Allowing wage-and-hour problems to fester can land you in hot water, which puts a premium on being proactive and performing a self-audit of your company’s pay policies.
But if you do, be aware that you may have to provide this so-called self-critical analysis to employees’ attorneys, should they sue the company. However, there are steps you can take to minimize this possibility.
Find the right privilege
To minimize the likelihood of having to disclose the findings of an audit, retain outside legal counsel to conduct it. That way, the company can claim the attorney-client privilege or the work-product privilege. You probably won’t be able to work with the attorneys as they conduct their audit, so steer them in the right direction beforehand.
• Analyze job descriptions. The duties outlined in job descriptions should be the same duties performed by employees. Too often, duties change in reality, but not on paper. Suggestion: Develop a job description survey for employees to complete. You can truthfully tell employees that the company is interested in their input in updating job descriptions.
• Test employees’ status. Employees who are classified as exempt must meet the criteria for their exemption—administrative, executive, professional, computer or outside sales.
• Review overtime calculations. Certain items must be included in employees’ regular rates (e.g., incentive bonuses); other items may be excluded from employees’ regular rates (e.g., vacation pay).
Remedy Fair Labor Standards Act () errors in a nonconfrontational and timely manner. For that, you’ll need buy-in from the executive suite. Courts will look favorably on your efforts to identify FLSA errors. On the other hand, identifying problems, and not fixing them, will not sit well in court. If a court interprets your inaction as willful, you’ll be on the hook for three years’ worth of back overtime, instead of two years, and liquidated, or double, damages.