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Significant Wage-Hour Changes, Trends Require Employer Vigilance

July 16, 2021, 6:06 PM

Significant changes underway at the federal Labor Department and discernable trends in wage-hour case law, as well as pandemic-related shifts, provide a framework for employers to consider and confirm their compliance readiness, a wage-hour lawyer said July 15.

Changes Under New Administration

“There will be more changes under this Biden administration than there have been in over 20 years in wage and hour law,” according to James Reid IV, a partner at the Dinsmore & Shohl LLP law firm.

Already there has been a lot of activity, with the confirmation of the former mayor of Boston, Marty Walsh, as the new U.S. labor secretary, and “all of the opinion letters, for the most part, under the Trump era have been withdrawn,” said Reid, who spoke at the American Payroll Association’s Virtual Congress.

Twenty wage and hour opinion letters were issued in 2020 and another nine were in the works by the time President Trump left office on Jan. 20, 2021, Reid said. Several of those opinion letters have already been withdrawn by the Labor Department under President Biden, he said.

The withdrawn opinion letters addressed independent contractor status of “gig-economy” service providers (FLSA2019-6), compensability of time spent by truckers in their sleeper berth during multiple-day long-haul trips (FLSA2019-10), restaurant tip pools (FLSA2021-4), independent contractor status of distributors (FLSA2021-8), and independent contract status of motor carriers (FLSA2021-9).

Now that we know that most workers have to be classified as employees and that the test to determine worker status is to be stricter under the Biden Administration, it is a great time to revisit all of your job descriptions and all of your job classifications, said Reid, who regularly conducts audits and investigations into employers’ wage and hour practices.

There’s also a push to raise the federal minimum wage to $15 an hour by 2025, Reid said, noting that “many states have also created their own initiatives to do the same thing on an even faster track.”

“I’m already seeing a major struggle because when you raise the bottom of the totem pole, that $15 an hour creates a waterfall effect to the remaining employees, and you are going to lose workers if you don’t increase wages across the board, especially when there is a high demand,” Reid said.

There was a push for education, safe harbors, and chances to correct mistakes, under the Trump Administration, Reid said. With the end of the federal Labor Department’s PAID program, employers are now more likely to see efforts to narrow wage and hour exemptions and defenses, he said.

Misclassification is also receiving greater scrutiny now than under the Trump Administration, he said, noting that misclassification of workers is the number one reason for class action lawsuits in 2021.

Trends in Wage-Hour Claims

In the past year, several themes arose in wage-hour case law that are worth sharing, Reid said.

Misclassification: Someone misclassified certain assistant store managers as exempt in one case that resulted in a $13.5 million settlement, Reid said. The problem is that misclassifying an employee based on job titles has a class action effect, he said. If one employee has this scenario then that means every assistant store manager is likely in the same boat if they have similar job duties, he said.

So, it is a great time to look not only at the job title, such as assistant store manager, but also to look at the actual job duties, he said, noting that employment practices liability insurance won’t cover the actual overtime that may be owed or other possible violations, but it could cover such things as attorney fees.

Off-the-Clock Duties: Failure to pay for off-the-clock duties was the subject of another big case that resulted in a $9.5 million settlement, Reid said. “I think that is going to be a hotter issue in 2021 because so many employees have been working remotely over the past year,” he said.

Workers are checking in at all hours of the day or at off-hour times and, likewise, managers may be calling employees or emailing them during off-hours. If the employees are receiving those calls or emails, that may be additional time that must be clocked, he said.

Even if a policy exists of “no off-the-clock work and no overtime work,” employers still must pay for all hours worked, Reid said. So, employers could essentially write up the employee for not following company policy, but they would still have to pay them overtime, he said.

Preliminary, Postliminary Activities: Time spent waiting for managers to close their stores, open their stores, or provide breaks is another common theme and another hot issue that resulted in a class action lawsuit settlement of $8.5 million for a retail store, Reid said.

“What I recommend doing is maybe have a waiting room where employees are free to do whatever they want, get coffee, get fully set up, and just wait to start punching the clock,” Reid said. “I would not want them to do any work before they start being on the clock.” Likewise, failure to pay for time spent booting up and shutting down computers resulted in a $6.2 million settlement involving call-center nurses. Misclassification and failure to pay overtime to independent contractors in the manufacturing industry resulted in a $1.1. million settlement, he said.

Opportunities for Change

Classifying employees as exempt is going to be harder, so it is a good time for employers to revisit their job descriptions if they want to ensure that they are not paying employees for overtime, Reid said.

Look not only at salary levels, but also look to see if job duties involving management and significant decision-making are accurate in the descriptions, Reid said. Interview other workers with similar positions to ensure everything in the job description is accurate, he said. Update the job descriptions as needed “so that you have a better argument that you can rely on the job description as making the employee exempt,” he said.

The burden is on employers, not employees, to maintain records that verify compliance with minimum wage, overtime, equal pay, and child labor laws, Reid said. He sometimes looks to security logs of when employees swiped their key card or looks at keystrokes on their computer to verify time worked.

The most frequent issue that Reid sees involves employees who say that they lie on their time cards. They indicate that they work eight hours every single day to avoid trouble with the boss for working unauthorized overtime. “That is a problem,” Reid said. To circumvent or avoid such an issue, employers should make it clear to employees that all time worked must be reported and that employees who feel pressured or uncomfortable about reporting the time are allowed to contact the human resources department, he said.

Most Common Wage-Hour Violations

Misclassification: The most common wage-hour violation is misclassifying nonexempt employees as exempt by paying everyone a salary, Reid said. Beyond the job duties, employers should ensure that case-law research or an express regulation verifies a position as exempt.

Hazard Pay: Hot issues in 2021 include hazard pay, Covid-19 pay, and job-shortage pay, Reid said. Guaranteed extra pay or guaranteed bonuses or commissions for achieving certain results must be retroactively applied in the overtime calculation, he said.

Charging Employees: Particularly in the Covid-19 era, a common issue is charging employees for equipment or for uniforms in an amount that would reduce pay below minimum wage, Reid said. Rather than deduct those costs from a single paycheck, small amounts could be deducted over several paychecks so that employees are still receiving more than the minimum wage, he said.

Clock time: Requiring employees to clock in and out throughout the day, based on customer needs, is a common violation, Reid said. Realize that if an employee is punching out, it must be for at least 20 uninterrupted minutes or for 30 uninterrupted minutes if it’s a lunch break, he said. Otherwise, shorter breaks must be paid.

Training Time: Paying a salary instead of an hourly rate to an employee attending training for an exempt position is another common issue, Reid said. Even though the employee is about to get promoted to manager and is almost exempt, the training time likely is still hourly, he said.

Reimbursements: Failure to reimburse delivery drivers for gas and maintenance that would reduce pay below minimum wage is a common issue, Reid said.

As far as working remotely goes, Reid does not anticipate too many class actions for failure to reimburse. These are less concerning, Reid said, because he’s “seen so many articles where employees are saving an average of $5,000 a year by working at home” and are not having to dry clean or use their vehicles as much.

Addressing Violations

Civil actions by the U.S. Labor Department could result in $1,000 for each violation or $10,000 for each employee, Reid said, noting that this is what keeps him up at night.

Usually, if you have one violation, there are many others that are happening, so this is where payroll officers want to pay attention because there could be individual liability if employees are paid wrong.

Someone in the human resources or payroll department is included in employee lawsuits 18% of the time, Reid said, noting that it might be worth checking whether any insurance would at least cover any payroll officer’s legal bill. Having an indemnification agreement from the employer might help to avoid individual exposure to liability as a payroll officer working on the employer’s behalf.

The best way to learn is to ensure issues are being spotted, the right questions are being asked, and instructive stories are being shared, Reid said.

To contact the reporter on this story: Christine Pulfrey in Washington at

To contact the editor responsible for this story: William Dunn at