Keeping up with what can seem like endless government regulations is not easy, and some businesses have faced fines of hundreds of dollars a day for violating laws they did not know existed. A law that went into effect in August 2011 gives companies time to rectify some of those violations before a fine is levied.
State law requires employers to notify employees of their pay rate and every change to that rate, and have employees sign and date a written record. Violations of this law-and other related minor infractions-have left employers facing fines that could quickly add up. The new law requires the NH Department of Labor to give an employer 30 days' written notice to correct certain violations before
penalties ensue.
This new legislation may come as welcome relief to businesses facing ulcer-inducing hearings and potential fines exceeding some companies' net annual profits. But businesses beware, not all fines will be preceded by a warning. For more serious violations, such as not paying employees the full amount due them on payday, there will still be no warning.
There are millions of dollars at stake for businesses. In 2009, the state secured for employees: $3,479,973 in wage claims, $368,892 in wage complaints and $1,452,755 in wage adjustments.
The Process
The NH Department of Labor administers labor laws and levies civil penalties and fines for violations based mostly on audits of payroll records and personnel files. These audits can be triggered by either an employee complaint or random selection.
Even employers who treat employees fairly, pay them well and intend to follow all labor laws can find a wage and hour
audit vexing.
The process usually begins when a labor inspector with a badge shows up with a list of documents he or she intends to review. Those generally include personnel files, time and payroll records for a designated period of time (a year, perhaps two), evidence of worker's compensation insurance, and minutes of safety committee meetings. The employer then scrambles to pull the documents together and leaves the inspector in a room with a pile of documents, a calculator and a pen.
While these inspections are usually unscheduled, the inspector will often give the employer a week to pull the needed documents together.
The inspector spends a day or two combing over the records and returns a week or two later with a lengthy report enumerating each and every violation found. That is accompanied by a suggested civil penalty with an amount specified for each and every violation.
The total suggested fine can run anywhere from a few thousand dollars to several hundred thousand dollars.
For employers with hundreds of employees, even minor unintentional infractions add up quickly. The inspector will tell the business owner not to pay the civil penalty until they have attended an informal conference at the Labor Department to discuss the fine. The discussion usually leads to a reduction in the fine, and often a significant reduction.
The law states penalties cannot exceed $2,500 per violation. Most fines commonly fall between $100 and $1,000 per violation, but it depends on the size of the employer and whether that employer has a prior negative history with the department. The state has a great deal of discretion. All fines collected are deposited in the general fund.
The new law intends to minimize some of this trauma for employers who are trying to do the right thing by giving them the opportunity to correct minor infractions prior to the benignly named informal conference.
The Exceptions
While the new law formalizes a process of helping employers get into compliance by providing written warning and 30 days to correct minor infractions, there are some massive loopholes.
The new warning requirement does not apply to actions that, in the opinion of the commissioner of the Labor Department, are intended to cause harm or pose a threat to public safety. Those include:
Failure to pay an employee in full and on time;
Payment of wages by checks on a financial institution that is not convenient to the place of employment;
Failure to pay final wages in full;
Failure to pay amounts withheld for court-ordered child support to the custodial parent;
Continuation of wage withholding for insurance benefits that were cancelled;
Illegal withholding of wages to compensate the employer for employee actions resulting in loss or damage;
Failure to comply with laws regarding illegal aliens;
Requiring that employees perform any illegal activity under threat of job loss.
Being Proactive
The myriad of state and federal laws with which employers must comply present a challenging legal and regulatory minefield to maneuver. Clearly the statute was designed to provide some peace of mind to employers who get caught making honest mistakes and are willing to work diligently to correct them. What has not changed are the proactive measures employers should take to remain in compliance and avoid
any problems.
Those include signing up for email alerts from the NH Department of Labor or an attorney; conducting a self-audit of personnel and payroll records; sending the human resource managers and payroll and benefits coordinators to legal seminars; and underwriting the cost of membership in human resource organizations. Be proactive rather than reactive and make the effort to do things right the first time.
Charla Bizios Stevens is a director in the Employment Practice Group with the McLane Law Firm in Manchester. She is also the state director for the State Council of the Society for Human Resource Management. Bizios Stevens practices in NH and Massachusetts and regularly consults with employers on wage and hour matters. She can be reached at 603-628-1363 or at charla.stevens at mclane dot com.
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