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The Retail Employer

The Retail EmployerApril 2008

Limiting Your Exposure Under the Fair Labor Standards Act

by Jeanne Montross

Many employers are asking, and rightfully so, why they should revisit their compliance under the Fair Labor Standards Act (FLSA), a law that has been in effect since 1938.  Although it has been around for a long time, like the dormant volcano that erupts after a hundred years, the FLSA has resurged over the last decade with incredible force and has been a primary focus of both the Department of Labor (DOL) and eager plaintiffs’ lawyers.

Due to the nature of FLSA claims, the costs have been truly staggering for employers.  Verdicts and settlements are often in the millions of dollars and can range into the hundreds of millions for larger employers.   No industry has been spared, as recent lawsuits in the headlines against Starbucks, Merrill Lynch, Wachovia, Pilgrim’s Pride, AIG, CVS, Walmart, AT&T, Dell, Qwest and FedEx starkly demonstrate.  According to a March 14, 2008 headline, Tyson Foods, Inc. is facing its 7th FLSA suit this year.

“Exposed” is often the best description for how many employers feel about these lawsuits.  The FLSA is a complex law with an even more complex set of regulations.  When asked what attracts him to FLSA claims, a plaintiffs’ attorney recently commented that it is simply impossible for even the most diligent employers to get the FLSA 100% right 100% of the time.  Employer violations inevitably touch large numbers of employees, and therefore, the cases are profitable.  Simply put, FLSA claims have become a best bet for plaintiffs’ lawyers looking to make big dollars.

What then, is an employer to do?  First, be aware of basic FLSA requirements, including minimum wage and overtime requirements, and understand where you are most vulnerable.   The following common violations are often the basis of wage and hour lawsuits:

  • Failure to pay overtime to non-exempt (hourly) workers.  If your policy requires pre-approval for overtime and an employee works it anyway without pre-approval, pay the overtime and discipline the employee for violating the policy. 
  • Requiring or permitting non-exempt employees to work “off-the-clock.”  Beware.  This includes more than the egregious manager who locks employees in the store after hours.  Do not permit non-exempt employees to work through unpaid breaks, work at their desk through lunch or take work home without recording it and getting paid.  Take seriously claims by multiple employees that they require overtime to get their job done.  For example, a recent case was brought against Starbucks after it reclassified its assistant store managers as non-exempt (making them eligible to receive overtime), but did not, at the same time, increase store labor budgets.  The assistant managers (365 of them) alleged that by taking these two steps, Starbucks encouraged them to work 10 hours a week off-the-clock to get their job done.  The lawsuit recently settled for an undisclosed amount.
  • Misclassifying employees as exempt from overtime and therefore, failing to pay proper overtime.  Remember, just because an employee is paid a salary does not make him exempt from overtime.  The position must qualify as exempt under the FLSA.
  • Giving non-exempt employees “comp time” in place of overtime pay.

Second, be proactive.  An ounce of prevention really is worth a pound of cure in this case.  Take the following actions now:

    • Conduct an internal audit.  Review employee classifications and company wage and hour records and policies.  Document your conclusions and any action you have taken.  Consider doing the audit with legal counsel, who will provide the necessary expertise, and will also render a “legal opinion” that can help limit damages in the event of a lawsuit.
    • Train your managers in their basic responsibilities under the FLSA.  You rely on your managers at all levels to ensure you are in compliance with this law.   Be sure they know your expectations regarding complying with this important law.
    • Keep accurate records of all time worked.  If possible, have managers and employees approve records of hours worked.
    • Pay non-exempt employees for all hours worked.  Where appropriate, have employees punch in and out at start and end of shifts, and for all unpaid breaks.
    • Do not take improper deductions from exempt salaried workers.  The FLSA permits such deductions in limited circumstances only.
    • Document job duties for all positions.  Ensure job descriptions are consistent with the status you have given the job under the FLSA.  Coordinate with your managers and operations units to ensure job expectations are reasonable and that managers are aware of the work being performed by employees.
    • Contact legal counsel immediately upon notification of a Department of Labor wage and hour investigation or if you are the subject of a wage and hour lawsuit.
    • Never ignore formal or informal complaints about wages or hours worked.  Act promptly and take advantage of the opportunity to address these issues before the DOL or a plaintiffs’ attorney does.

    Jeanne Montross advises and represents employers with respect to legal issues in the workplace. Jeanne works with David Nagle in the Richmond office of Jackson Lewis. Jackson Lewis has over 450 attorneys in 34 cities across the country, representing management exclusively in workplace law and related litigation. Jeanne and David may be reached at (804) 649-0404, or by email at jeanne.montross@jacksonlewis.com or david.nagle@jacksonlewis.com.

    David E. Nagle has advised employers with respect to legal issues in the workplace for over 25 years.  He is a partner in the Richmond office of Jackson Lewis, a law firm devoted exclusively to the representation of employers in labor, employment, employee benefits and immigration law matters.  Jackson Lewis has over 450 attorneys in 32 cities across the nation.  David may be contacted at (804) 648-4077, or at nagled@jacksonlewis.com.

    Calls requesting information on the Employment Law Information Program should be directed to Preston Perrin with the Retail Merchants Association at 804-662-5500.

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    Build Trust, Boost Morale: 7 Tips for Effective Employee Communication

    Communication between senior management and employees is one of the top five important elements of job satisfaction, according to a recent SHRM report. Research shows that businesses that communicate effectively have higher employee engagement, safer workplaces, lower turnover, better teamwork, more innovation, and better decision-making than organizations that communicate poorly. Effective communication starts from the top. So, what can you do to ensure you are communicating effectively with your workforce? Start by using these seven tips.

    1. Be transparent. Even when you don’t formally communicate with your workforce, your actions, policies, and practices are sending a message. That’s why it’s important to officially address even the most difficult of subjects, such as a crisis or change. Being transparent, open, and honest with your workforce will build trust and loyalty in any circumstance.
    2. Be proactive. As simple as it sounds, taking a proactive approach to employee
      communications is not only critical, it’s often ignored. With the fast pace of business, it’s easy to shuffle employee communications to the bottom of the priority list. But rather than waiting to communicate until there’s a problem, a proactive approach is one of the easiest, most effective ways to increase morale and build trust.
    3. Ask for feedback. Effective communication is two-way. So, find ways to receive and internalize employee feedback, whether through surveys or focus groups or in-person meetings. Then, take action on the feedback you receive, otherwise, you will create an environment where employees feel they are not heard.
    4. Use the right method. Employee communication can take place in many forms, from e-mail to web content, from companywide conferences to in-person meetings. So, make sure you’re using the right technique for each message. For example, rather than e-mailing a long memo about a complicated benefits change, hold several small, short meetings to address questions first-hand.
    5. Target your audiences. Some messages are important – even legally required – for everyone you employ to hear, so sometimes you must communicate with your entire workforce at once. Other messages are better communicated only to those involved or impacted by the message. It’s often easier to communicate broadly, but it’s most effective to make sure that every message is communicated directly with the appropriate audience, whether large or small.
    6. Combat information overload. The average worker spends around an hour a day just managing e-mail. But, did you know research shows that over a third of work e-mails are a waste of employees’ time? Employers themselves often add to the information overload that plagues workers by e-mailing too much and too often. To help keep this from happening, formulate a policy that determines the approved types, frequency, length, topics, and approved senders of companywide e-mail.
    7. Prioritize for key messages. It may be easy for you to know what information you need and what you can ignore. But for your workers, it may be hard to judge what’s really important and what’s extraneous. Prioritize for your workforce by aiming only to communicate key messages. This will help ensure that you’re not piling too much information on your team and keeping them from getting work accomplished.

    By communicating effectively with your workforce, you can create a sense of trust and camaraderie that will elevate your business as a best place to work. Using these seven tips can help create an employee communication program that will add value to your workforce and enhance productivity and morale.

    This article is reprinted with permission of www.ExpressPersonnel.com. Contact Ms. Lorraine Alexander at 804-550-0200 or lorraine.alexander@expresspersonnel.com if you would like to be added to their distribution list. Express Personnel now offers RMA members a Retail Staffing Program. More information is available online through www.retailmerchants.com.

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    Downsizing When Times are Tough

    by Charlotte Jensen

    Whether or not you believe the U.S. is actually in a recession, there is no denying that times are tough.  Every business owner is somehow feeling the pinch and looking for ways to cut costs.

    To achieve this, reducing headcount is the first thing many employers consider.  If you anticipate a long-term or permanent downturn in business, it may be the right approach.  However, it’s not the only option.

    Alternatives to layoffs include temporary reductions in pay, job sharing, shortened workweeks or even small furloughs.  Such approaches spread the impact across the board and can help employers retain their experienced talent for when the tide turns.  You may be surprised at who is willing to take a week off without pay or every Friday off for a while, especially if the alternative is that their jobs may be lost altogether.

    If, however, layoffs are inevitable, there are a few things small business owners should think about – unlike layoffs in a large company that may impact one department, a layoff in a small company affects almost everyone directly.

    First, while it goes without saying that employees being laid off should be treated with empathy, the damage they can cause if they feel mistreated cannot be underestimated.  They know most, if not all of the names of your customers and vendors.  If they are not already under some sort of non-compete or non-disclosure agreement, or if you aren’t offering severance that includes a waiver, then the door is open for a potential effort to steal your customers or disclose your confidential business information to competitors.  Customers and competitors naturally come to mind when an employee is in panic mode about finding a new job quickly. 

    Second, once you lay off employees, what about the ones left behind?  Will you address them with a glass half full or empty?  It’s about balancing morale with honesty, and I’m all for simplicity.  Openly acknowledge that times are tight and the layoffs were needed for the health of the organization.  Don’t give false hopes or make promises, but show you’re doing what is necessary to protect the business and, ideally, your employees.

    Finally, small businesses don’t have an HR department to conduct layoffs, so it’s up to you.  When all is said and done, how will YOU feel affected by having let go of employees you probably hired and mentored?  If you’ve made appropriate decisions based on solid business needs, then you should take comfort in the fact that these temporary pains are critical to the potential for long-term gains.  That doesn’t mean it feels good to have to let go of some employees, but the goal is to protect the company so that the need to have ANY employees will be there for years to come.

    Additional Layoff Tips

    1. It is an emotional time but cannot be an emotional decision.  Who is laid off must be chosen with extreme caution, grounded 100% in business fact.  “Last in, first out” may be the safest way but is not always the most practical approach.  Performance-based decisions are also common, but you have to be careful about being subjective.  Well-defined, specific, measurable criteria must be used.

      Regardless of the method used, once you make your decision, how does it look on paper?  You wouldn’t intentionally discriminate, but if half of those laid off are over forty, and pretty much no one remaining is, then prepare to pay your attorney a lot of money to try to prove that you did not discriminate based on age.  A sloppy or subjective decision of who to layoff often leads to these unintentional consequences.
    2. If you’re going to give laid off employees any sort of severance or benefit, consult with your attorney to prepare the appropriate waivers.  Sure, you can give the pay or benefit as a kind gesture with no strings attached, but consider using it as an opportunity to protect your business.  That really is the point of a severance – giving the employee something of value in exchange for a consideration that protects you, such as “you don’t try to sue me for discrimination”. 
    3. When you conduct the layoffs, be prepared for the reaction, but don’t react to it.  As compassionate humans, our instinct is to do or say whatever we can to soften the blow (think “it’s not you, it’s me”).  The more you say and engage in conversation, the more you open the door for wrongful termination claims or making reemployment or other promises you can’t keep or have no intention of keeping.  Balance empathy with “just the facts, ma’am”.
    4. Resist the urge to write letters of reference for those who ask.  Again, although unintentional, what if the employees who get letters are largely of one race, and those who don’t are largely of another race?  While you may think it is ridiculous that you could ever be accused of discrimination, it happens every day, and accidental discrimination is still discrimination.

    This is meant to be general information on a complex topic.  It should not be considered legal advice, nor is it a replacement for seeking professional counsel for your specific situation.

    Charlotte Jensen is a Human Resources Consultant for small businesses (2-75 employees).  As President of Cole James Associates, Ms. Jensen provides her clients guidance on their employment and workplace issues.  She can be reached at cjensen@colejamesassociates.com or www.colejameshr.com.

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