Preparing for WHD’s Less-Carrot-More-Stick Enforcement Approach

Gone are the days when the U.S. DOL’s Wage & Hour Division (“WHD”) invited employers to proactively identify and collaborate with the Division to fix their wage and hour missteps. 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 the DOL, and its approach thus far might be described as less carrot and more stick.

We have observed the shift at WHD both through formal announcements and anecdotal experience. Mere weeks after the new administration’s arrival, the DOL confirmed its termination of the PAID program, which invited employers to conduct self-audits and work with WHD to remediate identified issues and provide back wage payments to employees. And just last month, the Division issued new guidance to its field staff confirming a reversal of prior policy that reserved the imposition of liquidated damages for rare and egregious cases.

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. We’ve 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 have rapidly issued investigatory conclusions to employers, sometimes with document requests still pending, both in FLSA cases and in the prevailing wage law context. Demands that employers enter into compliance agreements drafted by WHD also seem to be increasing in popularity.

Employers we work with are linked by their desire to do right by their employees and comply with the FLSA. 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.

So what can employers do when facing increased pressure from WHD? Here are a few tips:

• Ensure that records are in order. WHD has broad authority to request FLSA-related records required to be maintained under 29 C.F.R. Part 516. 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.
• 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. 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, recordation of all hours worked, and proper calculation of overtime pay. As noted in our update last month, Seyfarth’s FLSA Handbook offers useful material on these topics, including:

1. Chapter 14, “Compliance and Prevention Matters,” which provides an overview of steps employers can take to comply with wage and hour laws, and an outline to assist employers in structuring their own self-assessment process and to address any issues identified through that process.
2. Chapter 7, “Exempt Employees,” which explains the most common, “white collar” minimum wage and overtime pay exemptions.
3. Appendix 8, “Sample Job Assessment Questionnaire Form” which contains a practice and user-friendly set of recommendations to assist employers in reviewing exempt classifications.

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 in the Division’s wheelhouse. Prevailing wage laws may represent a particular area of emphasis, given the Biden Administration’s focus on infrastructure projects.

In short, employers must be prepared for a shift in approach at the Division and be ready to demonstrate and defend their compliance. Please feel free to reach out to the authors or your friendly, neighborhood Seyfarth attorney with any questions.