Story Published:
Nov 5, 2009 at 11:43 AM CST
Story Updated:
Nov 5, 2009 at 11:43 AM CST
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According to Wage and Hour Specialist Carol Merchant (left), employers of all sizes need to pay attention in 2010. There’s a new sheriff in town and her name is Hilda Solis. Secretary of Labor since February of this year, Solis sees her role as that of labor advocate, and seems serious about her opportunity to create change.
On the website "StrongerUnions.com" the front page reads "Whilst dealing with the economic crisis will be the new administrations top priority...the progress (or otherwise) of the Employee Free Choice Act will be an indication of just how much change we can expect. Early signs are good as Obama has nominated Rep. Hilda Solis for the key position (in this context) of Labor Secretary."
So, apparently, the union organizers think Solis is pretty good news. But it is already proving to be difficult news for small and mid-sized businesses.
In a speech today for the Wimberly Lawson Employment Law Update Conference in Knoxville, TN, wage and hour specialist Carol Merchant told participants that they will be impacted by the activities of Secretary Solis and the new Wage and Hour Administrator Lorelei Boylan, who comes from an enforcement background with the New York State Labor Department.
The effects of this new leadership are already visible. The Wage and Hour Division is in the process of hiring 250 new investigators, an increase of more than 33%. With an increased emphasis on enforcement, Merchant said that employers should expect a “narrower interpretation of application of exemptions.”
The biggest bottom line? Employers need to make sure that those who qualify for overtime are getting it, that those who are treated as employees (vs. contractors) are made employees, and that if an employee is at work (in any form – electronically, blackberry, etc.) they are being paid for that work.
This is tough news for small employers, many of whom rely on contractors to complete the work. Filing a 1099 on a contractor is vastly more simple than paying them as an employee, given all of the regulations on employers today, said one area small business person attending the conference.
Show Me the Money
In fiscal year 2008, over $185 million was collected from employers in back wage collections. Out of the 28,242 compliance actions, says Merchant, 88% were a result of overtime violations. Such overtime violations were reportedly found in 78% of all investigations.
So, the message seems pretty clear: employers, know thy overtime practices and the law.
If not, an increasingly desperate unemployed public is likely to turn to court for help. There has been a 77% rise in Fair Labor Standards Act lawsuits since 2004.
According to Merchant, there have been more wage and hour collective/class action suits filed in recent years than all other types of employment class action lawsuits combined. For the uninitiated, class action means a group of people filing under the same allegation.
For one large area employer with an employee base of over 200 persons, the outcome of such a lawsuit involving a handful of ex-employees may mean the difference in continued viability and closure of its doors. It’s a big deal.
Why so many class action law suits? It may not be rooted in employer action, but in the fact that the FLSA has created a way for employees to make only a minimal connection to other employees.
Previously, a class action suit required employees to demonstrate that they were similarly affected by the same employer action, which meant that the facts of their cases needed to closely align. That is no longer as true.
Today, the facts may somewhat align in order to qualify. And there is power in getting together on a lawsuit. Employees can afford the fight....and the synergistic effect of the case can be bad for employers demonstrating their actions.
In addition, Merchant told participants that there is now a 2-3 year statute of limitations based on determination of willfulness (did the employer act with intent or negligence?). And, the potential for damages is doubled....AND, the prevailing plaintiffs are entitled to automatic attorney’s fees, which typically run into the tens of thousands.
Does that sound like an attorney drumming up risk management business with employers? Maybe, but the 250 department of labor investigators are quite real, and they’ve got to find something to do. In the words of one participant “I’m paying attention.”
About the source:
Carol Merchant recently retired from the U. S. Department of Labor, Wage and Hour Division, after 33 years of service with the Division. From 2000 to the end of 2007 she was the Nashville District Director, supervising enforcement of Wage and Hour laws in the state of Tennessee . Prior to that she had been Assistant District Director of the Knoxville Wage and Hour office after 11 years as an investigator in Columbia, South Carolina .
She worked on rewriting portions of the Wage and Hour Divisions' Field Operations Handbook, organized and conducted the last three national training classes for Wage and Hour Technicians, and co-wrote the national training manual for investigators on developing litigation cases.
From 2003 until her retirement in December 2007 she was the Southeast Regional Representative on the National Health Care Team examining compliance problems in the health care industry. She testified in Federal Court on numerous cases litigated by the U. S. Department of Labor.
