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Taking Control: Five Achievable Employer Actions to Avoid Wage and Hour Claims

Lerch Early Legal Update

Employees are filing wage and hour claims – that is, claims for overtime pay under the Fair Labor Standards Act (FLSA) and analogous state statutes, as well as claims for bonuses and commissions – on an individual and collective basis at alarming rates. There is no question that the FLSA and the various compensation statutes contain traps that create more than a few challenges for unwary employers, so it is an area where an ounce of prevention is worth (at least) ten pounds of cure. Here are five steps employers can take now to avoid FLSA compensation claims in the future.

1. Be Careful About Self-Medicating

All too frequently, I see clients with a working knowledge of the wage and hour laws attempt to investigate a complaint without the assistance of counsel. This implicates many privilege issues in terms of confidentiality and how information is disseminated. Moreover, internal audits conducted without counsel run a greater risk of being discoverable should a claim be filed in the future. If a problem is brought to the attention of counsel early, the cost of addressing it can be regulated and the likelihood of a successful outcome will be improved.

2. 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. There are no doubt hundreds, if not thousands, of employees who have not been properly compensated for one reason or another. Yet, relatively few file claims. The pressing issue is to understand why that is the case. Employees file claims for several common reasons. Chief among them is that they feel disrespected. Another is when someone who feels that he or she has not been treated well goes to a lawyer and explains the circumstances that gave rise to the termination. The lawyer may ask if the individual was paid overtime, or received all of the bonuses or commissions that he or she was entitled to upon departure, part of the “inside baseball” of how and why these claims get filed. Before an employer terminates an employee, it should consider the wide range of possible claims that an employee could have, and not simply the immediate issue leading to termination.

3. 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 was that I was not hurt, and then explained that this was 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. In addition, employers can often purchase an insurance rider or addendum covering a certain amount of defense costs in defending wage and hour claims. Please explore this with your insurance agent or broker. The time to find out that you do not have insurance for a claim is not when you receive a lawsuit.

4. Be Proactive and Stay Proactive

The wage and hour laws and compensation area is a fluid one. This area of law receives a tremendous amount of attention from the plaintiffs’ bar. Companies and organizations need to commit to staying on top of these issues by attending seminars and reading informative articles. If you receive a wage and hour claim, formally or informally, do not wait – consult 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.

5. When in Doubt - Do the Right Thing

All too often an employer’s frustration with a departing employee gets manifested in issues such as paying for accrued leave or a bonus. If there is at least a reasonable concern about potential ambiguity, the employer is well-served to consider making the payment with the understanding or acknowledgement that there is no obligation to do so, but that the payment is a gesture of good faith. My grandmother’s admonishment to me – that you can almost never go wrong by doing what’s right – has served me well time and again when it comes to resolving and defusing wage hour, compensation, and other employment issues.

Marc Engel is an employment attorney and litigator at Lerch, Early & Brewer who advises employers of all types on employment issues, including compliance with the Fair Labor Standards Act, and provides strategies for preventing, defending, and resolving wage and hour claims. For more information, contact Marc at (301) 657-0184 or mrengel@lerchearly.com.

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This content is for your information only and is not intended to constitute legal advice. Please consult your attorney before acting on any information contained here.

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