As the end of the year is quickly approaching, many employers are taking a close look at their bottom line for 2011. But, here are some other numbers that deserve your attention: $280K, $1.0M, $1.7M, and $2.7M. Why? These numbers represent just a few of many significant back pay settlements and judgments against health care employers involving Fair Labor Standards Act ("FLSA") claims.
- $280K Failure to count time worked before the start and after the end of a work shift
- $1.0M Incorrect designation of employees as exempt
- $1.7M Automatic deduction for meal periods regardless of whether the worker was relieved of duty
- $2.7M Failure to properly calculate overtime pay for employees working at multiple sites
FLSA noncompliance puts your organization at risk for hundreds of thousands of dollars or more in back pay and penalties from either a Department of Labor ("DOL") audit or a class action lawsuit. FLSA violations could include:
- Time systems that automatically deduct all meal breaks
- Not paying employees for work before and after shifts, training session attendance, or off-premises work (e.g., answering email)
- Not ensuring that customized payroll software is compliant with state and federal laws
- Not including incentive pay, bonuses, and shift differential in overtime calculations
- Improperly classifying workers as exempt
- Putting employee hours that bridge workdays or workweeks into the wrong pay period
Health care employers are particularly vulnerable to these claims for two reasons. First, plaintiffs' attorneys are aggressively soliciting clients in the health care industry (see enclosed letter from an outstate law firm to a Michigan nurse). Second, in the last year, the DOL increased its investigative staff by one-third, adding 250 new investigators to uncover FLSA violations. In 2010, the DOL announced an initiative to boost FLSA compliance in New York's health care industry, noting in a press release that less than 36 percent of health care employers investigated by the division's Albany office during the last five years were in compliance with the FLSA. At the same time, the DOL is looking closely at the misclassification of employees as independent contractors. An employer that incorrectly classifies an employee as an independent contractor faces exposure not only with respect to FLSA claims but also for back taxes, ERISA claims, and worker's disability and unemployment payments.