New Year's Resolutions to Improve Your Wage-Hour Compliance

Did you know that nearly half of Americans make New Year’s resolutions? In truth, almost half of these resolutions are abandoned by the end of January, but experts say that making resolutions is useful because people who make resolutions are ten times more likely to attain their goals than people who don’t make resolutions.

The U.S. Department of Labor (DOL) Wage and Hour Division (WHD) resolved a while back to catch more violators of the Fair Labor Standards Act (FLSA) and other laws the division enforces. And, it has stuck pretty well to that resolution, collecting more than $274 million in back wages and damages on behalf of some 163,000 workers during fiscal year 2023. Therefore, prudent employers should make a New Year’s resolution of their own, namely to improve their FLSA compliance in the coming year.

To help, we suggest below 12 mini-resolutions that employers can make — one per month. While we can’t guarantee that a resolution every 30 days will keep DOL or lawsuits away, logic dictates that employers who maintain best practices less likely to get big back wage bills following an audit or to be on the wrong end of a large damages award in court.

January

This may be a busy month when you are trying to close-out the previous year, so we’ve made the first resolution easy.

By the end of this month, you must distribute W-2 forms to your employees and 1099’s to your independent contractors. Resolve to know the difference between an employee and an independent contractor, since the former may be due the minimum wage and overtime, while the latter are not. Bear in mind that the FLSA’s “independent contractor” test is different from the Internal Revenue Service’s test, so it’s theoretically possible to reach different conclusions for the two purposes. If you decide that you have misclassified an employee as an independent contractor, calculate and pay any back wages and overtime due.

February

If you really want to comply with the FLSA, you need to know how close to, or far from, compliance you are already. Therefore, resolve this month to get an FLSA self-audit, which involves having someone extremely knowledgeable about the FLSA — perhaps a consultant or outside attorney — review your existing policies and practices and determine where there is room for improvement or correction. And there is always room for better FLSA compliance.

Many employers, for example, are relying on outdated job descriptions to make exemption decisions without having a clear understanding of the duties that incumbents actually perform. Or they may be making improper deductions from employees’ pay for uniforms; jury duty; broken or lost equipment; or a number of other things. An FLSA self-audit will find these and other problems and will help devise a strategy for correcting them.

March

With the weather gradually improving, some exempt employees may get spring fever and miss partial days from work. Indeed, employees may have partial day absences at any time of year. Resolve to understand the definition of working time as applied to nonexempt employees and the salary basis test as applied to exempt employees so that you don’t pay too much, on the one hand, and too little, on the other.

April

Many employers file their tax returns this month. With earnings and costs now calculated, this may also be the month when they make profit-sharing payments. Such payments can have a number of FLSA implications, including increasing the overtime due to nonexempt hourly employees and, potentially, destroying the salary basis of pay for nonexempt salaried employees who receive overtime on a fluctuating workweek or half-time basis. Resolve to understand these complex areas of FLSA compliance.

May

Late this month and early next month, thousands of college students will begin internships in the workplace. Resolve to know the criteria for determining whether an intern must be paid.

June

Did you know that employees of some seasonal recreational and amusement establishments are exempt from the FLSA? Resolve this month to learn about some of the lesser-known exemptions from the act, of which there are dozens. You might find one that will save your employer money.

July

School is out and teenagers are looking for jobs. Child labor violations can be costly, not to mention dangerous. Resolve this month to be familiar and to comply with the different restrictions that apply to youth of different ages.

August

Reportedly, August and September are the months in which the most babies are born. Resolve this month to understand the provisions in the FLSA that require employers to provide break time for nursing mothers to express milk as well as a place other than a bathroom in which to do so. Along with this, resolve to understand the rules relating to break times and meal times.

September

Many recent graduates will start work this month. Resolve this month to correctly apply two rules that apply to new workers.

First, the Youth Opportunity Wage allows employers to pay employees under age 20 a subminimum wage for the first 90 calendar days of employment. Be careful, as there are certain conditions that must be met.

Second, entry-level employees, even college graduates, are more likely to be doing nonexempt work than their more experienced counterparts who have the same job title. Be careful to base exemption determinations on actual job duties.

October

Sending workers for training this month, or in any other month? The FLSA’s rules regarding the compensability of both training and travel time trip up many employers. Resolve this month not to be one of them.

November

This month has more holidays observed by some employers than any other month. (Can you name them? They are Veterans Day, Thanksgiving and the day after Thanksgiving.) Some people don’t realize that the FLSA does not require any holidays, nor does it require that overtime be paid if an employee worked fewer than 40 hours in the workweek, even if, with holiday pay, he or she was paid for more than 40 hours. Resolve this month to understand what the FLSA does not require. A word of caution, though, some payments that the FLSA does not require might be required by state law or even other federal laws.

December

Many employers pay out bonuses in December. The rules regarding when bonuses must be included in the “regular rate,” which potentially creates an obligation to retroactively pay additional overtime, are complex. Holiday bonuses that are completely discretionary generally do not require re-calculation of the recipient’s regular rate, but don’t guess. Resolve to familiarize yourself with the applicable rules and to get it right.

Conclusion

If you’ve stuck with your resolutions until the end of the year, congratulations! Hopefully, you are now fully compliant with the FLSA. At a minimum, you have earned the right to tell a judge that you have made good faith efforts to comply with the law and, therefore, any damage awards against you should not be doubled pursuant to the liquidated damages provisions of the law.

If you need help tailoring or sticking to any of these resolutions, or if you have other questions about wage-hour compliance, please get in touch with your usual Brown Rudnick contact or this writer.