Positioning Your Company As FLSA Compliance Experts to Clients

By Colin MenchinFLSA Compliance Alert

As a service provider, you’re a trusted resource for the businesses you work with when it comes to key functions like processing payroll, managing human resources, and/or collecting time and attendance data. To ensure you’re keeping customers happy with your business and services, your responsibilities to clients extend beyond that.

In a previous post, we wrote about how the impending Affordable Care Act (ACA) employer mandates mean that your clients need to have their ACA solutions in place to avoid compliance failure and the ensuing penalties that go with it. The ACA aside, compliance issues are something that companies are faced with every single day, and you need to work towards positioning your organization as a compliance partner to your constituents.

One way you can do this is by helping companies maintain compliance with the Fair Labor Standards Act (FLSA)

In 2013, employers paid $4.5 million on average to settle a wage and hour case1.

The FLSA is a law dating back to 1938, and was enacted by Congress as a means of eliminating the poor labor conditions that had led to a lower standard of living in the U.S. The FLSA sets minimum wage, overtime pay, recordkeeping, and youth employment standards affecting full-time and part-time workers. Administered and enforced by the Wage and Hour Division of the Department of Laborthe legislation typically applies to all public sector employers and private sector businesses grossing over $500,000 in annual sales.

The Department of Labor has been cracking down on violations more and more each year. In the last decade, FLSA cases have more than doubled from 3,426 in 2004 to 7,764 cases in 20132. An FLSA lawsuit can be a serious blow to an organization, especially for many of the small and mid-sized businesses that service providers like you typically work with. Financially speaking, these lawsuits can be quite crippling. Monetary penalties may include compensatory damages of two to three years’ back pay. In addition, the awarding of liquidated damages can sometimes be double this amount. And of course, there are the associated defense costs and legal fees, which can be in the hundreds of thousands of dollars when all is said and done. Then you factor in nonmonetary damages, such as severed relationships between managers and employees, and a damaged company image that could hurt customer relationships. Plus, higher level management will undoubtedly be tied up in court depositions, causing a large distraction and lost productivity. The rise in lawsuits recently has also been blood-in-the-water for lawyers who specialize in these cases. We’re now starting to see them contacting employees of at-risk companies directly in order to try and sniff out a case. Simply put, the threat of FLSA compliance failure has never been higher, and only continues to grow…

The President’s FY14 budget includes $3.4 million for increased enforcement of the Fair Labor Standards Act and the Family and Medical Leave Act3.

With this challenge to businesses comes a great opportunity for service providers to offer an automated workforce management solution. Manual processes or outdated systems can easily lead to errors, which leave an organization open to wage and hour claims. The laws governing wage and hour issues are complex, vary from one jurisdiction to the next, and change over time. Ignorance of the law is no excuse; your clients must be compliant with all applicable federal, state, and local wage and hour regulations. Because there are so many rules and regulations, automation plays a key role in helping businesses ensure full compliance.

Service providers seeking to minimize their clients’ compliance risk should look to provide a workforce management solution that centralizes wage and hour policy administration, establishes local policy enforcement, and creates detailed audit records. A tremendous advantage of an automated, single-platform system is also that it enables employees to see, in real time, that their punches are being accurately recorded. Reporting capabilities should complete the solution by enabling management to access detailed timesheet data for any point in time and go as far back as needed. This feature can be a real lifesaver in the event of a discrepancy or lawsuit, when this data will be requested and needs to be readily available.

How are you raising awareness with clients and prospects about FLSA compliance? During your sales process, do you place an emphasis on communicating the value proposition of your workforce management system as an FLSA compliance solution? Please share your thoughts and comments below.

1 http://www.wagehourlitigation.com/files/2013/11/16470719_1_NERA-2013-Trends-in-WH-Settlements-report1.pdf

2Seyfarth Shaw LLP, FLSA Cases in Federal Court (Seyfarth Shaw LLP: 2013), http://www.wagehourlitigation.com/files/2013/07/FLSA-Cases-Filed-2013.pdf.

3U.S. Department of Labor, FY 2014 Department of Labor Budget in Brief (Department of Labor, 2013), 3.

About Colin Menchin:
Colin is a Marketing Specialist at SaaShr responsible for the marketing strategy and programs of the company along with other responsibilities within the department.

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