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The SESCO Report – December 2019

Are You Complying with Minimum Wage and Overtime Pay Laws?: 81% of Employers Are Not!

The Fair Labor Standards Act — commonly known as the Federal Wage and Hour Law — was enacted in 1938 as a remedy to the depression. It specifies a minimum wage, requires overtime pay and places restrictions on child labor. The purpose of the Act was to spread employment by placing financial pressure on employers via overtime pay and to compensate employees for working lengthy hours. Despite a long history of clarification and education, confusion about the FLSA and resulting non-compliance still exists. In fact, back wage fines and legal fees resulting in non-compliance of the Fair Labor Standards Act remains the number one employer liability when it comes to labor and employment laws. In FYI 2019, the Wage-Hour Division recovered a record $322 million in wages owed to workers.

As we consider the Wage-Hour Division, we must first understand their mission as follows:

"To promote and achieve compliance with labor standards to protect and enhance the welfare of the nation's workforce."

It doesn't take long to understand how aggressive the Wage-Hour Division is as when exploring their website. If you Google Wage and Hour Division — Data, they make it very clear about how proud they are in terms of the back wages that have been collected for workers, how many millions of workers they've helped and what it means to employees to receive these back wages to include estimating what employees can buy with back wages received.

As SESCO was founded by an ex-Wage-Hour officer in 1945 what then was the first Wage-Hour consulting company in America, our history is deeply rooted in compliance. SESCO has literally audited thousands of employers over these many years to determine their compliance with the Fair Labor Standards Act. As stated above, what is concerning is that non-compliance is significant based on our auditing practices and, in fact, 81% (8 out of 10) of those employers audited by the Department of Labor, Wage-Hour Division are, in fact, in non-compliance. So, if you think you are complying, more than likely you are not.

Wage-Hour Division Statistics

When we look at DOL investigations, we must consider:

  • Fifty-one percent (51%) of Wage-Hour investigations are complaint driven. This means that an employee or ex-employee of the employer has contacted the Wage-Hour Division and made a complaint.
  • Forty-nine percent (49%) of the remaining cases are non-directed meaning that employers are selected "randomly" for an audit. However, we know based on the Wage-Hour Division that they have identified what they call "high violation industries" and have such targeted these employers for investigations. These include:

- Distribution
- Auto Repair
- Construction
- Food Services
- Healthcare
- Retail
- Hospitality
- Landscaping Services
- Pest Control
- Manufacturing

There are many other "high violation industries" but the list above will provide an idea of those employers that should be on high alert.

In fact, we are seeing specifically Home Care and Long-Term Care/Nursing Homes being targeted. SESCO has had a number of clients who have been audited in the last few weeks and months in these industries as, again, violations tend to run much higher as a percentage.

Another concerning statistic is that the Wage and Hour Division has been automatically doubling penalties because their competitor, i.e., lawyers and state court cases apply doubled damages/liquidated damages as part of their cases. Therefore, if investigated and found in non-compliance, the Department of Labor will issue wages due back two (2) years for all current and previous employees. Then they will automatically double these back wages.

Common Minimum Wage Violations

  • The current minimum wage is $7.25 per hour. However, many states and even cities and municipalities have passed their own minimum wage which are higher. You must comply with the highest rate enacted.
  • Can weekly rates be averaged? The workweek (7 consecutive 24-hour periods starting on any day as selected by the employer) is the basis for establishing a minimum wage rate. Therefore, each week must stand alone and you cannot average hours in multiple workweeks.
  • Uniform purchase and maintenance — When employees are required to purchase or clean uniforms, a minimum wage violation will occur if such costs reduce an employee's wages below the FLSA's minimum and the week's uniforms are purchased or cleaned. This same principle will apply to any other required tool, computer, etc.
  • Breakage, shortage and theft deductions — Deductions from an employee's paycheck for losses due to such things as breakage, spillage or cash register shortages are not allowed if the effect would be to reduce the employee's pay below the minimum rate. Funds allegedly misappropriated may not be deducted if that will cause the wage rate to fall below the FLSA minimum — deductions for theft that result in payment of less than the minimum wage can be made only if a court has judged the employee guilty of criminal misconduct.

Hours Worked

  • What are hours worked? An employee must be paid for "all hours worked." That includes the time an employee is required to perform principle activities related to the job on the employer's premises or a prescribed workplace and also the time an employee performs work with the knowledge of the employer even if no order to work has been given (FLSA calls this "suffered or permitted" to work). Most importantly, this means working before or after hours and at home.
  • Are time clocks required? Employers must maintain accurate records of time worked by employees covered by the Act, but time clocks or time recordkeeping systems are not required. If an employer uses a time system, voluntary early or late punches may be ignored if no work is performed before or after hours. Permitting employees to forego punching time clocks during lunch does not require lunch periods to be counted as hours worked if employees are relieved of all duties and the lunch period occurs at a regularly appointed time.

Overtime Pay

  • Must unauthorized overtime be paid? An announcement or policy that overtime work will not be permitted or that overtime work must be authorized in advance will not always protect an employer. An employee can collect overtime if he or she is actually suffered or permitted to work extra hours — that is, if the employer or a supervisor actually knows the employee is working overtime or if the overtime appears on payroll records.
  • For example, employees have recovered overtime pay despite prohibitions against unauthorized overtime work where (1) an employee filed daily reports showing overtime hours and handed them to the time keeper; (2) a supervisor knew that an employee was working overtime hours; and (3) an employee consistently started working in the morning before regular hours.
  • What is the correct overtime rate? The FLSA overtime rate is one and one-half (1.5) of an employee's "regular rate." The regular rate generally means an hourly rate — it is roughly equal to straight time earnings divided by hours worked. Because overtime is figured on a weekly basis, the regular rate must be computed each week. What is critical and one of the most common violations is that the employee's regular rate does not mean an employee's hourly rate. The regular rate must also include bonuses for accuracy of work, attendance, continuation of employment relationship, incentives, production, quality of work, contest prizes, shift differentials and many other payments. These payments must be included in the computation of the regular rate which, in turn, increases the cost of overtime.

SESCO Staff Recommendations

  • On-Call Time — Whether or not the time an employee is on call need be counted as part of his/her compensable working time depends on his/her freedom while on call. If he/she must remain on the employer's premises or so near thereto that he/she cannot use the time as he/she pleases, this would be compensable time. If on the other hand the employee is free to come and go, even though he/she must leave a telephone number where they may be reached, the time can be excluded from hours worked.
  • Lectures, Meetings and Training Time — Attendance at lectures, meetings, training programs, and similar activities need not be counted as working time if all of the following four (4) criteria are met:
  1. Attendance is outside employee's regular working hours.
  2. Attendance is voluntary (it is not voluntary if required by the employer or if the employee is led to believe that non-attendance will prejudice working conditions or employment standing).
  3. Employee does no productive work while attending.
  4. Program, lecture, or meeting is not directly related to the employee's job (it is directly related to the job if it aids in handling the present job better as distinguished from teaching another job or a new or additional skill).
  • Travel Time — The guidelines which apply in determining whether or not time spent in travel is working time depends upon the kind of travel involved.

It is the position of the Wage-Hour Division that an employee who is required by their employer to drive an automobile or a truck for the transportation of other employees to or from work at any time is working while traveling. It makes no difference whether the vehicle is the employee's own car, the employer's car, a rented car, or a truck.

SESCO's Exclusive Professional Service Agreement

SESCO serves thousands of clients in all 50 states through our Professional Service Agreement. The Professional Service Agreement is designed to provide services on a fixed fee basis and not on an expensive per-hour program like most providers and attorneys.

Our monthly fee averages $150 (based on number of employees and locations) per month and provides our clients the following at no additional charge:

  • Telephone, email, research support from our consulting staff and labor and employment lawyers without time restrictions.
  • Annual harassment and/or leadership training.
  • Annual labor and employment law audit.
  • Annual employee handbook review.
  • Federal and state posters.
  • Monthly newsletter and weekly email updates.
  • Priority service at reduced fees.

If you are currently not a SESCO client, please contact SESCO at 423-764-4127 or to learn more about our professional firm and the services that we provide to our valued clients in all industries across all states.

Special Thanks to New SESCO Clients!

Emmaus Bible College
Dubuque, IA

A&R Complete Auto Care
Clarksville, TN

McPeak Supply, LLC
Roanoke, VA

Region Ten Community Services Board
Charlottesville, VA

Stan McNabb Automotive
Tullahoma, TN

Dave Kirk Automotive
Crossville, TN

Virginia Business College
Bristol, VA

Shop Fix Academy
Nashville, TN

SESCO Client Feedback

"Joel, you have no idea how refreshing it was to speak to you today. The setting I was in prior to this was with 450 employees and I had no access to legal support and if a problem arose, I would be credited with the mistake even if I was not the cause. I always asked them to give me access to legal to mitigate risk but they would not support it. I ended up calling the DOL, OSHA, EEOC offices, and others to get answers which was always scary to me. I thought I would get put on some sort of list. I look forward to visiting with you in the future and I will definitely give positive word of mouth advertising if your organization likes that sort of thing. Thanks Again!!" ~ Terry Govoreau — Chapel Hill Tire

Feedback from the National Funeral Directors Association 2019 Convention
Session Title: "Is It Sexual Harassment?" by SESCO's Jamie Hasty

  • Jamie is an excellent presenter, very knowledgeable and experienced
  • Loved Jamie's presentation. She answered our questions clearly, competently, and with professional patience.
  • Should’ve been two hours
  • Very informative and engaging session

Featured SESCO Client

TIS Insurance Services, Inc. (TIS) is an independent, privately-owned insurance consulting and brokerage agency. TIS has served the insurance needs of policyholders in Tennessee and throughout the Southeast since 1945. With over 150 employees, TIS is the largest independently owned insurance agency in Tennessee and was once again named a Top 100 Agency out of 30,000 Independent Agencies nationwide by Insurance Journal magazine.

Headquartered in Knoxville, Tennessee, TIS serves over 6,000+ individuals and businesses in 47 states. A large staff of professionals is available to assist with all types of Risk Management insurance including Commercial Lines, Personal Lines, Construction, Healthcare Services, Financial Services and Employee Benefits. TIS has the expertise and resources required to deliver tailored and effective solutions and private ownership ensures immediate responsiveness to the needs of the clients.

SESCO is proud to partner with TIS Insurance Services, Inc.

Merry Christmas

Your business this year means so very much to all of us at SESCO. We could not have made it through 2019 without you! May your Christmas season be filled with peace and joy! Blessings to you during this Christmas season! We look forward to a continued relationship in 2020.

The SESCO Staff

2019 Client Satisfaction Survey

Please click on the link below to complete and return SESCO's 2019 Client Satisfaction Survey:

Client Satisfaction Survey