Employers are desperately searching for wage and hour solutions. In the past few years, an astonishing number of organizations have been beaten down by litigation and expensive settlements, along with a daunting array of state and federal laws. To give you a sense of the scope of the problem, wage and hour class action claims now outnumber all federal discrimination class actions claims, combined.
Just yesterday, IBM announced plans to change the base pay and status of 7,600 workers. IBM will lower base salaries for these employees (6% of its workforce) and make them all overtime eligible. At the end of the day, employees shouldn’t see a significant change in their take-home pay – it will just be paid on slightly different terms, and workers will need to be diligent about properly recording their hours.
What motivated IBM to make this decision? A $65 Million settlement in 2006 for unpaid overtime (OT). IBM was hit with the kind of wage and hour case employers are terrified of facing – a class action claim that workers who are classified as exempt from OT are actually OT eligible. It’s typically a no-win situation for the employer, because when workers have been classified as exempt, detailed records of the hours they’ve worked simply don’t exist. That makes the job of plaintiffs’ counsel easy – and mighty lucrative. The burden of proof rests on the employer to prove employees did not work overtime, and without extensive documentation, that’s a tough row to hoe. Add in the ease of class certification with these types of cases, and you see why employers are facing a tidal wave of wage and hour litigation.
A Solution That Begs For Training
Reclassification is an interesting solution to an OT problem like IBM’s -- and one that could help some employers get a handle on a piece of the wage and hour risk puzzle. However, reclassification also brings some new challenges and issues. In this case, do IBM’s newly classified employees really understand the rules of the road when it comes to their hours and pay? With wage and hour law, the life of an exempt employee is very different from that of a non-exempt one.
Non-exempt (a.k.a. OT eligible) employees need to keep meticulous records of hours worked, and must pay close attention to employer rules about everything from properly recording time, to reporting errors, to taking meals and breaks, to avoiding off-the-clock work. Then add in the need for supervisors to understand how to manage hourly employees – especially ones that were previously considered OT exempt. Managers have special responsibilities when it comes to record keeping, errors and reporting, and handling employee complaints. Get any of the complex rules and requirements wrong, and IBM may find itself facing yet another expensive lawsuit.
That’s where wage and hour training comes in. Employers who chose to reclassify employees must also remember to educate them about key wage and hour rules. You should never just assume your workers know what to do – no matter how sophisticated or professional they may be. The requirements are complex and don’t always make sense. (In fact in many cases, they’re counter intuitive.) And while a well written and widely distributed policy is a good idea, we all know that policies are very unlikely to change employee behavior (let alone be read by your workers). Policies need to be brought to life, and put into context, by companion education programs.
Beyond educating your workforce about how to avoid wage and hour mistakes, training in this area has another huge benefit – the ability to establish affirmative defenses in the event of litigation. While most HR and legal professionals are aware of this concept in the harassment and discrimination context, few truly understand the extent of damage mitigation that a training and compliance program can offer in the wage and hour arena. To find out more, check out ELT’s whitepaper on training ROI.