In the past year, the U.S. Department of Labor, the Equal Employment Opportunity Commission (EEOC), and the Internal Revenue Service all have announced a renewed focus on enforcement initiatives. With increased funding from the Obama administration, these agencies will have more investigators devoted to ensuring compliance with the laws that they enforce. Over the next several weeks, we’ll update you on steps that you can take now to be sure you’re in the best possible situation if you become involved in an agency audit of your employer practices.
The Wage and Hour Safe Harbor
One important safeguard for employers involves the Fair Labor Standards Act (FLSA), which governs federal overtime and minimum wage requirements. Employers often make deductions or other changes to exempt employees’ paychecks, inadvertently jeopardizing the right to categorize these employees as exempt from minimum wage and overtime requirements. For example, an employer may have a practice of deducting wages when an exempt employee misses half a day of work due to illness or when the workplace is closed due to bad weather. These deductions are improper for an exempt employee and may lead to a claim by the employee, or by the Department of Labor, that the employee is actually a non-exempt, hourly employee and is entitled to overtime payments.
According to Department of Labor rules, employers can enjoy a “safe harbor” under the Fair Labor Standards Act that may preserve an employee’s exempt status, even if impermissible deductions are made from the employee’s pay. The rules state that the employee’s exempt status is supported if the employer:
- has a policy prohibiting improper deductions and has “clearly communicated” that policy to its employees;
- has established a complaint mechanism for employees who believe their wages have been improperly deducted;
- reimburses employees for any improper deductions; and
- makes a good faith commitment to comply in the future.
This safe harbor doesn’t excuse willful violations of the FLSA, but it can be an effective tool in showing the Department of Labor that you intended to comply with the wage and hour laws and that you communicated that intent to your employees. This Safe Harbor provision should be one part of a comprehensive wage and hour policy.
Now that we know that increased enforcement is on the horizon, it’s an excellent time to assure that you’ve achieved a wage and hour safe harbor for your company. Talk to a Garlo Ward attorney if your policies need an update to put you in the strongest possible position. The firm offers a complete policy handbook customized for your needs and including this safe harbor protection.