Wage and hour lawsuits are being filed against employers under federal and state wage and hour laws at a record rate. Most wage and hour claims allege the employer failed to pay employees for off-the-clock work, failed to pay employees for overtime worked, misclassified employees as exempt from overtime pay requirements, or made improper deductions from employee pay. Aggressive plaintiff attorneys use class- and collective-action procedures to pursue these and similar claims on behalf of hundreds, sometimes thousands, of current and former employees. While all industries are at risk, plaintiff attorneys have started targeting the post-acute industry with alarming frequency.
For example, home health agencies (HHAs) are particularly susceptible to wage and hour violations for a variety of reasons. Until just a few months ago, the status of the “companionship services” exemption utilized by so many HHAs had been in limbo for well over a year. Another reason is that the typical workforce of HHAs is composed of hourly employees who do not work in a traditional office setting. And compliance attention by many HHAs is understandably focused on navigating the healthcare laws and regulations governing their industry and not on the wage and hour laws. Just last week, for example, an HHA in New York City got slapped with a wage and hour class action for failure to provide full overtime wages for all hours worked over 40 in a workweek. See Santiago et al. v. Allied Health Services, Inc., Case No. 1:16-cv-00446, in the U.S. District Court for the Southern District of New York.
Attention to wage and hour risks will help prevent lawsuits from being filed or will put employers in a much better position to aggressively and efficiently defend against lawsuits that have little factual or legal merit. In light of this growing trend, we thought it appropriate to provide HHAs and similar employers with 10 preventive strategies to help guard against wage and hour lawsuits.
1. Stay up to date on changes in the law
Federal and state wage and hour laws are constantly changing. For example, HHAs were forced to make fundamental changes to their business models when the U.S. Department of Labor (DOL) amended regulations to reduce the number of workers that qualify for the companionship services exemption. Additionally, HHAs, like all employers, must comply with not just the Fair Labor Standards Act (FLSA), but also state wage and hour laws. Some states impose stricter restrictions on employers than the FLSA does. Be mindful of state wage and hour laws before expanding into a new state.
2. Use an effective time-keeping system
Employees who bring wage and hour lawsuits typically allege that the hours paid were not accurate and that hours worked by the employees were either not reported or under-reported by their employers. HHAs should use a standardized system for employees to record all time in and out, either electronically or with a punch-clock. This is critical for HHAs because a large percentage of their workforce does not work in a traditional office setting. The system should require each nonexempt employee to record, review and sign off on their time for each pay period and provide a signed acknowledgment that the hours reported are accurate and include all time worked for that period. Supervisors should monitor and review time cards of the employees they manage on either a daily or weekly basis. The system should also include a procedure for making and tracking edits to time records as necessary. And it should keep track of what changes are made, by whom, and why, particularly where edits remove or reduce paid time.
3. Implement comprehensive written policies
Employers should also implement and maintain comprehensive but easy-to-understand attendance and timekeeping policies and procedures. At a minimum, these policies should inform employees (1) that they will be paid for all time worked, (2) that they must record their hours accurately, (3) that off-the-clock work is prohibited, and (4) of how to report concerns if an improper deduction was made to their pay or they did not receive all pay owed. Make sure to discipline employees and supervisors who violate the timekeeping policies.
4. Engage outside counsel to conduct a wage and hour audit
Employers are often blindsided by wage and hour complaints and lawsuits alleging violations they never knew existed. HHAs and other employers can hire experienced outside counsel to conduct an audit of their wage and hour practices and procedures. Counsel can help employers identify and address potential wage and hour violations. The attorney-client privilege enables counsel to have a frank and direct conversation with management about potential issues and certain ways they can be resolved. The cost of a wage and hour audit is far less than that of defending a lawsuit.
5. Conduct periodic compliance training
Employers should provide compliance training to supervisors, managers, nonexempt employees, and HR representatives. These individuals are the first (and primary) line of defense for wage and hour issues. Effective training can help identify and prevent wage and hour issues at their source. Do they know, for example, whether employees are recording work done outside of “official” shift times or schedule, or that employees typically should be paid for time spent in training or meetings, or for work done at home?
6. Separate companies are not necessarily separate companies
It is quite common for HHA owners to operate several different companies that do pretty much the same thing. It is also common for employees to work for multiple HHAs that share ownership. Unless each company is truly distinct (i.e., there is no commingling of finances or resources and no shared management or decision-making), both companies could be deemed by the DOL or a court to be “joint employers” of the shared employees. The same issue arises if HHAs “lease” workers from staffing companies. Whenever there is a “joint employment” or “co-employment” situation, each employer is responsible for complying with the FLSA vis-à-vis the employee. And in some situations, the “hours worked” by an employee who works for multiple HHAs that share ownership may need to be combined when calculating hours worked for overtime purposes.
7. A meal break should be treated as a meal break
Under the FLSA, if the company provides unpaid meal breaks to nonexempt employees, the breaks must be at least 30 minutes long and truly uninterrupted (e.g., employees are not restricted from leaving the premises during their break, and are not required to respond to work-related calls, emails, or text messages). State laws may impose stricter requirements. Unless the employee has a truly uninterrupted meal break for at least 30 minutes, he or she should be paid for that time. If possible, avoid making automatic deductions for breaks.
8. Pay attention to employees who work remotely
Although employees usually should not be paid for time spent commuting to and from work, employees typically should be paid for time spent traveling between workplaces or when traveling to and from a client. To further complicate things, technology has blurred the lines of when employees are working and not working. Nonexempt employees should be paid if they make work-related phone calls or if they send or receive work-related emails or text messages while working at home, remotely or otherwise outside normal work hours. Aside from the off-the-clock work issue, permitting employees to access company email or content on their personal phones creates a potential security risk from hackers, competitors, or anyone who wishes to do the company harm, since these devices can easily be lost or stolen.
9. Make sure to properly calculate the “regular rate” of pay
Employers are required to properly calculate employee compensation. Because these calculations can be very complicated, it is easy to make errors. For example, overtime is calculated at a 50 percent premium rate from the “regular rate” of pay for all hours over 40 worked in a workweek. The regular rate of pay includes not only the base hourly wage paid to the employee, but in most cases also includes other forms of nondiscretionary compensation such as certain bonuses, incentive pay, commissions, shift differentials, and retroactive pay increases. Although electronic timekeeping and payroll systems can help companies properly calculate the “regular rate of pay,” they are not foolproof. HHAs and other employers should periodically review their timekeeping and payroll records to ensure that compensation is being properly calculated.
10. Be prepared to defend each employee’s exemption
It is the company’s burden to prove an employee is properly classified as exempt if the exemption is ever challenged. HR and management must be familiar with the criteria for making these determinations. Some positions, such as high-level executives and professionals are obviously exempt. Most of the litigation focuses on “gray area” positions, such as account or sales managers and middle managers (who manage paper, not people). Misclassifying an employee as exempt can have significant financial consequences. When in doubt, treat the employee as non-exempt.