Law360: To Avoid Wage-Hour Risks, Use Ounce Of Prevention

August 2010

Law360
By Stephen M. Paskoff, ELI® Inc.
Posted 8/9/10

Ask almost any employment lawyer where case loads are growing fastest, and you probably won’t be surprised to hear about the explosive increase in the wage-and-hour arena.

Virtually any viewer who has switched on late-night television likely has been barraged by a string of attorneys’ wage-and-hour commercials and public service announcements from the U.S. Department of Labor’s “We Can Help” wage-and-hour awareness campaign. The growing public awareness of wage-and-hour claims may even trigger more lawsuits and even bigger resulting settlements.

At the same time, industry-standard practices uncovered in one employer’s operations are setting the stage for me-too claims in other organizations. For example, unpaid work that occurs during donning and doffing clothes and gear, meal breaks or training, can impact hundreds or even thousands of employees in a single organization, triggering class action lawsuits that are expensive to defend and settle. This copy-cat legal action is happening in the health care, pharmaceutical sales and telecommunications industries.

At a time when some experts estimate that as many as 70 percent of employers are failing to comply with the Fair Labor Standards Act and 86 percent of U.S. work force may not be exempt from the law’s overtime provisions[1], it’s clear that wage-and-hour liability is a corporate risk that won’t soon disappear.

Certainly, Congress isn’t likely to change the 72-year-old FSLA in the foreseeable future. While the intensity of regulatory enforcement by the Department of Labor may wax and wane from one Administration to the next, lawyers won’t abandon lucrative and relatively easy-to-win wage-and-hour cases. Nor is there much chance that the courts will curtail the law’s provisions.

While much has been written about defending claims, little has been said about prevention. Neither stopping violations nor avoiding recurrence involves exclusively legal considerations. However, employers must consider both factors if they intend to address and eliminate ongoing liability.

The first question is whether employers will recognize the need to analyze their situation and address the biggest problem areas — or will they roll the dice and hope they won’t get hit with a wage-and-hour claim? In the short run, it may appear easier to let sleeping dogs lie. But, the longer questionable practices continue, the greater the liability and risk to corporate reputations.

Noncompliance: a Bad Wager

Many organizations are choosing to take their chances by continuing improper pay practices and behaviors. Take your pick of metaphors: This wager is akin to 1) deciding not to seek health care coverage and hoping no medical emergencies arise, or 2) avoiding paying taxes on the bet an audit will not follow.

In fact, failing to address broad-based FLSA problems may be a riskier wager as private lawyers and the Department of Labor swoop in, seeking their prey for class claims. The larger the potential class, the less likely that blatant and even gray-area practices will escape litigation.

The stark business decision organizations must confront is this: Are we going to fix a problem now that may trigger current risk as lawyers realize that employees are owed back wages? Or, are we going to hope this problem will not be uncovered, be settled for a reasonable amount if it does or, that the whole issue will somehow magically disappear?

In my view, it’s preferable to analyze and identify the biggest problem areas and take steps to reduce ongoing liability and comply with present legal standards.

Changing Deeply Ingrained Workplace Behavior

Second, before litigation or as a result of court imposed settlements, many employers adjust their practices to cut off future liability, invest in manager and employee education and comply with the law as currently interpreted. For example, in health care, many hospitals require nonexempt employees to take paid meal breaks that they traditionally had not taken or for which they had not been paid.

The inherent problem is that for several working generations, managers and employees have adopted the practices of working through and not being compensated for meal time.

Getting employees to change when most were satisfied and comfortable with such workplace rituals will require a difficult break with longstanding culture. This can’t be done by simply writing a new policy, sending out a few memos, getting everyone to acknowledge the change or even giving individuals a dose of information about new standards.

In the press of daily work, especially given that many workers saw such behaviors not as problems but as comfortable routine ways of getting work done, it will be all too easy for these risky practices to resurface.

If this happens, new pockets of FLSA liability will quickly reappear. Accordingly, managers and employees have to be educated on the new practices and reminded of changes in their wage practices in a nonintrusive, routine way. And, the new system or ritual behaviors must be enforced.

Ironically, those firms that recognized ability, made a commitment to change, but then failed to permanently do so, will face courts and administrative agencies less inclined to settle next-wave claims as favorably the second time around.

One-Time Fix is No Fix at All

Liability will likely return because the central issue won’t be whether the employees objected. Instead, it will be: Did the employer allow improper actions to arise? At least in the area of wage-and-hour employment law, a one-time fix is no fix at all, but instead, just a temporary Band-Aid.

Unless employers consciously and deliberately address FLSA issues and permanently fix them, ongoing FLSA liability will persist or even grow. For employers that choose to gamble or others that ineffectively address underlying problems, wage-and-hour compliance will continue to be a long-term and costly business and legal risk.



About the Author

Stephen M. Paskoff, Esq., is president and CEO of Atlanta-based ELI Inc., which provides award-winning ethics and compliance learning solutions that transform complex laws and ethical codes of conduct into simple behavioral rules that improve performance, reduce legal risk, and create productive workplace cultures. Mr. Paskoff writes the Ethical Workplace blog at www.eliinc.com/blog.


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