Law Office of Marc J. Smith, LLC
Employment Law and Litigation Counsel

Employment Law Blog

Obama-Era FLSA Amendment DOA

The continuing saga of the Obama-era overtime rule now appears to be officially over.  This rule, if implemented, would have required employers to pay employees more than $47,000 annually to qualify under one of the Fair Labor Standards Act’s white- collar exemptions.  As set forth in a previous post below, the rule was in serious limbo after a Texas federal district court judge temporarily prevented its enforcement just before Thanksgiving last year, and now that same judge has struck down the rule permanently.

In a nutshell, the court said the DOL exceeded the authority granted to it by congress by fashioning a rule that effectively doubled the salary employers had to pay employees to qualify under the white-collar exemptions. Although the court didn’t quite shut the door on whether the US Department of Labor (“DOL”) has any authority to alter the salary basis test, the decision substantially limits DOL’s authority to implement a new salary basis test and dramatically alter the landscape of workers eligible for overtime compensation.

Marc Smith
Anticipated FLSA Salary Requirements Blocked by Federal Judge

Late on November 22, a federal district court in Texas enjoined nationwide implementation of the Labor Department’s new overtime requirements that have been the subject of several articles posted below.  The new regulations were to go into effect on December 1.  Judge Amos Mazzant, ruling on a consolidated lawsuit brought by 21 states and a business coalition, concluded that the executive, administrative, or professional employee exemption contained in FLSA Sec. 13(a)(1) does not grant the Department of Labor the authority to utilize a salary-level test or an automatic salary updating mechanism under the rule. “With the Final Rule, the Department exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test. Consequently, the Final Rule does not meet [step one of the] Chevron [deference test] and is unlawful,” the court ruled (State of Nevada, et al v. Dept. of Labor, et al, Dkt. No. 4:16-CV-00731, Nov. 22, 2016.

Marc Smith
Side-Stepping the New FLSA Requirements

In the article below, we informed readers that effective December 1, 2016, sweeping changes will be implemented with regard to the Fair Labor Standards Act (“FLSA”) that will require employers to more than double the minimum weekly salaries of exempt employees in order to maintain the exemption and avoid paying overtime.  Under existing regulations, employers have to pay employees a weekly salary of at least $455 to maintain the exemption.  Under the new regulations, employers must pay a minimum weekly salary of $913 to maintain the exemption.

As a practical matter, most employers probably won’t face a doubling of salaries for their exempt staff as weekly salaries tend to be substantially higher than $455 for most exempt employees.  Yet, many employers will still face a substantial and sudden economic impact as of December 1st.

There are a few ways to avoid or minimize the financial impact of the new regulations.  First, consider the fact that many exempt employees actually don’t work overtime (more than 40 hours per week).  For these employees, there would be no need to increase their pay to maintain the exemption.  Exposure for occasional overtime work could be controlled by carefully managing overtime hours and requiring approval before overtime is worked.  Employers should therefore carefully analyze the hours actually worked by their exempt employees to determine if there is even a need to comply with the new regulations.

If your exempt employees actually do regularly work overtime, consider surrendering the exemption and paying hourly.  Consider this example.  An exempt employee making $455 per week is making $11.38 an hour based on a 40-hour work week.  After December 1st, this employee will be making $913 per week, or $22.83 per hour.  If this same employee is converted to hourly pay at $11.38 an hour and consistently works 10 hours of overtime each week, his weekly pay would be $625.70 — far less than the $913 per week required by the new regulations.

Marc Smith
Significant FLSA Changes Looming

Under the Fair Labor Standards Act (“FLSA”), employees are entitled to minimum wage and overtime (i.e. time and one-half of the employee’s regular rate of pay) for all hours worked over 40 in any given work week).  However, certain categories of employees are considered “exempt” from the FLSA’s minimum wage and overtime provisions.  In this regard, employees that meet the definition of executive, professional, administrative, outside sales and computer employees are exempted from the FLSA’s minimum wage and overtime requirement.

In order to qualify as exempt under any of these categories, employees must perform certain duties defined in Department of Labor regulations and must be compensated on a salary basis at a rate of not less than $455 per week ($23,660 per year).  Employees who are not paid on a salary basis at the required rate are not considered exempt and must be paid overtime (and minimum wage).

Effective December 1, 2016, the minimum weekly salary required to maintain the exemption under the FLSA increases from $455 per week to $913 per week (or $47,476 per year) — more than doubling the current minimum.  The Department of Labor will permit employers to satisfy up to 10 percent of the new standard salary requirement with nondiscretionary bonuses, incentive payments, and commissions, provided these forms of compensation are paid at least quarterly.  This regulation, 29 CFR Part 541, can be found here.

Undoubtedly, unless employers are willing to dramatically increase the pay of exempt workers in order to avoid losing the exemption, this change will dramatically increase the number of employees eligible for overtime compensation.

Marc Smith
Montgomery County To Require Paid Sick Leave

Effective October 1, 2016, Montgomery County will require employers to provide paid sick leave to their employees. “Sick and safe” leave under this amendment is earned for all work performed in the county. Employers with five or more employees must provide at least one hour of paid leave for every 30 hours worked, not to exceed 56 hours of earned paid leave in a calendar year. Employers with fewer than five employees must provide leave at the same rate – one hour for every 30 hours worked – and up to 56 hours of leave per year. However, for these small employers, only 32 hours must be paid and 24 hours can be provided on an unpaid basis. Employees exempt from overtime requirements earn leave pursuant to their normal workweek, up to 40 hours each week.

Employers may either award leave as it accrues throughout the calendar year or grant the full amount of leave to be earned over the course of the calendar year at the beginning of the year. Employers who utilize the accrual method must permit earned unused leave to carry over from year to year, although an annual carryover cap of 56 hours is permitted. Even with carryover, employers may limit the use of paid leave (or the combination of paid/unpaid leave for small employers) to 80 hours a year. Leave taken pursuant to this amendment is paid at the employee’s usual rate and with the same benefits. For tipped employees, earned leave must be paid at the county’s minimum wage rate, which is currently $9.55 on Oct. 1, 2015, but will rise to $10.75 on July 1, 2016. Leave accrues at the beginning of employment but employers may prohibit use during an initial 90-day probationary period.

Employees may elect to use leave in the smallest increment available under the employer’s payroll system and must not be required to take leave in increments of more than four hours. Earned leave does not have to be paid upon termination.

Marc Smith
Court Upholds DOL Requirement For Paid Breaks

The Fair Labor Standards Act requires employers to pay their non-exempt employees for hours worked. The Department of Labor has a implemented a regulation that states: “Rest periods of short duration, running from 5 minutes to about 20 minutes, are common in industry . . . . They must be counted as hours worked.” 29 C.F.R. § 785.18.

Courts are not bound to follow such agency regulations, but they do afford them some deference.

In Perez v. American Future Systems, Inc. the Eastern District of Pennsylvania adopted the DOL regulation, holding that employers in most circumstances must pay non-exempt employees for breaks not exceeding 20 minutes.

Marc Smith
A Common Misconception About Tipped Employees in Maryland

In my 25 years of practice, I have represented both restaurant owners and employees in a variety of wage and hour matters. One issue that I have seen on a recurring basis concerns the payment of minimum wage to tipped employees, such as wait staff and bartenders. Many restaurant employers appear to believe that receipt of tips by employees somehow relieves them of the responsibility to pay minimum wage. This is simply not true.

In Maryland, tipped employees are indeed entitled to receive some form of minimum wage in addition to their tips. However, Maryland employers take can advantage of what is known as a “tip credit” to in effect reduce the amount of minimum hourly wage due a tipped employee. This is how it works — minimum wage in Maryland currently stands at $8.25 per hour (as set forth in the article below, minimum wage for Montgomery County employees is $9.55 per hour). If a tipped employee works 20 hours in any given week, he/she is entitled to at least $165.00 in compensation (20 hours x $8.25 per hour). However, if during that same period the employee earned $200.00 in tips, the employer would be entitled to a “tip credit” up to the required minimum hourly wage, less $3.63 (this is known as a “sub minimum” wage). So, in this example, the employer would only be required to compensate the tipped employee at the rate of $3.63 per hour.

Employers should be aware that if they fail to pay at least the required sub-minimum wage to tipped employees, they will be obligated to pay the full applicable minimum wage of $8.25 per hour and the employee will be entitled to retain all tips. This common mistake can cost employers thousands of dollars.

Marc Smith
Montgomery County Passes “Ban the Box” Legislation Prohibiting Inquiries About Criminal Convictions Before Conclusion of First Interview

In a relatively below-the-radar manner, Montgomery County has enacted the “Fair Criminal Record Screening Standards Act” (the “Act”), prohibiting most private employers, as well as the County government itself, from inquiring about criminal arrests or convictions before the conclusion of a first interview. This prohibition applies to both applicants for initial hire and promotions of current active employees. The Act went into effect on January 1, 2015.

Often referred to as “ban the box” legislation (referring to the box appearing on many job applications inquiring about criminal arrests and convictions), this Montgomery County law prohibits employers from requiring an applicant or potential applicant to disclose on an employment application the existence or details of his or her arrest or conviction record. According the Act, an “applicant” is any person who is considered, or requests to be considered, for employment in the county, including a current employee who requests to be considered for a promotion. In a nutshell, prior to the conclusion of a first interview, Montgomery County employers are prohibited from requiring any criminal background disclosure, conducting a criminal record check, or inquiring of the applicant or others about whether the applicant has an arrest or conviction record or otherwise has been accused of a crime.

While an employer may not try to gather (directly or indirectly) criminal background information, the employer may ask questions about an applicant’s criminal or arrest record when the applicant voluntarily discloses its existence. After the conclusion of the first interview, the Act permits employers to inquire about an applicant’s criminal arrest or conviction records. However, if an employer makes a conditional offer, and then intends to rescind the offer based on the applicant’s arrest or conviction record, the employer will be subject to certain additional notice and other requirements, similar to those currently required under the federal Fair Credit Reporting Act. Specifically, prior to rescinding the offer, the employer must first:

  1. provide the applicant with a copy of any criminal record report that formed the basis of the decision to take the adverse action;

  2. notify the applicant of the employer’s intention to rescind the offer, and identify the items on the criminal record report that form the basis for its intention; and

  3. delay rescinding the offer for seven days to permit the applicant to give the employer notice of inaccuracy of the item(s) on which the intention to rescind is based.

If, at the end of the seven-day period, the employer still intends to take the adverse action, it must notify the applicant of the rescission in writing.

The Act in its present form is relatively toothless. An aggrieved individual Act may file an administrative complaint with the Executive Director of the County’s Office of Human Rights; however, the only remedy is a fine for each violation of up to $1,000, payable to the County as a civil penalty.   Nevertheless, covered employers (those employers who employ 15 or more full time employees) would be well advised to remove the “box” from all job applications and train employees with regard to the Acts requirements.

Marc Smith
Employers Beware — Maryland’s Confusing Minimum Wage Laws

Federal minimum wage now stands at $7.25 per hour — meaning that non-exempt employees (i.e. those entitled to overtime) must generally receive an hourly wage that is equivalent to or greater than $7.25.  Pretty simple — unless you happen to work or own a business in a jurisdiction with a minimum wage that is greater than the federal minimum wage.

Maryland happens to be one of these jurisdictions.  Effective January 1, 2015, the minimum wage in Maryland (Labor and Employment Article, Title 3, Subtitle 4, Annotated Code of Maryland) is $8.00 per hour.  This summer (on July 1, 2015), the minimum wage in Maryland will increase to $8.25 per hour — $1.00 greater than the federal minimum wage.

To make matters even more confusing for employers (and employees), Montgomery County has its own minimum wage law.  As of October 1, 2014, the minimum wage for employees who work in Montgomery County is $8.40 per hour, which will increase to $9.55 per hour on October 1, 2015.   By July 1, 2017, the minimum wage in Montgomery County will be $11.50 per hour.   A chart summarizing the law can be found here.    PG County has a similar law summarized here.

Employers in Maryland outside of Montgomery and PG County must pay employees the higher Maryland minimum wage.  Employers in Montgomery and Prince George’s counties must pay the even higher minimum hourly wage established by the county.

Marc Smith
Secret Service Fully Implements Relief Imposed by EEOC

Some months ago, I wrote an article concerning a case in which we successfully pursued a discrimination and retaliation case against the Secret Service on behalf of a former Special Officer.  Although it had a right to refuse to implement the EEOC Administrative Judge’s order and appeal the case, the Department of Homeland Security (of which Secret Service is a part) reviewed the hearing transcript and evidence admitted during the hearing, and elected to fully implement the Judge’s order granting relief to my client.

Marc Smith
Firm Prevails in Discrimination and Retaliation Case Against Secret Service

In February 2013, we began representing a former Secret Service Special Officer in a discrimination (age and race) and retaliation claim against the Secret Service from which he had recently retired after more than 20 years of service. Among other things, our client claimed that he was denied a promotion because of his race (white) and age (mid 60’s) and was retaliated against for prior EEO activity.

After engaging in months of discovery, including many depositions of Secret Service officials and employees, the Agency moved for summary judgment on all of our client’s claims.   The Motion was promptly denied by the EEOC Administrative Judge handling the case.

In July and August 2014, a three-day hearing was conducted before Administrative Judge Mary Ryerse during which 11 witnesses testified, including our client. The Agency was represented by two attorneys from its General Counsel’s office. During the hearing, a number of Secret Service employees testified that documents relating to the promotion sought by our client had been disposed of in a “burn bag.”   These witnesses were unable to clearly articulate why 2 substantially younger Special Officers (one of whom was African American) were promoted.   Further, testimony from several key Secret Service employees was inconsistent with other evidence introduced at the hearing, damaging the credibility of these witnesses.

Today, we received the Judge’s opinion, who found that the Secret Service had indeed discriminated against our client on the basis of his age and race. The Judge also found that the Secret Service had retaliated against our client for engaging in prior EEO activity. In her decision, the Judge awarded our client full back pay from the date he should have received the promotion, a corresponding increase in his monthly pension, compensatory damages in the amount of $25,000 and attorney’s fees.   A very gratifying win in a difficult case.

Marc Smith
EEOC — A Black Hole?

In most jurisdictions (DC excluded), the filing of what is known as an “administrative complaint” is a prerequisite to filing a discrimination lawsuit. The administrative complaint process, in theory, is supposed to result in an investigation of the claim and an opportunity to conciliate the complaint through alternate dispute resolution, such as mediation.

Unfortunately, the administrative complaint process is very often (but not always) flawed, at best. Many complaints filed at the Baltimore field office (where complainants of discrimination in Maryland are filed) are now frequently farmed out to other field offices across the country, which can cause delay and other procedural issues. Other complaints are not investigated and simply sit idle at the EEOC with no action at all. Fortunately, but only after waiting 6 months, the complaining party can request a “Right to Sue” notice from the EEOC and proceed with the filing of a lawsuit.

I have had some positive experiences with EEOC filings — but have had some bad ones as well. Most memorable involves a case I handled for a federal employee with the FDA. In this case, I was hired to represent the employee in a failure to promote case in a hearing before the Chief Administrative Judge of the EEOC. After a multi-day hearing at the Agency, the parties submitted written closing arguments to the judge and awaited the decision. That hearing took place during the summer of 2009. Now, more than 5 years later, the parties are STILL waiting for a decision.

Fortunately, there are some benefits that are provided during the EEO process. However, I tell this story to all of my federal sector clients who are considering filing an EEO claim so they know what to expect.

Marc Smith
The Surprising Costs of Mandatory Arbitration

Over the years, the benefits of arbitration versus litigation have been repeatedly touted by employers. With increasing frequency, provisions mandating arbitration of employment-related claims have appeared in employee handbooks or employment contracts. These provisions, which are generally enforced, preclude an aggrieved party from filing a lawsuit and instead require that party to have his or her claims resolved through arbitration.

There are certainly some benefits to arbitration. It is generally quicker and less formal than litigation. But the advantages are often offset by the limited discovery often afforded by arbitration, out of state forum requirements and arbitrators who lack the necessary expertise to determine the merits of the dispute.

While arbitration can be less expensive than litigation, the opposite is often true. In this regard, the filing fee at the American Arbitration Association (“AAA”) — the organization that is often appointed as the administrator of arbitral proceedings — can be prohibitive. These filing fees can exceed $10,000 (depending on the amount sought by the aggrieved party) and arbitrators frequently require advance payment of their estimated fee which can easily drive the initial cost of just starting the arbitration to $20,000 or more. In contrast, a case can be filed in the Circuit Court for Montgomery County for $135.

Who foots the bill for the potentially prohibitive cost of initiating arbitration? Unfortunately, in some cases, a substantial part of this cost is shifted to the employee. In this regard, the AAA will examine whether the dispute arises from an “employer promulgated plan” (i.e. a standardized, company-wide policy) or from a “negotiated agreement” (i.e. a contract that was or could have been negotiated by the parties).   For disputes arising out of employer promulgated plans, the current fee schedule would require the employee to absorb only $200 of the filing fee and the employer has to pay the remaining costs of arbitration, including the arbitrator’s fee. For disputes arising out of individually negotiated agreements, the employee is required to pay a much higher filing fee (depending on the amount claimed) and one-half of the arbitrator’s fee.

Thus, in the case of a $200,000 dispute arising out of a negotiated agreement, the employee would be required to pay a $2,800 initial filing fee, a subsequent filing fee of $1,250 and absorb one-half of the arbitrator’s fee (which can often exceed $20,000).   In other words, the employee in this example would be potentially required to pay over $14,000 just for the privilege of pursuing his claim in arbitration. Without a mandatory arbitration provision, this same employee could pursue his case in court by paying a filing fee of $135.

While there are some benefits to arbitration, the hidden costs often eclipse these benefits. Sadly, because of these costs, employees with legitimate claims often cannot afford to arbitrate their claims and are left without a remedy.

Marc Smith
Obama Seeks to Expand Overtime Coverage to Previously Exempt Employees

On Thursday March 13, 2014, President Obama ordered the U.S. Department of Labor to revise applicable regulations governing overtime pay to expand eligibility for potentially millions of employees to receive overtime pay when they work in excess of 40 hours in any given week.

According to the Obama White House, as many as 88 percent of salaried workers are not guaranteed overtime pay (i.e. time and one-half of a worker’s regular rate of pay) because they supervise (even if minimally) other employees and earn more than the current cap of $455 a week.   Under current regulations, these workers can be denied overtime pay — typically under the so-called “white-collar” exemption no matter how many hours they work each week. Thus, the “working supervisor” can be forced to work significant overtime (i.e. more than 40 hours per week) without receiving any additional compensation provided he or she makes a salary of at least $455 per week.

Although the winds of change are blowing, Obama’s order does not prescribe a new salary threshold, and it does not take effect immediately. Instead, he has instructed Labor Secretary Thomas E. Perez to come up with a plan that would expand the number of workers eligible for overtime pay. During a period of public comment, business groups will almost surely seek to dramatically scale back this initiative by limiting the number of employees who might benefit from the change.

Marc Smith
Common Missteps To Avoid When Making Federal Sector EEO Complaints

Over the course of my career, I have litigated hundreds of employment cases.  Most of these cases have involved private sector employers, but I have handled a number of federal sector EEO claims over the years as well.  There are significant differences in the manner in which private vs. public sector EEO claims are handled.  In my opinion, there are many more “opportunities” for federal employees to damage their case or lose their rights altogether.  Here are some of the more common missteps to avoid:

  1. Failure to seek EEO counseling. If you feel you have been discriminated or retaliated against for engaging in protected activity, you must seek EEO counseling within 45 days of the discriminatory event.  Failure to seek EEO counseling in a timely manner usually means you lose your right to pursue that particular claim.

  2. Failure to Timely file your EEO Complaint.If EEO counseling is not successful (and it is usually not — “counseling” is a bit of a misnomer as my experience has been that little effort is made to “counsel” or resolve the EEO complaint at this stage) and you intend to continue to pursue your claim, you must file a formal complaint of discrimination within 15 days of receiving notice of your right to do so.  Again, failure to timely file your complaint results in a loss of your rights.

  3. Sloppy and Incomplete Complaints.  Only the issues identified in your EEO complaint will be investigated.  Be sure to include all issues underlying your complaint and identify the type of discrimination you are complaining about.  If you are asserting a retaliation complaint, be sure to identify the protected activity you claim spurred the retaliation.

  4. Failure to Remain Engaged During the Investigation.After the timely filing of a formal EEO complaint, the Agency will use an investigator (an Agency employee or contractor) to conduct an investigation of your complaint.  Unfortunately, there are times when the investigator assigned to your case is lazy, not thorough or perhaps even biased.  It is therefore critical that you remain engaged during the investigation and identify all witnesses for the investigator, carefully review the affidavit the investigator prepares for you for inclusion in the “Report of Investigation,” and prepare rebuttals to all affidavits that contain allegations that you take issue with.

  5. Failure to Request a Hearing in a Timely Manner.Upon completion of the investigation, federal employees have a period of 30 days in which to request a hearing before an EEOC administrative judge. Failure to request a hearing in a timely manner will result in the loss of the right to a hearing and will allow the agency to issue a “final agency decision” on the merits of the employee’s complaint — in other words, the agency will decide the merits of your claim and determine whether it is guilty of discrimination or retaliation.

Marc Smith
Marc J. Smith Selected by XpertHR as Contributing Author

Recently, Marc was selected by XpertHR, a comprehensive on-line resource for human resource and other employment specialists, to be a contributing author on various issues relating to employment law in the Commonwealth of Virginia.

The articles are focused on Virginia law and include the following topics:

  • Terms of Employment

  • Involuntary and Voluntary Pay Deductions

  • Payment of Wages

  • Minimum Wage

  • Health Care Continuation

  • Employee Classification

  • Hours Worked

Marc Smith
Maryland Legislature Prohibits Employers from Demanding Facebook Access

Maryland became the first state to enact legislation prohibiting employers from requesting or requiring an employee or applicant to disclose any user name, password, or other means for accessing Facebook or any other similar service. The legislation was prompted by a state agency’s policy of demanding prospective employees disclose their user names and passwords to social media websites as part of its background investigation process. The agency had discontinued the practice after an employee claimed that the practice was a violation of his personal privacy.

Employers are prohibited from requesting or requiring an employee or applicant to disclose a user name, password, or any other means of accessing Facebook or similar on-line accounts or other service through an “electronic communications device” (defined as “computers, telephones, personal digital assistants, and other similar devices”). Employers cannot refuse to hire an applicant or discharge, discipline or otherwise penalize an employee who refuses to disclose any user names and passwords relating to a personal account or service.

Under this law, employers may require an employee to disclose any user names, passwords or other means for accessing an employee’s “non-personal” accounts related to the employer’s computer or information systems. Further, employers are not prohibited from acting upon and investigating information it may receive regarding an employee’s unauthorized downloading of proprietary or financial data or conducting an investigation for the purposes of ensuring compliance with applicable securities or financial law or regulatory requirements.

All private and public employers are covered.   The law becomes effective October 1, 2012.

Marc Smith
Marc J. Smith Has Second Appearance on “Law School For the Public” To Discuss Worker Misclassification

Recently, I was invited for my second appearance on “Law School for the Public” — a television series produced by Montgomery Community Television/Montgomery Community Media that runs on cable channel 19/21 on Comcast, Verizon and RCN in Montgomery County. We filmed on May 8, 2012. A recording of the program can be found here.

We had a great time filming the show, which was hosted by Lauri Cleary, a partner with Lerch, Early & Brewer in Bethesda. Rick Vernon, Lauri’s partner, was also a guest. The topic of discussion concerned the widespread problem of misclassifying workers as independent contractors and the impact of such misclassification on both the workforce and employers. During the show we also discussed the factors used by various agencies and courts to identify whether a worker is an employee, independent contractor or intern, why correctly classifying workers is so important and the penalties associated with misclassification.

Marc Smith
IRS Creates Incentive to Fix Worker Classification Errors

As we have written elsewhere in this blog, when an employer misclassifies a worker as an independent contractor, the employer exposes itself to a host of potential claims and liabilities, including but not limited to  payroll taxes, income tax withholding, workers compensation, unemployment insurance, overtime pay, and benefits.

To encourage employers to voluntarily fix worker classification errors, the IRS has created a new program known as the Voluntary Classification Settlement Program (“VCSP”) pursuant to which eligible employers can significantly decrease their exposure as a result of misclassifying employees as independent contractors.

With the creation of the VCSP, employers that use independent contractors should re-evaluate their independent contractor relationships and confirm whether the facts support the independent contractor label.  If an eligible employer determines that one or more independent contractors should have been classified as employees, it may apply for relief under the VCSP.

An employer participating under the VCSP: (i) agrees to prospectively treat a class of workers as employees; and (ii) pays to the IRS an amount equal to 10% of the employment tax liability that would have been due on compensation paid to the misclassified workers for the most recent tax year and will not be liable for any interest or penalties.  In exchange, the employer becomes exempt from an employment tax audit with respect to the worker classification for the group of workers reclassified under the VCSP.

While the relief offered under the VCSP is potentially significant, employers must keep in mind that the VCSP provides relief only from federal payroll tax liabilities. The program does not reduce the exposure relating to other potential claims and liabilities, such as state taxes, workers compensation, overtime pay, and benefits.  Accordingly, employers should ensure that they understand and weigh both the benefits and the potential risks of participating in the program.  For more about the program, the IRS website contains useful information.

Marc Smith
Department of Labor Creates App That Allows Employees to Track Work Hours

This past spring, the U.S. Department of Labor announced the launch of its first application for smartphones, a time sheet to help employees independently track the hours they work and determine the wages they are owed. Available in English and Spanish, users conveniently can track regular work hours, break time and any overtime hours for one or more employers. Glossary, contact information and materials about wage laws are easily accessible through links to the Web pages of the department’s Wage and Hour Division.

Additionally, through the app, users will be able to add comments on any information related to their work hours; view a summary of work hours in a daily, weekly and monthly format; and email the summary of work hours and gross pay as an attachment.

This new technology highlights the importance of accurate time keeping for employers who typically bear the burden of proof in wage and hour cases.  Without accurate time records, employers may be very vulnerable in wage and hour litigation and during DOL investigations.

Marc Smith