Executive Summary: The Department of Labor (DOL) has agreed to pay $7 million to resolve claims that it failed to pay overtime to thousands of its own employees. The settlement reached with the American Federation of Government Employees Local 12 (AFGE), which represents approximately 3,000 federal employees in the Washington metro area, brings closure to longstanding allegations claiming the DOL failed to properly compensate employees.

Background

In 2006, AFGE filed a collective action grievance against the DOL, claiming employees were not properly compensated for off-the-clock work, such as during lunch breaks and weekends, and for overtime worked. The irony is obvious – the Labor Department is the very federal agency charged with enforcing the nation's wage laws. At the date of publication, notably absent from the DOL's website was any reference to the settlement.

Snidar & Associates LLC, the firm representing AFGE in the overtime case, issued a press release on August 15, 2016, giving very few details regarding the settlement. According to that press release, it is estimated that the pool of those receiving the payout will include a little more than 3,000 current and former members of the AFGE Local 12 bargaining unit who were in the national office at the time of the case from 2006 until present. The payout distribution is expected to occur at the end of this year.

Compliance Likely Will be More Complicated with New Overtime Rule

The DOL's wage and hour regulations are complex, and compliance is likely to become more difficult. The settlement comes at a time when the DOL's Wage and Hour Division is promoting its recent rule changes that expand workers' access to overtime pay. The final rule updating the overtime regulations will go into effect December 1, 2016. It is important to diligently monitor these new changes, which update the regulations governing the exemption of executive, administrative and professional (EAP) employees from the minimum wage and overtime pay protections of the Fair Labor Standards Act (FLSA). The changes focus primarily on updating the salary and compensation levels needed for the EAP exemption. As a result, the right to overtime pay will be extended to an estimated 4.2 million workers who are currently exempt. The last update to these regulations occurred in 2004 and triggered a significant increase in litigation. Moreover, with these changes, it is anticipated that state and federal departments of labor will be conducting more audits to ensure that companies have met the demands of these new regulations. It is imperative employers spend time auditing and preparing for the upcoming changes to ensure compliance with updated regulations while also mitigating their exposure to future litigation.

Bottom Line: It is evident wage and hour laws are complex – even for those charged with enforcement of such laws. The Labor Department's settlement makes clear that no one is immune from suit. Employers should review the duties of their exempt employees to ensure that they fall within the exemption and that their compensation meets the new requirements of the salary level test to guarantee strict compliance with these regulations.