The very first bill signed into law by
President Obama was the Lilly
Ledbetter Fair Pay Act, which was in
response to a U.S. Supreme Court decision that found, essentially, that pay discrimination claims could only look back
to decisions made within 300 days of the
claim being filed. The new law removes
that limitation, allowing an employee to
pursue a pay discrimination claim even if
the decision resulting in the discriminatory pay was many years or even decades
earlier.
Although the ink is still wet on the
Ledbetter Act, the flurry of pay discrimination claims is already starting to hit the
courthouses. Making matters worse, the
perilous state of the economy is bringing
an increased focus on all aspects of businesses’ pay practices, with employees less
willing to let their employers and particularly former employers slide on even the
most technical wage and hour violations.
For these reasons, it is critical that businesses at least consider undertaking an
internal wage audit to ensure their practices are in conformity with the labyrinth
of wage and hour laws, says Peter B.
Maretz, a shareholder with Shea Stokes
Roberts & Wagner.
“There are myriad ways to perform an
internal wage audit, but an overarching
concern should be to select a process so
that you establish and maintain confidentiality over the audit, which generally
means involving your attorney at some
level,” he says.
Smart Business spoke with Maretz about
conducting internal wage audits within
your business.
What is an internal wage audit?
A comprehensive wage and hour audit
scrutinizes all aspects of your compensation practices. It is rare that a wage and
hour audit does not turn up some issue, so
be sure to consult with your counsel to
either have them perform the audit directly, or, at a minimum, work directly with
your HR or finance people to gather the
data to analyze. This way, you will have a
strong argument that the entire process is
protected by the attorney-client privilege.
What should be the focus of an internal wage
audit?
Of course, make sure basic laws, such as
minimum wage and overtime, are being
followed. On the heels of the Ledbetter
Act, examine your compensation decisions
to make sure that they are balanced and
supported by nondiscriminatory bases,
and examine the processes that are used to
make decisions on compensation, be they
starting pay, promotional pay or merit
increases. The decision-making should be
transparent, nondiscriminatory and well-documented. If there is a committee making these decisions, endeavor to make the
committee diverse.
The audit should examine lower- and
middle-management positions to make
sure those people are properly classified as
overtime-exempt or nonexempt based
upon their work duties. There has been significant attention paid to this issue over the
last several years, and a full discussion is
beyond the scope of this article, but keep
in mind that whether a person is properly
classified depends upon the work that person is actually doing, not what their job
description says he or she should be doing.
What other wage and hour issues should
companies be aware of?
Also receiving significant attention lately
have been the timing and administration of
meal and rest breaks. The California
Supreme Court will likely clarify many
issues concerning meal breaks within the
year. Until then, key issues remain in flux.
You should make certain you have a comprehensive, regular audit mechanism in
place to check for meal-break violations
and pay the one-hour meal premium where
indicated.
Also, if you require employees to change
into uniforms or safety equipment on site,
examine this ‘donning’ and ‘doffing’
process. If it takes more than a minute or
two, it should be compensated time.
Similarly, if there is significant time spent
by an outgoing shift transitioning information to an incoming shift, that time is
compensable.
If employees earn bonuses based on
purely objective criteria (e.g., manufacturing employees make so many parts in a
day and earn a set bonus amount or reservation agents earn bonuses for upsells),
these additional amounts should be added
to the regular rate before the overtime rate
is calculated.
This outline is by no means exhaustive
but should provide the foundation for a
worthwhile audit.
What should a company do if violations are
found?
How you implement a change in the practice and whether you issue back pay,
depends upon scores of factors, not the
least of which is the amount of back pay.
Keep in mind, however, that there is value
in presenting this information to your
employees on your own terms. And do this
proactively — don’t wait for your employees to bring it to you through their lawyers.
If it does get to that, any resolution will
likely involve you paying that lawyer, and
you will have lost the opportunity to build
employee loyalty.
PETER B. MARETZ is a shareholder with Shea Stokes Roberts & Wagner. He regularly advises businesses on all aspects of employment law. Reach him at [email protected] or (619) 237-0909.
