According to the U.S. Department of Labor (DOL), it plans to increase its emphasis on audits and prosecutions of minimum wage and overtime violations, to increase its scrutiny of independent contractor classifications, and to issue a revision to the Fair Labor Standards Act’s white collar overtime exemption rules. As part of its initiative, the DOL plans to increase its enforcement efforts to combat wage and hour violations. To that end, the current administration has increased the number of DOL investigators from approximately 700 to over 1000. Reports suggest that that the leisure, hospitality, education, health services and wholesale and retail trade industries might receive the most immediate attention from the DOL. However, history has shown that nearly any employer, regardless of size, could be subject to an audit or enforcement action by the DOL.
The DOL continues to scrutinize employers who engage independent contractors to perform duties that in the past would have been performed by employees. In the DOL’s view, some of these employers are misclassifying employees as independent contractors in their effort to avoid overtime and other employee costs. To address this concern, the DOL has increased its investigation of worker classifications and partnered with several states to share information and coordinate enforcement efforts to reduce misclassification of employees. The DOL will continue its focus on worker classification through 2015, so employers are advised to carefully analyze their independent contractor relationships to ensure individuals are properly classified, with special emphasis being on the amount of control the employer exercises over the contractor’s day to day activities. The more control, the more likely it is that the DOL will declare that a contractor has been misclassified.
Finally, the DOL plans to issue a proposed rule that will revise the current white collar overtime exemption regulations. Currently, overtime exemptions are allowed for certain employees in executive, administrative, professional, outside sales and a few other job categories. The DOL was instructed by the president to modernize the overtime exemptions and to consider how they could, among other things, be revised to address the changing nature of the American workplace and to simplify their application. The DOL has indicated that its proposed rule will be issued in early 2015. Employers who rely on the white collar overtime exemptions will have the opportunity to provide comments to the DOL after the proposed rule is issued.
DOL audits and enforcement actions that result in findings of wage and hour violations can be very costly for employers, exposing them to unpaid overtime, penalties and other expenses. Considering the DOL’s renewed emphasis on enforcement in the coming year, this is a good time for employers to audit their pay practices to ensure that they are keeping proper time and payroll records, that they are paying overtime properly, and that they have properly classified exempt employees and contractors. The factors for classifying contractors and the white collar exemption rules, in particular, are sometimes difficult to apply, so employers should not hesitate to seek assistance from experienced employment counsel in making those determinations.