You can’t always control the hand you are dealt. When the Department of Labor (DOL) comes knocking at your door you should be prepared to defend you wage and hour practices. Hopefully, you have already done an audit of your time records for accuracy; you know that your employees and independent contractors are properly classified; and all of your workers are being properly paid. Right? Unfortunately, wage and hour mistakes are common and can be very costly. Now is the time to play your cards well.
Prepare to Negotiate.
The basic principles of negotiation, whether with another business, an opposing party, or with federal agencies, are the same. You should know several things about your case before you begin a negotiation: (1) your strengths; (2) your goal; (3) your breaking point; and (4) what will happen if you don’t reach an agreement. You should also be able to gauge the opposing party’s or agency’s position on these four matters. Break the case down into four steps:
Step 1: Are the cards stacked against you?
A wage and hour investigation can be prompted by an individual employee’s complaint or because your business is a targeted industry. In other words, from the outset you likely won’t know why you are under investigation. You should know, however, that DOL only has the authority to investigate. It cannot, on its own accord, enforce federal laws. This will be your greatest strength: DOL wants to reach a settlement with a business so that it doesn’t have to go to court to prove any violations it may find.
You will meet the investigator at the Opening Conference. To determine your strengths or weaknesses in your particular case, allow the investigator to do her or his job by examining your time records and interviewing your employees. Afterwards, the investigator may interview managers and business owners. Your attorney should be present for management interviews because this will be the time to start building your defense. Based on the questions you are asked and documents the investigator wants to review, you will have a better sense of the stakes.
Step 2: Sweeten the Pot.
Your goal is likely to spend as little money as possible. DOL’s goal is to ensure that all of your workers are paid what they are allegedly owed. Perform a self-audit to re-evaluate whether your job descriptions match your exemptions and organize your payroll records. If you have defenses to alleged violations, make sure that your records clearly establish that your employees are properly paid. For example, if you have a dispute about the number of overtime hours an employee allegedly worked, provide support to establish that the employee worked fewer hours than claimed. Remember to be cooperative with the investigator and support your defenses with documentation. The more you can defend against alleged wage and hour violations, the more favorable your settlement will be.
Step 3: Know When to Fold.
Understanding your bottom line is essential to knowing when to settle. At the Closing Meeting, the investigator will tell you her or his findings. You should ask for an explanation for her or his legal conclusions and calculations. Upon review, you may find that your defenses aren’t as strong as you had hoped, or happily discover there is a relatively small amount at stake. There are also many benefits to settling. Your case will have finality. In addition, although DOL can look back as far as three years, if you are cooperative, the agency typically limits its investigation to two years. If you can demonstrate that you acted in good faith, you could also avoid an assessment of liquidated damages. Ask yourself, “Is this settlement agreement below my bottom line?”
Step 4: All Bets are Off.
There are two main reasons you may choose not to settle: either you have strong defenses or the proposed settlement is cost-prohibitive. At this final step you should already know your best alternative to a negotiated agreement. If you don’t reach a settlement, what will happen? You will likely be involved in a lawsuit. There will be attorneys’ fees; DOL may examine an additional year of records for its investigatory period; and if you lose, you will likely pay more than the proposed settlement AND be liable for liquidated damages – twice the back pay owed. If you win? Well, you probably will still have the attorneys’ fees.
Don’t be caught off-guard in a wage and hour investigation. Regularly audit your payroll records and job descriptions to ensure that you are in compliance with the law. If you are under investigation, play your cards well and fold before the game gets too rich.
Need assistance with auditing your payroll records? Contact your HR Consultant.