Federal courts tried a record 6,000 wage and hour cases in 2009.  Wage and hour laws apply to virtually all employers regardless of size. Employees whose employment is terminated because of reduction in force or layoff often become disgruntled about pay practices they begrudgingly accepted when they were taking home a paycheck.
 
Employers frequently are not fully aware of Fair Labor Standards Act (FLSA) regulations regarding “time worked” for non-exempt (hourly) employees. Common issues are clocking in and out, travel time, waiting time, on-call time, rounding clock time, breaks and meal periods and off-the-clock work.  And there are strict regulations on pay deductions for exempt (salaried) employees. Several of these issues are exacerbated when employees telecommute, which is becoming increasingly common.

The Wage and Hour Division of the DOL recently hired 250 new investigators to boost its ability to ensure compliance with wage and hour laws and intends to update FLSA recordkeeping regulations in 2010.

What can employers do to protect themselves? 

• Perform internal audits of compliance with all FLSA wage and hour regulations.
• Stay abreast of upcoming changes in recordkeeping and transparency regulations.
  

The IRS has announced that 5,000 or more employers are to be randomly selected for detailed employment tax audits. The focus will be on four areas:  improper classification of workers as independent contractors rather than as employees, fringe benefits, reimbursed expenses, and compensation of owner employees.  Who is or is not an independent contractor is not easily determined. Small businesses and nonprofit organizations often incorrectly believe they have wide latitude to classify a worker as an independent contractor. As a result, they commonly misclassify workers as independent contractors and required employment taxes are not paid by the employer.  And an annual salary substantially less than $106,800 (the FICA limit for 2010) for an owner/executive of a successful company may raise a red flag because the IRS may assert that the low salary, if coupled with high non-taxable distributions, was set to avoid paying employment taxes.

What can employers do to protect themselves? 

• Better understand the factors currently reviewed by the IRS when classifying workers, including behavioral control, financial control and type of relationship.
• Enter into formal agreements with those workers properly classified as independent contractors.  
• Perform internal audits to determine compliance with compensation and employment tax regulations related to fringe benefits, reimbursed expenses and compensation of owner employees. 

The Lilly Ledbetter Fair Pay Act affects any employer with 15 or more employees.  The Act states that an unlawful compensation-related employment practice occurs when a discriminatory compensation decision or other practice is (1) adopted, (2) when an individual becomes subject to it, or (3) when an individual is affected by its application, including each time benefits or other compensation is paid.  This means that if an employee was discriminated against (even inadvertently) years ago when hired or when raises were granted or promotions awarded, every time the employee receives a paycheck he or she has 180 days to make a charge of discrimination and claim for back pay.

What can employers do to protect themselves?