Under the administration of President Biden, the U.S. Department of Labor (DOL) Wage & Hour Division (WHD) has made it clear that its approach to enforcing federal wage laws is going to involve a whole lot less carrot and a whole lot more stick.
“Closed is the chapter in which employers could expect WHD to stand down on the threat of double damages outside of egregious cases. After years of a prior administration focused on compliance assistance, there’s a new guard at DOL,” declare attorneys A. Scott Hecker and Kevin M. Young of the Seyfarth Shaw law firm.
“We have observed the shift at WHD both through formal announcements and anecdotal experience,” the attorneys note. “Unsurprisingly, these shifts in policy have been coupled, in our experience, with a change in the temperament and approach of many WHD investigators who knock on employers’ doors and pursue investigations.”
Citing examples from their own experience, the attorneys say they have seen more investigators push for near-instantaneous document production, threatening use of subpoena power or imposition of civil money penalties and citing a regulation requiring employers to make documents available for inspection within 72 hours of WHD’s demand.
Some DOL staff have rapidly issued investigatory conclusions to employers, sometimes with document requests still pending, both in The Fair Labor Standards Act (FLSA) cases and in the prevailing wage law context. Demands that employers enter into compliance agreements drafted by WHD staff also seem to be increasing in popularity, Hecker and Young report.
Employers they work with are linked by their desire to do right by their employees and comply with the FLSA, Hecker and Young admit. Certainly, WHD and its investigators want the same. “But for many businesses, the change in approach at the division, from policymakers at the top to enforcement agents in the field, presents a new type of pressure that demands a different level of preparedness.”
Termination of the Payroll Audit Independent Determination (PAID) program was one of the first indications of the new approach. Adopted during the Trump Administration, it was a pilot program designed to allow employers to report what they believed to be potential wage and hour law violations and negotiate a possible lower penalty.
The Biden Labor Department has no such interest in collaborating with employers on obtaining adherence to the rules, and its language was dismissive when it ended PAID. In short, employers must be prepared for a shift in approach at the division and be ready to demonstrate and defend their compliance.
How to Protect Yourself
Hecker and Young laid out a number of steps employers can take to make it less likely that they will end being poster children for WHD’s new, tougher approach.
Ensure that records are in order. WHD has broad authority to request FLSA-related records required to be maintained under the 29 C.F.R. Part 516 regulations. All employers should take proactive steps to ensure that their records required under these regulations, as well as other documents pertinent to wage-hour compliance, are in good order so that they can be efficiently accessed and reviewed if the WHD comes knocking.
Be prepared for the knock. Employers operating across multiple physical locations should ensure that front-line managers know what to do when an investigator from any government agency, including WHD, shows up in person, sends them a letter, or contacts them by phone. While investigators should be treated with the utmost respect, their inquiries should be promptly deferred to a pre-designated point of contact who can help coordinate a response. “We encourage employers to carefully consider what their response team and protocols should look like,” the attorneys suggest.
Be respectful and reasonable. Responding promptly and respectfully to an investigator’s inquiries should help limit fireworks in a potentially combustible situation. While WHD has fairly broad subpoena authority, it’s fair to question whether the division would get much traction in court in the event that an employer isn’t objecting to or stonewalling an investigator’s requests, but is simply asking for a more reasonable approach, whether in terms of time to respond or the types of documents to produce.
Seek counsel. With WHD becoming increasingly zealous with its demands—both in terms of what must be produced and when—the potential for business disruption and missteps is greater than ever.
“We strongly encourage employers to retain counsel familiar with these investigations to assist. Experienced and capable counsel can help to manage the flow of information and work with the investigator to identify efficiencies to avoid overburdening an employer’s personnel,” Hecker and Young stress. “When necessary, counsel can support employers who choose to contest WHD’s conclusions.”
Self-audit. The FLSA’s statute of limitations forces employers to live with missteps for two (and sometimes three) years, and the termination of programs like PAID makes it more difficult to resolve those missteps in a decisive way when they are identified. As a result, there’s no time like the present for employers to take reasonable steps to ensure compliance.
The need is even greater in businesses where employees are performing different duties, or working in different settings or circumstances, as a result of the pandemic. Areas of focus will vary by business, but at a minimum they should include exempt classification, recording of all hours worked, and proper calculation of overtime pay
As President Biden’s appointees settle in at WHD, we expect to see ramped up enforcement not only under the FLSA, but also under the Davis Bacon Act, Service Contract Act, and other statutes that fall within the division’s wheelhouse. However, Hecker and Young warn that prevailing wage laws may represent a particular area of emphasis, given the Biden Administration’s focus on infrastructure projects.