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Bar News - April 19, 2013


Labor & Employment Law: Time and Money: Hot Topics in NH Wage and Hour Law

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Over the past 15 years, employees have generally become much more aware of their workplace rights. Nowhere is this more evident than in the area of wage and hour law. Employees are constantly made aware of additional rights and are much more willing to bring claims against their employers than in any time in the past. For these reasons, it is important for employers to be sure that their payroll practices are fully compliant with state and federal wage and hour laws. This is not an area in which any employer can afford to be "penny wise and pound foolish."

From 2009 to 2012, the number of wage and hour complaints reported to the US Department of Labor has more than doubled Ė a trend that is sure to continue. During the same period, the US Department of Labor instituted programs called We Can Help and Plan/Prevent/Protect: The Beginning of a Broader Regulatory Enforcement Strategy, which are designed to provide more information to employees about their wage and hour rights. The US Department of Labor also partnered with the American Bar Association to institute Bridge to Justice, a program through which the department refers disgruntled employees to attorneys willing to take on wage and hour cases.

Also since 2009, the department of labor increased its budget by $25 million, to focus on dealing with wage and hour complaints. These dollars have been used to hire more personnel with expertise in the wage and hour area and to fund prosecutions of wage and hour complaints. The department projects that over the next ten years these efforts will result in over $7 billion in fines and penalties being collected, which could constitute a substantial return on the departmentís investment.

There has also been an effort to coordinate investigations and regulatory actions between the department of labor and other federal agencies, including the Internal Revenue Service, the Office of Federal Contract Compliance Programs and OSHA. The federal agencies, in turn, are coordinating with state enforcement agencies, including local departments of labor, divisions of revenue, state unemployment agencies, and state agencies responsible for administering workerís compensation programs. Formal memoranda of understanding have been signed between the Department of Laborís Wage and Hour Division and a number of states, including Massachusetts.

Failure to comply with wage and hour laws exposes employers to claims that include not only back pay, but also multiple damages and attorneyís fees. In many cases, multiple damage awards are mandatory, as are attorneyís fee awards.

In addition to the fairly straightforward wage and hour claims, employer noncompliance can also have unintended consequences in other areas. For example, if an employer needs to discipline or terminate an employee, the affected employee may well raise wage and hour noncompliance as a shield to termination, or as the basis for demanding severance pay. What would otherwise be a clear and fairly well justified and documented termination can easily turn into a nightmare if the affected employee has a legitimate wage and hour compliant.

Busy Year for NH Department of Labor

In FY 2009 the NH Department of Laborís Wage and Hour Division collected about $5.3 million, between wage claims, wage complaints/audits and wage adjustments. That was an all-time high collection rate for NHDOL, and that enforcement initiative sent shockwaves throughout the state.

Employers scrambled to comply with state wage laws. NH Department of Labor also spent more time on education and training. Those efforts paid off as the departmentís collection numbers decreased in FY10 to about $2.6 million. Those numbers decreased again in FY11 to $1.7 million. In FY12, the downward trend in fines and collections continued, as the department collected nearly $1.2 million in civil penalties and wage adjustments.

While this decline in penalties has been a positive trend for employers, if you are one of those employers who has been on the NH Department of Laborís Top Ten Violations (a/k/a the Naughty List) you know that an unfavorable wage claim decision or audit can still be disruptive and expensive to your organization. In other words, as with the US Department of Labor, the time spent on compliance, before the NH Department of Labor comes knocking, is always time well spent.

Mistakes Employers Make

Itís rare that employers simply do not pay employees for hours worked, and most noncompliant employers typically believe they are properly compensating employees. Misclassifying employees remains the most frequent wage and hour violation. Classifying employees as independent contractors is a close second. Disputes about commissions and bonuses are a constant source of work for employment lawyers.

Recordkeeping compliance provides a number of traps for the unwary employer. Accounting for meal and rest breaks, off-the-clock work, and the use of smart phones and remote computer access are all challenges that need to be met and dealt with. Given the time of year, dealing with summer interns also presents unique challenges for many (See related article).

Now, more than ever, itís important for employers to keep up-to-date about wage and hour laws and to assure that compliance objectives are met. There is no substitute for a full wage and hour audit conducted by competent counsel. While there may be some costs associated with the audit, it will be minimal when compared with the defense costs of even one wage and hour claim. In addition, any employer with a substantial workforce should have employment practices liability insurance as part of its risk management program. The risks are simply too high to go without it.


Jim Reidy is a shareholder with Sheehan Phinney Bass + Green and he is the Practice Group Chair of the Firmís Labor, Employment and Employee Benefits Group.

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