Originally published in CCJ on March 3, 2020. Republished with permission. All rights reserved.
This is the second piece in a three-part series on how fleets can protect themselves against wage and hour law claims brought by private or government-backed litigation. See Part 1 here: Walmart’s court-ordered payout to drivers a sobering reminder for fleets: Check your employee manuals.
Claims of violations of the wage and hour provisions of the Fair Labor Standards Act (FLSA) are on the rise in both private and federal enforcement contexts. The Wage and Hour Division of the Department of Labor reports that in 2019 alone, it recovered $322 million in back wages across the country—amounting to $883,000 in back wages per day.
This massive number does not even account for all settlements and judgments in the private actions brought by employees against their employers, or for wage violations based in state law.
The transportation industry is not immune to this type of litigation. With the FLSA allowing for statutory recovery of back wages, liquidated damages, and even attorneys’ fees, plaintiffs’ lawyers are discovering the industry’s perceived weak points and certifying class-actions to turn big profits.
In transportation, frequently litigated issues include: minimum wage claims by drivers (including claims they’re misclassified as independent contractors); overtime violations for non-driver employees such as dispatchers; and overtime violations for pay-by-load intrastate drivers.
When it comes to wage and hour claims, a good offense is the best defense. Ensuring your business has proper corporate policies and documentation of hours worked and wages earned is the only way to limit and avoid liability.
Last week, we wrote about the importance of examining – and updating – your employee handbook, if necessary. Walmart’s private fleet recently was ordered to pay nearly $55 million in back pay to drivers, as that column noted, due almost entirely to the language within its driver manuals.
Next, the best thing an employer can do to protect itself when litigation arises is to keep accurate and organized records. These records form the bedrock for proving to a court or federal agency that an employer’s pay practices are correct and that they do not owe additional pay (and the associated costs and penalties when found to have not paid correctly).
Disorganization can have devastating and costly consequences. Prepare now to defend your practices and have peace of mind that, when questions arise, you have the answers ready to go.
FSLA requires certain records to be kept by employers. According to the DOL, payroll records, collective bargaining agreements and sales and purchase records must be kept for three years, while the records on which wage computations are based should be retained for two years (i.e. time cards and piece work tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages).
Electronic logging device records only need to be kept six months, according to the DOT. This means if you are relying solely on your ELD records for timekeeping of employee drivers and your ELD vendor is automatically removing records after six months, you may not be satisfying your DOL recordkeeping requirements.
Do you pay your interstate drivers by the mile? Their on-duty hours and per-mile calculations must be retained for two years to ensure compliance with minimum wage laws.
Do you have intrastate drivers you pay by the load? While interstate drivers typically fall under an overtime exemption, intrastate drivers are entitled to overtime compensation—even those not paid hourly. According to the DOL, the regular rate of pay for an employee paid on a piecework basis, such as a pay-by-load model, “is obtained by dividing the total weekly earnings by the total number hours of worked in that week. The employee is entitled to an additional one-half times this regular rate for each hour over 40, plus the full piecework earnings.”
Take this example:
Dana Driver is an intrastate dump truck driver paid on a piecework basis based on distance, commodity price and tonnage of the product. Dana works 50 hours per week and earns $500. $500 divided by 50 hours results in a $10.00 hourly rate. In addition to the straight-time pay, Dana is also entitled to $5.00 (half the regular rate) for each hour over 40, resulting in an additional $50.00 for the 10 overtime hours, and a total of $550.00.
As you can see from the example, to do this properly, the employer must be keeping proper track of covered drivers’ hours and compensation. Let’s say you pay Dana Driver $500 based on the piecework factors, but you did not look at how many hours it took Dana to run those loads (outside of ensuring conformance with hours of service regulations). Without that information, you could not accurately determine (or later prove) that Dana’s pay did not dip below minimum wage or that any overtime compensation was properly paid. These hours must be tracked on a weekly basis, even if payment is per load or per mile.
Not only is failure to keep these records a violation of federal law, but it also leaves employers vulnerable to additional damages for wage and hours claims. While the burden is on the employee to prove she or he performed work for which they were improperly compensated, the burden is on the employer, not the employee, to keep the time records.
Many courts allow estimates of overtime hours by employees where employer’s records do not exist. Without proper records, employers risk damages of triple the amount of back wages owed where a judge or jury determines the employer’s violations were willful.
Developing a method to match pay with hours can help to easily deflect any accusations of underpayment. There are many forms of timekeeping — a time clock, a designated time-keeper or even self-reporting by employees. The FLSA deems any of these acceptable, as long as the records are complete, consistent and accurate. You must evaluate what form of recordkeeping will be reliable and enforceable, but also least burdensome for you.
While wage and hour laws are complex, proactively implementing policies and procedures before claims arise can save you and your business significant funds and headaches later on. Legal counsel can help navigate state-based nuances and complex situations. Take the time to review your employee handbook, employee classifications, and records retention policies to ensure your company is adequately protected from the claims most never see coming.
Taylor and Associates is a full-service transportation law firm assisting clients to meet their federal and state compliance requirements. If you have questions about this or other issues, contact us.
Co-authors: Elena Adang & Lesley Sachs