggressive enforcement, issue pro-employee interpretations of the laws it enforces and enter into inter-agency alliances, such as joining forces with the Internal Revenue Service (IRS) to root out worker "misclassifications" ( i.e., the practice of paying workers as "independent contractors" when they really should be taxed as employees and subject to minimum wage and overtime protections), now is a particularly good time to assess whether or not your company has any wage and hour compliance challenges.  This is especially true for Las Vegas-based employers who have witnessed the city's business and legal climates fall right in line with those in the rest of the nation that are struggling with a large number of employee collective and class action lawsuits seeking hundreds of thousands and, in some cases, millions of dollars.  Not only is such large scale wage and hour litigation financially crippling for any employer to defend against, the settlement of such cases is also just as financially precarious.  When your company undertakes its critical self-assessment some of the important wage and hour issues to consider in 2012 include:

1. Ensuring proper application of all overtime exemptions. The most common exemptions are the "white collar" administrative, executive and professional exemptions, and the "computer professional" exemption. With these and all exemptions, the most important points to remember are:
- Just paying an employee a salary does not make him or her exempt from overtime.
- The employee's title or even job description means little - the focus of the regulations is on the employee's actual work duties.  The DOL currently applies a very narrow interpretation to all overtime exemptions under the Fair Labor Standards Act (FLSA), meaning the "benefit of the doubt" is in favor of employees.  For example, calling an employee a "manager" even though the employee in reality manages no one and lacks any real independent authority will not help to support the asserted exempt status of the employee.
- The Obama Administration's DOL has frequently departed from prior interpretations of exemptions under the FLSA established during the Bush Administration and earlier.
- Companies are often unable to prove the hours worked by employees they have paid a salary to under the belief that the employees are exempt from overtime when the DOL ultimately disagrees.  In these situations, companies will have few or no records, such that the DOL or court will likely accept any documentation the employees are able to produce as to their schedule.  Indeed, the DOL has made instructions, forms and even a smartphone application available to employees so they can keep their own time records.  Even more frustrating for employers, in the absence of company time records or other objective evidence of the time employees actually worked, the next best evidence accepted by the DOL and the courts is the personal and often selective recollections of the employees.
2. Compensation issues related to workers use of new technology. Employers must generally compensate non-exempt employees who check email on personal and/or company-owned computers and smartphones outside usual work hours, as well as those non-exempt employees who update their personal social media accounts at their managers' direction in order to market the company and its products/services through such forums.
3. For non-exempt employees, the proper recording of, and payment for, all time worked. As companies must pay employees for all hours worked if the employer "suffers or permits" the work, employers must ensure supervisors are not allowing "off the clock" work, "shaving" time from employees' work hours or using rounding procedures that are disadvantageous to employees.
4. Considering whether persons performing work are truly "independent contractors" and not "employees." During an audit, the DOL and the IRS frequently review IRS Form 1099s and question company officials about the duties performed by such workers and other relevant issues associated with the performance of their work. An adverse ruling as to a worker's independent contractor status can lead to many types of expenses and liabilities beyond the compensation for unpaid regular and overtime hours, including those related to federal and state tax obligations, employee benefit plans and workers' compensation.  For the most part, the applicable rules for establishing independent contractor status focus on the amount of control the company has over how, when and where the work is performed.  A helpful guide is the IRS's Publication 15-A, found at www.IRS.gov.  Also useful in proving a worker's independent contractor is the existence of a written contract that specifies the respective responsibilities, control and payment arrangements associated with the independent contractor's work.
5. Use of unpaid interns. The current DOL has focused substantial enforcement efforts on the use of interns as it is concerned that interns are actually employees entitled to compensation because they displace regular employees and the interns' work experience is not primarily for their own benefit.  See DOL Fact Sheet on Internship Programs Under the FLSA.
6. Compliance with Nevada's wage and hour laws. For employees at lower compensation levels, ensure your company's compliance with Nevada's minimum wage and overtime statutes.  New wage bulletins are issued April 1st of each year, with changes applicable July 1st.  In addition, keep in mind that some federal exemptions are not recognized by Nevada law and vice versa.
7. Use of Nevada-based employees to perform work in other states. The Ninth Circuit Court of Appeals (which has jurisdiction over federal cases originating in Nevada) and the California Supreme Court have recently ruled that companies with non-resident employees who perform even temporary work in California must compensate such employees according to California law for the time they performed work within California.  See Sullivan v. Oracle Corporation, No. 06-56649 (9th Cir., Dec. 13, 2011).  Other state courts have issued similar rulings.

Not only are the attorneys of KZA able to help clients address and resolve such wage and hour challenges in Nevada, but the firm is also able to quickly access the necessary resources to address out-of-state wage and hour issues given its affiliation with the Worklaw® Network.  Focusing their practices exclusively in the area of labor and employment law, the Worklaw® Network is an international network of independent management labor and employment law firms formed for the professional exchange of information.  Kamer Zucker Abbott is proud to be the exclusive Nevada member firm of the Worklaw® Network since 1995.

Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.