By: Big Fish Payroll On: September 04, 2015 In: Human Resources Comments: 0

Federal Fair Labor Standards Act (FLSA) lawsuits don’t target specific types of companies; every company could be faced with this challenge and the ensuing penalties.

FLSA lawsuits numbered over 7,000 in 2012 alone. Companies such as Walmart, Staples, Merrill Lynch, JPMorgan Chase, Oracle, CVS, Tyson Foods, Lowe’s and AT&T have been subject to significant FLSA penalties.

Determining violations
In order to determine violations, investigators generally look at the following five areas.

Earning codes

Your company’s earnings codes may be the easiest way to identify compensation being improperly excluded from the employee’s pay. In an FLSA lawsuit investigation, investigators tend to first look at safety, incentive, bonus, auto allowance, operator incentive and per diem earnings.

Deduction codes

Looking at your list of deduction codes can also reveal existing issues such as inappropriate deductions or if the deductions reduce wages below minimum wage. Investigators will pay special attention to advances, laundry, safety glasses, tools, uniform fees and shoes and union dues.

It’s important to remember to document anything that requires employee authorization and to avoid deductions that cause pay to go below minimum wage.

attendance/"class="replaced">Time system

Your time and attendance rules and the resulting employee time punches can be one wage and hour issue, but there are several causes:

  • Rounding rules – make sure rounding is fair
  • Automatic meal period deductions – this is the single largest reason for litigation; if you require employees to punch out/in rather than auto deduct,you have proof of meal periods
  • Time clock rules – treat clocking in early or late the same for everyone
  • Shift hours overlaps work weeks – this may cause underpay one week and overpay the next week

Time card Practices

There are a few areas which investigators focus on as possible clues to inappropriate time clock management.

  • Identical in/out and meal period times for almost every day – is the employee actually punching?
  • No out/in and meal time punches – hard to prove if nothing is documented
  • Exact time punches when shift begins
  • Employee time punches are almost the same exact time – possibly buddy punching

Pay stub issues

  • Paid for fewer hours than shown on time record
  • Deductions for work required equipment (e.g., uniforms, tools)
  • Employee was paid a shift differential or bonus instead of overtime pay

Avoiding difficult, expensive, and time-consuming business problems are now a part of our reality with FLSA lawsuits. Proper record keeping and documentation is vital, along with a time and attendance system that integrates with payroll and other business functions.

Your systems should have consistent rules across the board, maintain documentation, have easy data management and reports to prove your compliance.

Big Fish Payroll is dedicated to staying updated on current laws and regulations to help guide our clients to stay compliant.The FLSA isn’t the only rule that we keep our eye on, we are closely monitoring the Affordable Care Act (ACA) as well. Since the passing of the Act, it has had over 40 revisions! Check our post How’s Your Company Vision? for more information.

Big Fish Payroll, as a Certified Partner of iSolved, offers a Human Capital Management system that helps our clients stay compliant by generating an unlimited number of reports and tracking employee data. Let us help you run your business better by keeping you compliant. Contact us today!

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