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Wage and Hour (W&H) Rules Are In and Claims Are Up: What You Need to Know

THE CHANGES

Recently, the federal government has implemented several changes that have resulted in an increased number of claims for W&H violations made against employers. And all indictors are pointing to more on the way. But first let’s define W&H and take a quick look at its history.

WHAT IS W&H?

It is commonly – and incorrectly assumed that W&H claims are restricted to either misclassification of exempt/nonexempt employment status or failure to pay overtime. However, W&H liability also includes allegations such as:

  • underpayment of overtime
  • not paying overtime
  • miscalculating wages
  • refusing breaks
  • expecting employees to work off the clock
  • not paying employees regularly
  • refusing to pay exempt employees for absences
  • following federal minimum wage guidelines when state guidelines warrant higher pay 

A BRIEF HISTORY

In 1938, the Department of Labor’s passed the Fair Labor Standards Act (FLSA) giving birth to wage and hour claims. The law defined which employees were to receive overtime pay (nonexempt) and which were not (exempt). Since that time, W&H claims have risen steadily, with sharp increases starting in 1993 and additional increases every year.

THE NEWS

Recently, the federal government has implemented several changes that have resulted in an increased number of claims for W&H violations made against employers. And all indictors are pointing to more on the way.

New federal overtime rules taking effect in December 2016 will extend overtime pay protection to 4.2 million workers who are currently exempt. That, as well as proposed rules that would require companies to provide a breakdown of pay by race, gender and ethnicity will likely bring more allegations of W&H violations.

THE RULES

Federal Legislation and Regulation

  • Overtime Pay

On December 1, 2016, the new federal overtime rule took effect. The biggest changes are the redefining of what it means to be an exempt and nonexempt worker. Thus, overtime pay protection will extend to 4.2 million workers who currently earn less than $47,476 annually. Also, there is a mechanism for automatic updates every three years, beginning on January 1, 2020 expanding the number of employees falling under W& H guidelines.

Franchisors: In the August 2015 Browning-Ferris Industries decision, the National Labor Relations Board refined its standard for determining joint-employer status. The decision held that two or more entities could be considered employers of a single workforce if:

  • they are both employers within the meaning of the common law; and
  • they share or codetermine those matters governing the essential terms and conditions of

This decision impacts staffing firms, subcontractors, and franchisees.

  • Equal Pay

In January of 2016 , the Obama Administration proposed new rules that would require companies to report what their employees are paid, broken down by race, gender, and ethnicity. Meant to close the gender pay gap, the new rules would apply to employers with 100 or more employees. Of course, in light of the new administration, this proposal remains up in the air. But it’s definitely something to keep in mind.

  • Coverage Limitations

Unfortunately, W&H violations are rarely covered by employment practices liability insurance (EPL). Many U.S. carriers are willing to endorse their standard EPL forms, on a case-by-case basis, to grant defense costs only W&H coverage, up to a specified sublimit.

THE SOLUTION

As new legislation and changes to employment rules come into effect, it’s critical that you are informed and well prepared with proper coverage and both short and long term strategies. Keeping our clients informed and educated is a cornerstone of our Professional Client Care® program. As always, feel free to call us to discuss this issue.