What to Expect When Wage Hour Calls

As Wage hour continues to make investigations, the following is an update on dealing with Wage Hour procedures during an investigation.

Since Wage Hour has approximately 750 investigators nationwide, they normally are able to investigate only one-half of covered firms in a given year. However, you may be one of the “lucky” ones and become scheduled for an investigation.  First, you should understand that Wage Hour has the authority to investigate any employer they choose and they do not have to disclose the reason for the investigation.  However, nearly all investigations are conducted because Wage Hour has received information that the employer may not be paying employees correctly; Wage Hour has received information that the employer is employing minors (contrary to child labor requirements); or the employer is in a “targeted” industry. Investigations vary in length due to several factors, including the size of the business, complexities of the firm’s pay plan, and schedules of both the employer and the investigator.  Some investigations may be completed in a day, while others may take months.

Wage Hour also has an informal procedure, known as a conciliation, where they will phone (or write) an employer stating that an employee has alleged he/she was not paid properly.  They ask the employer to look into the allegation and report back to them.  If the parties can resolve the issue through this “conciliation” process, Wage Hour will not come to the establishment and conduct a full investigation.  If the problem is related to a group of employees or a department, in many instances Wage Hour will ask the employer to rectify the problem with that group of employees rather than instituting a full investigation.

First, a comment regarding complaints and the person(s) making complaints: Wage Hour receives complaints from many different sources, including current employees, former employees, competitors, employee representatives, and other interested parties.  Wage Hour has a policy of not disclosing the name(s) of the complainant unless the complaining party has given written permission for them to do so.  Therefore, unless they are only looking at the pay practice related to a single employee, Wage Hour normally will not tell you if there is a complaint and will not identify the complaining party.

With respect to child labor investigations, they are typically scheduled for one of two reasons.  (1) Each year they will target an industry, fast food restaurants or grocery stores for example, that has a history of employing minors contrary to the requirements of the Act.  (2) They have received information that a minor was injured while working for the firm.  A copy of each Workers Compensation Accident Report relating to the injury of a minor is forwarded to Wage Hour for review.  If they have reason to believe the minor was employed in a prohibited activity, they will schedule an investigation.

In addition to the above reasons for investigations, each year Wage Hour selects a few industries to target for enforcement.  They pick industries that have a history of non-compliance with the Fair Labor Standards Act (FLSA) and will investigate a large number of employers in the industry.  A few years ago they selected the poultry processing industry and investigated approximately one-third of all processing plants in the country.  As a result there is some litigation still pending in Alabama from an investigation that was completed in 1999. In recent years, they have looked at the health care industry, fast food establishments, and construction industry.  Although some targeted activities are national, in most cases they vary from state to state.  For example, during the past year there has been a concerted activity in Alabama that targeted grocery stores.

Although on rare occasions Wage Hour will make an unannounced visit, the employer will normally be contacted by phone or letter to schedule an appointment to begin the investigation.  Once the appointment is confirmed, Wage Hour will come to the employer’s place of business to begin the investigation.  The investigator will begin the investigation by conducting a conference with the person in charge to gather information regarding the firm’s ownership, types of activities, and pay practices.  The employer may have whomever he/she would like at this conference, including legal counsel. It is always advisable to be cooperative and courteous.

After the conference the investigator may ask to tour the establishment so that he/she may better understand how the business operates.  The investigator will then ask to review the payroll and time records for the past two years. Wage Hour realizes that many employers outsource their payrolls to a third party or have them prepared at another location.  If this is the situation, the employer can authorize the investigator to review the records at another location, or he may arrange to have them brought to the establishment.

The investigator may ask the employer to make photocopies of certain records.  Although the employer is not required to do so, the investigator has the authority to gather this information and the making of copies will expedite the investigation process.  Thus, most employers find that it is beneficial to furnish the photocopies.  It is suggested that the employer also retain a copy of all records provided to Wage Hour in the event the matter is not resolved and litigation is begun.

Once the investigator has completed a review of the records, he/she will want to conduct confidential interviews with a sample of the current employees at the establishment during normal working hours.  The employer is not required to allow the investigator to do this at the establishment; however, if not allowed to do so at the establishment the investigator will contact the employees away from the business.  Most employers find that allowing the interviews to be conducted at the establishment is better than forcing the investigator to contact the employees at home or other locations.  Again, the easier it is for the investigator to complete his assignment, the quicker he/she will be finished and gone.
After the fact-finding phase of the investigation is completed, the investigator will schedule another conference with the employer to discuss the findings.  As with the initial conference, the employer may have a legal representative at the conference. If the investigator determines that the employer has not complied with the FLSA, he/she will discuss the issues and ask for an explanation of the matter.

The employer will then be asked to agree to make changes in the pay system to comply with the Act. Once an agreement is reached for future compliance the employer will be asked to pay back wages to the employees that have not been paid correctly.  In many instances, as provided by the regulations, the employer will be asked to compute the amounts due to each employee and submit them to the investigator for review and approval.   If the investigator agrees with computations that were submitted, he/she will negotiate a payment schedule with the employer to distribute the back wages to the employees.

Note:  Wage Hour does not have the authority to force an employer to pay back wages except through litigation.  If the employer (or his representative) and the investigator cannot reach an agreement to resolve the matter, the employer may request a meeting with the investigator’s supervisor.  If no agreement is reached at that level, listed below are some of the options for Wage Hour.

  1. Wage Hour may bring an action in Federal District Court to compel the employer to comply with the FLSA and to pay the back wages that are due the employees.  If this action is taken they will typically sue for a three-year period (vs. a two-year period for investigations that are resolved through negotiation), as they will allege willful violation of the Act.  In addition they will ask for liquidated damages in an amount equal to the amount of back wages that are due.
  2. Wage Hour may also assess penalties for repeated and/or willful violations of the minimum wage and overtime provisions of the Act of up to $1100 per employee.  If minors were found to be illegally employed they may assess penalties of up to $11,000 per minor.
  3. In situations where Wage Hour chooses not to pursue litigation, they may notify the employees of the fact that they are due back wages and of the employee’s right to bring a private suit to recover back wages.  Additionally, the employee will be informed of his right to recover liquidated damages, attorney fees and court costs.
  4. Employers should also be aware that employees may bring a suit under the FLSA without contacting Wage Hour.  There are attorneys that specialize in Wage Hour suits. As a result there has been more private FLSA litigation in recent years than under any of the other employment statutes.  In 2007, the ten largest Wage Hour settlements resulted in employers paying for more that $300 million in back wages.

In summation, if you are one of the “chosen” ones, be cooperative and courteous to the investigator so that the investigation can be completed as quickly as possible.  However, you should only provide the information requested and only respond to the questions that are asked.  Further, if you are asked a question that you do not feel comfortable answering, stall the investigator while you seek guidance from your legal representative.

Lyndel L. Erwin, Wage Hour Consultant
Lehr Middlebrooks & Vreeland, P.C.
2021 Third Avenue North
Birmingham, AL  35203
205-323-9272 (direct)
205 326-3008 (telefax)
[email protected]