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DOL Targets Warehouse Wages

If you are an employer in the private and third-party logistics warehouse industry, you now have a target on your back that was pinned there by a new Department of Labor wage enforcement initiative.

What you also need to know is this initiative conveniently coincides with a renewed union organizing campaign directly aimed at unionizing distribution facilities and which has chalked up at least one victory in New York so far.

The DOL Wage and Hour Division (WHD) recently announced the hiring of 100 additional investigators it intends to deploy for the purpose of mounting a “vigorous” enforcement campaign regarding adherence to federal wage and hour laws in the warehouse and logistics industries.

Companies employing warehouse workers, delivery drivers or truck drivers should prepare for more WHD investigations, says Mitchell J. Rhein, an attorney with the law firm of Spilman Thomas & Battle, “The resulting equation is simple: More WHD investigators + “Vigorous” enforcement = More WHD investigations.”.

DOL is leading the administration’s government-wide campaign to use federal agencies both separately and working together to promote the interests of the nation’s unions as well as their continuing organizing efforts.

This has resulted in formal working agreements signed by DOL, the National Labor Relations Board, the Occupational Safety and Health Administration and even the Department of Homeland Security when dealing with employers of illegal immigrant workers (but not enforcing laws against the workers for illegally entering the country).

However, the U.S. Senate made it clear recently that the DOL division responsible for mounting the warehouse industry wage and hour inspection campaign will have to proceed without a leader for the foreseeable future.

The nomination of David Weil, a dean and economics professor at Brandeis University, who previously served as head of WHD in the Obama administration and was re-nominated to that post by President Biden, saw his prospects wither after Senators Joe Manchin (D-W.Va.), Mark Kelly and Kyrsten Sinema (both D-Ariz.) joined their Republican colleagues in voting against advancing his nomination for a final vote.

Weil had become notorious during his earlier reign as head of the WHD for declaring that there are no real independent contractors, only misclassified employees (a position that was later repeated publicly by Hillary Clinton during her 2016 presidential campaign.)

Chris Meagher, President Biden’s deputy press secretary reportedly declared, “We’ll continue to evaluate this nomination and how we move forward, but remain proud of the administration’s pro-worker policies and work being done.”

Under the Biden administration, all employers should expect more WHD enforcement of the Fair Labor Standards Act (FLSA), especially when it comes to possible minimum wage violations, Rhein warns, noting that these investigations are often costly, even when no violations are found.

In 2021, the vast majority of these investigations – about 80% — resulted in the WHD finding the employer violated the FLSA, and employees who were involved received back wages that amounted to, on average, nearly $1,000.

“You cannot avoid a WHD investigation, but you can mitigate the chances and burden of an investigation,” Rhem says.

Keep in mind that the WHD also has pointed out that all of the employees of wholesale or warehouse employers with gross annual dollar volume of sales made or business done is not less than $500,000 are covered by the FLSA as well and they also could turn out to be the subjects of the new national inspection campaign..

However, the division also notes that even if a wholesale or warehouse business is not a covered enterprise, most of its employees will be covered by the FLSA on an individual basis

“It has been the experience of the Wage and Hour Division that virtually all employees of wholesale and warehouse businesses are covered by the [FLSA’s] provisions,” the WHD stated. The federal pay requirements it refers to include both minimum wage and overtime standards.

How to Protect Yourself

Rhein describes several ways that a warehouse employer can help mitigate the risk and burden of a WHD investigation.

Keep required payroll records. He is unequivocal on this point: “You will not fare well if you tell a WHD investigator that you do not have records that employers are required by law to maintain.”

The most frequent – and problematic – kinds of records that are discovered to be missing involve accurate records that account for the hours worked by employees.

“While the WHD will not impose civil money penalties for this violation, it will presume that the records would support violations of the minimum wage and overtime pay requirements of the FLSA, and the cost of the investigation will increase as will the likely amount of back pay owed to employees,” he stresses.

Create or save electronic versions of your payroll records. Even if you keep all the required payroll records, they are not useful if the records exist only in unorganized boxes in a remote storage unit.

Employers must be able to produce the records required by the FLSA within 72 hours. Because of the pandemic fallout, WHD investigators are not allowed to review records in person. As a result, employers must send records electronically to the investigator to review and transcribe.

Many employers may find it difficult to organize and scan two years of paper records within 72 hours, which is the standard request from the WHD at the beginning of every investigation.

“Employers also incorrectly assume these records will be easy to obtain from a third-party payroll company,” Rhem observes. “If you do not maintain the required records in an electronic format, then you should start doing so now.”

Know what you don’t know. Many of the WHD investigations begin with seemingly small issues.

“These issues are usually easy to identify in payroll records and can be corrected in a couple days. But when an investigation begins, the same small issues and the investigation’s geographic reach can grow into larger, expensive issues,” Rhem explains.

Once a violation is found, he says “the investigator will exhaustively scrutinize the employer’s compliance with the FLSA and may expand the investigation to other locations based on the assumption that the violation exists at all locations.”

Rhem points out that another good reason to prepare ahead of time is that the average WHD investigation lasts more than two months.

“Employers can avoid or mitigate the burden of an investigation by regularly auditing their compliance with the FLSA to identify problems and, if necessary, resolve them before the WHD begins an investigation.”

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