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The SESCO Report – April 2008

Wage and Hour Compliance Not an Issue ? Think Again!

Many employers today believe they are in compliance with Wage and Hour regulations including minimum wage, overtime and time records. Simple enough, right? However, the Fair Labor Standards Act is a very complicated piece of legislation regulating hours of work and compensation practices. To complicate compliance, the trend today is plaintiffs' attorneys "trolling" for employees to file lawsuits through the state court systems. The reason — it is a very lucrative business. Employees can receive liquidated damages (2 times that normally received through the Department of Labor and attorneys' fees are paid). Also, court systems are not "throwing out" lawsuits, so win, lose or draw, employers are losing because of the expense of defending practices. Even if you are in compliance or think you are in compliance, the reality is sooner or later you will be challenged by a lawsuit.

However, compliance is achievable and affordable if you completely understand the regulations and the impact they have on your business. The best and most effective way to ensure compliance is to have SESCO conduct a Wage and Hour audit. As many clients may know, SESCO was founded in 1945 by an ex-Wage-Hour officer, Dr. J.W.R. Lawson, Sr., therefore, our roots and history are strongly grounded in Wage and Hour consulting. Additionally, don't count on your CPAs or payroll service to ensure compliance to Wage and Hour accounting. Through our audits where an outside service is utilized, most of these CPAs or pay systems are not in compliance because they are not aware of the regulations nor are their computer programs utilized able to compute overtime appropriately on certain compensation.

More common violations include:

On-call time. Employees required to remain on-call on the employer's premises are considered working while on-call. Employees required to remain on-call at home and are restricted to their home are working.

Waiting time. Employees are paid for waiting time when they are "engaged to wait." Employees fall under this definition if they're required to be at a work site at a certain time.

Rest and meal periods. You must pay employees for short rest periods, usually 30 minutes or less. You generally don't need to pay employees for bona fide meal periods (typically 30 minutes or more). Employees must be completely relieved from duty during unpaid breaks and meal periods. Example: If you require your assistant to eat lunch at her desk in case a call comes in, she must be paid because she hasn't been fully relieved of her duties. (Some states require paid breaks.)

Sleeping time. Employees required to be on duty for less than 24 hours are considered "working," even if they're permitted to sleep. Employees required to be on duty for 24 hours or more may agree with their employer to exclude from hours worked any scheduled sleeping periods of eight hours or less.

Training programs and meetings. You don't have to pay employees for time spent at training programs, lectures or similar activities as long as they meet the following four criteria:

1. The event is outside normal hours;
2. It's voluntary;
3. It's not job-related;
4. No work is performed during that time.

Travel time. The Labor Department rules clearly say home-to-work commuting isn't counted as paid time. In addition:

? Day trips to another city. Time spent traveling to and returning from the other city is work time. You can exclude the employee's regular commuting time.

? "All in a day's work" travel. Travel time spent by employees as part of their principal activity, such as travel among job sites during the workday, is considered "work time" and must be paid.

? Overnight travel away from home. Travel away from home is considered "work time" when it cuts across the employee's workday. That's true not only on regular working days during normal working hours, but also on nonworking days such as Saturday and Sunday. You don't have to pay employees for time spent in travel away from home outside of regular working hours while they're passengers on a plane, train, boat, bus or automobile.

Commissions on Bonuses and Incentives. Employers must pay overtime on all wages earned to include bonuses, incentives and commissions. Overtime must be calculated on these payments on a prorated basis.

If you should have any questions concerning any of your pay practices, contact us. SESCO clients receive free telephone consulting and an onsite audit annually to review not only Wage and Hour compliance, but also compliance to all federal and state employment regulations. If you are not a retainer client, feel free to call to discuss our Professional Service Arrangement providing professional services at no additional cost.

Altering Time Sheets Can Mean Personal Liability for Managers

If you're responsible for approving time sheets or signing off on alterations to the hours reported by employees, take note: It's not just your organization that risks a big fine and costly litigation. Your personal assets are also at risk, as a new court ruling shows.

That's because the Fair Labor Standards Act allows employees to sue their bosses, execs and HR professionals for personal liability for altering pay records.

For that reason, make sure supervisors don't tolerate ? or, worse, encourage ? off-the-clock work or the altering of time records. U.S. Labor Department officials announced last year that they're receiving more complaints about employees forced to work through breaks.

Remember: For breaks to be unpaid, employees must be completely relieved of their duties and it must be at least 30 minutes in length. (That's one reason to discourage them from eating lunch at their desks).

Recent Case

A group of "living assistants" (hourly workers) at a home for the disabled worked 48-hour weekend shifts and were required to check on each resident every two hours, around the clock.

When those employees turned in their time sheets, managers routinely deducted eight hours because each living assistant supposedly got two four-hour breaks. The CEO then signed off on the altered time sheets.

The problem: The employees couldn't leave the building during "breaks" and had to call the main office once an hour. Because the time wasn't their own, the court said they should be compensated.

The kicker: The court held the CEO personally liable, ordering him and the company to pay more than $500,000 to the employees, including $155,000 as a penalty.

You May Be Liable for Accidents if Employees Do Business by Cell Phone

You want your managers and employees to stay productive, so you suggest they use their wireless phone. You may even buy phones or reimburse for them. This is fine, as long as employees don't drive carelessly while using their phones.

In a Pennsylvania case, a broker who allegedly was talking on his cell phone dropped it, bent down to get it, ran a red light and killed a motorcyclist. The broker's employer agreed to pay $500,000 to the family, who sued the firm for contributing to the accident.

If you expect employees to use cell phones for business, be sure to provide policy that requires them to pull over while they talk; or, at the very least, provide hands-free devices. SESCO prepares policy for clients including policy regarding cell phone and PDA usage.

Document "I Quit" Words to Avoid Unemployment Claims

Employees who quit typically aren't eligible for unemployment compensation. Yet employees who announce that they've had enough and won't be back still might file for unemployment insurance benefits anyway.

Teach your supervisors how to handle sudden "I quit" outbursts in order to avoid being on the hook for unemployment. Specifically, tell supervisors to note the "I quit" in writing, including the date and time and, if possible, the exact words.

They should then forward the memo promptly to HR for inclusion in the employee's personnel file. Send the employee written confirmation that his/her resignation has been received and accepted.

Recent Case

William Baker worked for Erie Construction. During a break, he asked a co-worker to drive him home and, as they drove along, he told her he had "quit." He then phoned his boss and told him the same thing.

The next day, he called his boss and asked to rescind his resignation. The boss told Baker to reapply. When he did, HR informed him that his position had been filled and no openings were available.

He filed for unemployment benefits. But Erie brought in the boss, his conversation notes and the co-worker, who testified that Baker had told her he quit. That was enough for the court: It denied the benefits and ordered Baker to pay the court costs of his appeal.

Create a Hiring "Checklist;" Lax Process Will Cost You

It's tempting to shorten your hiring processes, but don't do it. Give managers clear hiring procedures to follow during interviews. Make a checklist, if necessary. Practice the same procedures for internal and external candidates, match qualifications with job descriptions and be able to defend your decisions.

Cast in point: For nearly two years, Joyce Dennis worked in progressively more responsible jobs at a South Carolina hospital. But when she interviewed for a promotion to ER registration supervisor, the hiring manager suggested Dennis wouldn't get it because she was rumored to be having an affair with a doctor. Dennis denied the affair and complained to the hospital's CFO.

The CFO then took over the selection process. He reviewed Dennis's application but never interviewed her. Instead, he hired the husband of a co-worker he knew.

Dennis quit and filed suit, alleging discriminatory failure to promote and defamation. A jury sided with Dennis and awarded her $161,000 in damages. A federal appeals court agreed, calling the hiring process "peculiarly informal."

While Dennis didn't possess all the skills and criteria in the written description, the man who received the job was even less qualified.

Job Descriptions: How to Make them Lawsuit-Proof

Job descriptions are among the first items that courts examine to determine the legitimacy of a discrimination charge. You can use them as part of a defense in court only if they're accurate and were prepared before the job was advertised or interviewing began. To ensure accuracy, interview employees already doing the job and their supervisors. Here's what you need to find out:

The job's essential functions, including any physical requirements, such as heaving lifting. (Required by ADA)
Any secondary duties or responsibilities.
Attendance requirements.
Any education requirements and special skills necessary to perform the job.
Standards to which the person filling the post is held. (A salesperson, for example, may be expected to bring in five new clients per month.)
The worker's supervisors.
Any positions an incoming supervisor will be responsible for overseeing.

SESCO prepares job descriptions for clients which include a performance appraisal format built in. Call SESCO to have your job descriptions reviewed or developed.

SESCO Client Inquiry — Staff Response

Q. Are we required to offer continued health care insurance coverage when an employee leaves our business?

A. Employers with 20 or more employees offering health care coverage are required under certain circumstances to offer continuing coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) to qualified beneficiaries. The employee must have been enrolled in the employer's group health plan at the time of termination. The employee (and his or her dependents) are not eligible for continued coverage if the employee was released for gross misconduct.

Employers with less than 20 employees that offer health care coverage to their employees may also be required to offer continued or converted health care coverage to terminated employees. These requirements vary from state to state. If you have questions about your state's requirements, feel free to contact SESCO.