Based on the anticipated priorities of the Biden administration, employers and HR professionals may expect an increase in Department of Labor (DOL) audits and investigations. Although DOL audits may take many forms, the DOL’s Wage and Hour Division is expected to be more persistent in its enforcement of payroll compliance, including the appropriate payment of overtime. As your risk management partner, HBL offers the following three strategies for proactive wage and hour risk management.
Tip #1 – Prepare a job description for each exempt position.
To lawfully avoid paying overtime to an employee, the employee must be classified as “exempt” under the Fair Labor Standards Act (FLSA). For an employee to be properly classified as exempt, the following three criteria generally apply: (1) the employee must be paid on a salary basis; (2) the salary must meet a minimum threshold that is currently $684 weekly or $35,568 annually; and (3) the employee must mostly perform job duties that involve the exercise of independent discretion. To establish that an employee performs “exempt” job functions, the employees job description should, on its face, show that the employee performs exempt job duties. Importantly, the job description must be reliably based on the functions that the employee actually performs.
Tip #2 – Develop and implement an effective payroll and compensation policy.
Payroll and compensation policies can be effective for minimizing overtime liability by preserving the “exempt” status and prohibiting off-the-clock work. To protect the “exempt” status from challenges based on improper payroll deductions, the DOL allows employers to adopt a “safe harbor” policy that meets certain legal criteria. In addition to providing a safe harbor policy, a payroll and compensation policy should address other areas of vulnerability, such as prohibiting off-the-clock work. With more nonexempt (or hourly wage earning) employees working remotely, employers a best advised to vigilantly monitor and consistently prohibit after-hours or off-the-clock work, such as calling, texting, and emailing.
Tip #3 – Carefully analyze and document all independent contractor relationships.
Particularly for small employers, the independent contractor relationship has been a subject of confusion and uncertainty. With the DOL’s independent contractor rule suspended, employers are left without reliable authority on how to structure the independent contractor relationship. In the absence of any specific standard, employers are best advised to carefully develop and consistently implement a written agreement with each independent contractor.
BONUS TIP: Do not let your first payroll audit be with the DOL!
Conduct an internal audit of all payroll practices to ensure full compliance. Consider engaging outside counsel for a confidential communications strategy.
If you have any questions about the above, please contact Hall Benefits Law. We would love to hear from you, and the HBL team looks forward to serving as your legal risk management partner!
Keely Collins may be reached directly at 470-217-0167 or kcollins@hallbenefitslaw.com.
Hall Benefits Law, LLC
Latest posts by Hall Benefits Law, LLC (see all)
- Penalties for Failing to Timely File 2023 Forms 1094/1095 - April 18, 2024
