Tuesday, November 29, 2016

Curtis Samuel scores the winning touchdown in the second overtime for Ohio State. (Greg Bartram/USA Today Sports)
Overtime can be a major problem for you if you're a sports fan rooting for the team on the short end of the game score. That's one type of overtime. Overtime can also be a major problem for you or your client if they're facing a "claim" for back pay from a disgruntled employee. Or "better" yet, suit papers from a not so friendly law firm.

Before I could add the second part to the additional insured post from a couple weeks ago, some interesting things happened in the world of Employment Practices Liability (EPL). That triggered this post, as the rule itself is not as important as the overall subject matter.

New overtime rules for "while collar" workers, part of the Fair Labor Standards Act (FLSA), were to take effect as of December 1, 2016. The new OT rules, if or when they go into effect, change the "exempt" employee qualifying amount of compensation (one of several "tests" to determine eligibility) from $23,660 per year to $47,476, which is basically double. That means business owners that are not paying attention will immediately be out of compliance for any "exempt" employee making less than $47,476. 
As respects this rule, a Texas judge has issued a preliminary injunction. That injunction stems from a legal case brought by several states and business organizations. The injunction is not permanent, so the "freeze" on implementation by the Department of Labor may or may not be for long. Opinions differ as to whether the new rules will ever be implemented, and as you can imagine the reasons are mostly political in nature. But either way I'm guessing you're wondering what this has to do with you.
The problem. Odds are that some of your customers are in trouble and just don't know it, either due to their business practices related to non-exempt employees, or the fact that they don't have EPL including wage and hour coverage, or both.
Several years ago plaintiff attorneys discovered that the employment practices of many businesses are ripe for legal action. This occurs in at least two areas related to wage and hour, 1) mis-classification of exempt employees and 2) poor or no record keeping regarding overtime hours for non-exempt employees. Some business operations do a fair to poor job of properly identifying who is and who is not an "hourly" employee, and that mistake compounds over time.

One common misconception is that classifying employees is up to the employer. It's not as there are Federal guidelines and "tests" to be applied that don't leave much room for subjectivity. Even if the employer gets the classification correct, those employers that don't keep accurate records of hours worked open themselves up to suits alleging that back pay is owed for OT - almost always from former employees. The onus of responsibility in these situations is on the employer to prove they have accurate records of both hours worked and the payment for those hours.

What to do? First, your customers need to know the rules that exist now relative to exempt and non-exempt employees and how to properly apply those rules in their business operations. If they don't know for certain they need to ask for help to be sure they're following the rules that are established. That may or may not require a consultant, but given the cost of a consultant vs fines, penalties and legal costs, it seems like a pretty easy choice. Second, review their current EPL policy to see if that policy provides defense for wage and hour law violations (part of FLSA). If the policy does provide wage and hour language, read it. Most policies are defense only, i.e. no indemnity coverage, and most only offer a sub-limit, usually $100K.
If they don't have EPL coverage in place, quote and bind coverage for them asap and make sure you explain what is and is not provided by that policy.

I'm fairly certain that if you do a little reading and get current on this issue, you'll be a huge resource to your customer and separate yourself from many of your competitors on this subject. If you have questions or want to discuss the topic, let us know and we'll be happy to help.

No comments:

Post a Comment