You Better Watch Out, You Better Not Cry... Wage and Hour Investigations on the Rise

Santa Claus isn’t the only one coming to town.A representative from the U.S. Department of Labor (DOL)’s Wage and Hour Division recently warned that the payroll practices of some of this state’s most active industries (including the oil and gas services industry) may be under increased scrutiny in 2015. Also, on October 1, the DOL published regulations implementing Executive Order 13658, raising the hourly minimum wage paid by government contractors (and subcontractors) to workers performing work on covered federal contracts to $10.10 per hour, beginning on January 1, 2015.  Similar to most existing wage and hour laws, the Final Rule contains detailed procedures for Wage and Hour Division investigations and informal complaint resolution. Finally, the DOL previously issued a press release in March revealing its plan to crack down on FLSA-related worker retaliation in the Southwest region (which includes Texas), after the Wage and Hour Division witnessed a significant increase in the number of such retaliation investigations concluded — up from seven in 2013 to 40 in 2014.To ensure the DOL’s new initiatives are fully carried out, the DOL requested a considerable budget increase for 2015 as well as additional staff, which will be “dedicated to greater directed investigations” focused on “industries that employ business models that are at high risk of wage and hour violations where those who profit most from the labor provided are distanced from the workers who provide that labor.”  These investigations don’t necessarily have to start with an employee complaint. The DOL has the authority to investigate employers it believes may be violating applicable wage laws.  Some employers are chosen at random, and the DOL selects other employers based on working conditions and the types of workers they hire.For these reasons, Texas employers, especially those in the oil and gas, construction, and hospitality industries, should expect increased scrutiny from the DOL in 2015. Indeed, several large Texas-based employers have already been subjected to heavy penalties resulting from DOL investigations in 2014. For example, Shell Oil Co. and Motiva Enterprises, LLC (which markets Shell gasoline and other products) agreed this past September to pay nearly $4.5M in overtime back wages following a DOL investigation. Also, the (in)famous Big Texan Steak Ranch in Amarillo was assessed $800K in minimum wage back wages and liquidated damages in June following another DOL investigation. Even if your company has not been targeted for an investigation, there are several measures employers should take before the Wage and Hour folks come knocking. For example, employers should ensure all employee time and payroll records and I-9 forms are organized, intact, and up-to-date. In addition, employers should confirm that all nonexempt employees are accurately recording all hours worked, and that employees classified as exempt actually meet the legal exemption criteria. It is also important to ensure that all legal posters and other required notifications are posted in appropriate, conspicuous locations.In the event your business is ultimately audited, it is important to only allow specific employees to communicate with DOL personnel, as well as to keep a record of all documents viewed and questions asked by the investigator. Of course, legal counsel can provide fact-specific information and guidance concerning your business’ rights during such investigations. In addition to disrupting the workplace, DOL investigations may result in substantial fines and even criminal sanctions. Thus, Texas employers should remain vigilant and begin preparation for such investigations, as the DOL could easily pay your company an uninvited call in 2015. -Micah Prude and Barbara-Ellen Gaffney