An ounce of prevention

Wage and hour audits can help avoid expensive litigation and damages

The Fair Labor Standards Act (FLSA), the federal law governing the payment of minimum and overtime wages, turns 70 next year, and notwithstanding all the cosmetic revisions and amendments it has experienced at the hands of Congress, it is finally showing its age.

Courts are struggling with uniformly interpreting and applying FLSA and the U.S. Department of Labor's (DOL) interpretive regulations, particularly those governing overtime classification of employees. The result has been divergent opinions and guidance. This, in turn, has created confusion for employers as to the proper method for paying employees, particularly smaller companies that feel they do not have the resources to properly assess FLSA's practices and policies.

In the meantime, plaintiffs' attorneys continue to discover that FLSA collective actions represent low risk and lucrative undertakings because of a statutory provision requiring employers to pay for plaintiffs' attorneys' fees and costs incurred by plaintiffs to recover back wages. This makes these types of suits expensive, time-consuming and invasive for employers.

But there is some good news. You can take precautions to decrease the likelihood of FLSA lawsuits or, at least, minimize potential liability. The best precaution is to conduct an internal wage and hour audit of wage payment practices and job classifications for overtime purposes. The resources required to conduct an audit will pale in comparison to the costs of becoming embroiled in litigation.