10 Takeaways from "Avoiding FLSA Compensation Claims"
I usually get to bat leadoff in these kinds of seminars. Sometimes however, batting clean-up can be almost as much fun. I suppose it is my job now to try to tie together all of the excellent advice and commentary that you have received this morning from my colleagues and provide some helpful takeaways from this morning’s meeting. With a nod to David Letterman, here are my Top Ten Takeaways from this morning’s seminar.
10. Good news --this stuff is really manageable.
There is no question that the Fair Labor Standards Act (FLSA) and the various compensation statutes that have been discussed this morning are ready and willing traps for the unwary employers that create more than a few challenges. That said, this is unquestionably an area where an ounce of prevention is worth ten pounds of cure. Carefully reviewing and revising job descriptions to comply with the work that is actually being done by employees; understanding the basic regulations insofar as overtime is concerned; taking advantage of some of the safe harbors that these statutes provide; and making appropriate revisions in handbooks, timesheets and other documents can play a critically important role in not only reducing the likelihood of these types of claims, but serving as the foundation for defeating them if they are filed.
9. Good habits matter.
In counseling clients on how to both prevent these types of claims, in mediating them, and in attempting to defend them, time and again I see situations where -- for a variety of reasons -- employers simply have not adapted the best practices that are readily achievable. They lapse into poor and careless habits. Like most things in life, good habits matter. In the world of employment claims – and, in particular -- substantive claims having to do with wage hour and compensation issues -- it is critically important that good habits be established. Those good habits will be more often than not rewarded and put employers in a position to proactively address compensation issues.
8. Practice makes perfect (well almost).
Many of my clients believe that the world of wage hour and compensation issues is a daunting one and extremely difficult to master. Although there is more than an ounce of truth to that concern, the reality in my experience is that if employers make it part of their business affairs to regularly update handbooks, review job descriptions, evaluate whether individuals will be characterized as an employee or independent contractor, and carefully monitor the amount of overtime that is being worked -- that they can build the necessary disciplines to manage this very important area of the law.
7. Most of your competitors will do nothing.
Many business owners believe that wage hour and compensation claims are like death and taxes, and, therefore, largely unavoidable. For those of you that have competitors, which I venture to say is the vast majority of you, that -- in a bizarre sort of way -- is actually good news for you. The reality is that most employers do not have job descriptions (much less have reviewed and revised them in the past two years), do not have a clue about the Maryland Wage Payment Law, and have not taken advantage of some of the safe harbors that have been discussed this morning.
6. Be careful about self-medicating.
Although it is certainly important for companies and organizations to take the measures that have been discussed this morning very seriously and to make them part of your regular business practices, it is just as important that these actions be undertaken with the advice of experienced counsel. That was not intended as a shameless plug for work, but rather a cautionary message. All too frequently, I see clients that have a working knowledge of the wage and hour laws who, for example, have received a complaint about a particular issue, and decided to investigate that complaint on their own without the assistance of counsel. This implicates all sorts of privilege issues in terms of what can and cannot be kept confidential and how information is disseminated. Moreover, when the internal audits are conducted without the assistance and direction of counsel, once again those internal audits run a greater risk of being discoverable should a claim be filed in the future. All of which is to say, like most things in life, if the problem is addressed early and brought to the attention of counsel early, invariably the cost of addressing it can be regulated and the likelihood of a successful outcome greatly improved.
5. Take a wide angle view.
In my experience, many wage hour and compensation claims are the symptom of a problem, and not necessarily the cause. What I mean by that is that there are no doubt hundreds, if not thousands, of employees who have not been properly compensated for one reason or another. Yet, relatively few ever file claims. The pressing issue is to understand why that is the case. More often than not, employees file claims for several reasons. Chief among them is the fact that they feel disrespected, not taken seriously, or mistreated. Second, insofar as wage hour and compensation claims are concerned, sometimes they simply stumble upon them. An individual who feels that he/she has been disrespected or mistreated or terminated inappropriately, may go to a lawyer and explain the circumstances that have given rise to the termination. At which point the lawyer asks whether the individual was paid overtime, or received all of the bonuses or commissions that he/she was entitled to upon departure. This is part of the “inside baseball” of how and why these claims actually get filed. The takeaway then is to make sure that before an employee is terminated, that the wide range of possible claims that an employee could have are fully considered, and not simply the immediate issue that gave rise to the termination.
4. Yes, you need to explore insurance.
When I was 16 years old and had my first car accident, I was barely consolable for having damaged the family car. My father patiently explained to me that the most important thing that I was not hurt. Secondly, he explained that this is why we had car insurance. It is extremely important to keep in mind that many employment liability insurance policies exclude wage and hour and compensation claims, although they may cover retaliation claims. We do have a couple of insurance experts in our midst, including my friends Phil Gailbraith and Rich DiPippo, and I would deflect the serious insurance questions to them. But in my experience, there is coverage for at least defense costs in the amount of $100,000.00. Please explore this with your insurance agent or broker. When you receive the lawsuit is not the time to find out that you do not have insurance for a claim.
3. A good story always sells.
Defending employment claims is mostly about story telling. What I want to be able to tell courts, administrative agencies, and even opposing counsel is that our clients took all reasonable measures to comply with the applicable employment laws and to address problems once they develop. When investigative agencies, courts and even opposing counsel have the real sense that employers have genuinely tried to do the right thing, the risk of exposure decreases. Just as importantly, evaluate your story teller. Is that manager, HR professional or Vice President who made the decision to not pay overtime still with the company, still friendly with the company, likely to make a good witness and present well? A good story with a not-so-good story teller may be a prescription for a big verdict for an employee. Plan ahead and plan often.
2. Be proactive and stay proactive.
The wage and hour laws and compensation area is a fluid one. This area receives a tremendous amount of attention from the plaintiffs’ bar. Companies and organizations need to commit to staying on top of these issues, attend seminars such as this one, and read the wonderful follow up articles that we will of course send to all of you. If you do receive a wage and hour claim, formally or informally, don’t wait – consult with experienced counsel, explore insurance coverage, place a litigation hold on documents, and work collaboratively with counsel to map out your strategy (including possible mediation) through and possibly including trial.
1. When in doubt -- do the right thing.
All too often an employer’s frustration with a departing employee gets manifested in issues concerning whether an individual should be paid for accrued leave, should receive a portion of a bonus, and so forth. Sometimes, the underlying documents have not been properly drafted, and are not clear in terms of what the obligations of the employer are in that circumstance. The first objective, of course, is to get employment documents right so that there is no ambiguity. But if there is ambiguity, or at least a reasonable concern about potential ambiguity, more often than not, the employer is well served to go ahead and make the payment with the understanding or acknowledgement that there is no obligation to do so, but that it is being paid as a gesture of good faith. My grandmother’s admonishment to me many years ago -- that you can almost never go wrong by doing what is right -- has served me well time and again when it comes to resolving and defusing wage hour, compensation, and other employment issues. In other words, in this area in particular, don’t be penny wise and pound foolish.
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On behalf of my colleagues, I hope that we have helped to navigate you through an area of the law that can be very challenging. We also hope that we provided you with a new framework at looking at these issues -- one that may be a little different from what you have heard and what you may have experienced. The very good news actually is that many of these issues can be prevented through advance planning and a proactive approach to handling employment issues. From a competitive standpoint -- and from a bottom line dollar and cents standpoint -- you will be light years ahead of your competitors if you act upon the suggestions that we have provided and commit to doing so in the future.
Marc Engel is an employment attorney and litigator at Lerch, Early & Brewer who advises employers of all types on employment issues, performs human resource audits, and conducts training on a variety of employment issues, including compliance with the Fair Labor Standards Act.