The COVID-related challenges of 2020 and 2021 may be behind us, but 2022 had its own unique challenges especially in the area of wage and hour laws.
Employers still had many wage and hour challenges related to COVID shutdowns, furloughs and accommodation as well as some post-COVID issues. Those included timekeeping for remote workers, meal breaks, short breaks, reporting time pay, payout of PTO and vacation time, salary proration, workplace safety issues and other compliance issues that may have been overlooked because of staffing shortages or other more pressing concerns.
Most employers spent the bulk of 2022 focused on post-COVID related issues and getting their workplaces back on track. Inspectors from the U.S. Department of Labor (USDOL) and the NH Department of Labor (NHDOL) were out again conducting in-person workplace inspections. While many of those inspectors gave employers some grace because of COVID-related challenges, they still focused on enforcement of those statutes. As a result, many employers were cited for violations of state or federal wage laws.
Because the stakes for noncompliance with state and federal wage and hour laws are higher than ever before, employers need to pay attention to these violations to stay in compliance and to avoid expensive civil penalties and wage adjustment orders.
Another Busy Year for NHDOL
In FY 2022 (July 1, 2021 to June 30, 2022), there were 534 wage claims filed with NHDOL by individuals against their employers. That was an increase in claims from the previous year. Most of those claims proceeded to administrative hearings at NHDOL. Many of those hearings were virtual or telephonic in 2022, unlike the usual in person pre-COVID hearings. Rulings in favor of the claimant can result in significant awards of back pay.
During the last year, NHDOL also conducted many wage and hour law compliance audits at employer worksites. While some of those audits were via email or telephonic, many were back to in-person inspections. Some of those audits resulted in warnings, but most of those inspections resulted in assessments of civil penalties and wage adjustments. In FY2022, NHDOL inspectors conducted 229 onsite inspections at NH workplaces. While that was down significantly from 820 audits in FY2021, activity during the second half of calendar 2022 (July 1 to Dec. 31) suggests that the number of those inspections are increasing.
Through informal conferences, the total amount of civil penalties actually collected by NHDOL in FY2022 was $275,651. That was a significant decrease in what NHDOL collected in civil penalties in FY2021. This shows NHDOL’s flexibility when employers take the time to explain their pay practices, point out mistakes, rebut findings and commit to compliance with state wage laws. That said, even the reduced amounts can represent a serious bottom line hit for employers still reeling from COVID and related economic challenges.
During FY2022, the wage adjustments flowing from inspections, that were then collected and distributed by NHDOL to individuals, totaled more than $1.2 million. This was a fairly significant increase from the wage adjustments NHDOL collected in FY2021. Wage adjustments are required payments to employees and former employees who NHDOL determines are due unpaid wages. Those amounts, once assessed in an audit, are rarely reduced by NHDOL. Also, in order to try to reduce proposed civil penalties through an informal conference at NHDOL, in many cases, NHDOL asks the employer to first concede, pay directly to current and former employees and provide NHDOL proof of payment of the wage adjustments.
WhileNHDOL enforces state wage laws, it isn’t out to get employers. In fact, NHDOL offers several services to assist employers with compliance with state wage laws including: a website; inspectors available to answer calls from employers; informal conferences; relief from civil penalties when employers partner with NHDOL during inspections and perform self-audits/corrections; and they conduct comprehensive training sessions throughout the state. Because of COVID restrictions NHDOL couldn’t conduct those sessions in 2020. However, during 2021 NHDOL was able to offer 15 webinars with approximately 2,164 people attending. In the first half of 2022, NHDOL was able to offer more than 20 training sessions.
The Top 10
The following are the 2022 Top 10 worst (most common) wage and hour violations in NH, along with tips on how to avoid these issues and costly violations.
10. Misclassification of the employer/employee relationship (RSA 281-A:2). With low unemployment, lower labor participation numbers and wage inflation, many employers had difficulty filling vacant positions over the last year. Some employers turned to independent contractors to perform some services. There are several tests under state and federal law, but RSA 281-A:2 is the NHDOL’s standard for determining coverage of an employee for workers’ compensation purposes. NHDOL’s Wage and Hour division has a similar test.
During the last year, NHDOL inspectors found some employers misclassified individuals as independent contractors instead of as employees. If such a misclassification is found, there can be significant consequences (such as lost wages, benefits and workers compensation coverage)
for employers.
Recommendation: Review the state’s independent contractor test (as well as other applicable tests) and discuss this classification with counsel. While an agreement with a true independent contractor helps define the relationship and NHDOL/courts defer somewhat to those agreements, the reality of what the person does for the employer is the true determination. Therefore, it is best to confirm the nature of the relationship, and make sure it satisfies the statutory standards. If the standard isn’t satisfied, you should classify the person as an employee.
Note: A person’s request for an independent contractor classification, the excuse you couldn’t find an employee or you have always done it that way do not carry any weight under the law.
9. Failure to have a written safety plan, joint loss management committee and safety summary form, if required. (RSA 281-A:64 and Lab 602.01, 602.02, 603.02 and 603.03). Since the early days of COVID-19, employers have been asking if their new safety policies and responses to suspected and confirmed workplace COVID cases needed to be recorded and related safety issues needed to be addressed by their Safety Committees. The short answer is yes, just like with the OSHA 300 report, workplace safety policies, in addition to injuries, illnesses and the response to workplace hazards must be addressed. Many employers focused on screening and other priorities and neglected to maintain their safety committees and update their records.
Recommendation: As of Jan. 1, 2013, employers with 15 or more employees (used to be five) needed to have a joint loss safety committee to review and correct workplace safety problems. Also, employers, as of Jan. 1, 2013, with 15 or more employees (used to be 10) must file a written safety plan with the state (NHDOL). These reports can be filed with NHDOL electronically. Covered employers should check to be sure that their safety committee is organized, holds regular meetings (quarterly), properly maintains meeting minutes (posted and then filed) and that their plans and reports are up to date.
8. Paying later than designated pay day. (RSA 275:43 and Lab 803.01). This a perennial feature on the Top 10 list. Employers need to be sure deductions from wages align with the categories outlined in state law. Failure to pay an employee the full amount due, on time, could result in civil penalties and wage adjustments. This involves two issues: failure to pay wages on time; and failure to pay the full amount due because of unauthorized deductions.
Recommendation: Under state law, employees must be paid their wages within eight days from the end of the period in which they are earned. This typically comes up when an employee enters time after the close of payroll. The employer should cut a manual check for the additional time and not wait for the next payroll.
Under state law there is a list of approved deductions from wages. That list expanded with the August 2011 amendments to state wage law, which provided that employers and employees can now agree on deductions for just about any reason. However, the deduction must still be based on the employee’s voluntary request and be for the employee’s (not the employer’s) benefit. Also, employers need to be sure they comply with each deduction’s requirements as outlined in the law. Remember, these arrangements should be in writing, and all elements of the arrangement be satisfied before the deductions commence.
7. Working without parental permission. (RSA 276-A:5). This is related to the challenges of remote hiring and onboarding, the disruption of administrative practices in the last year or so and the rush to fill vacant positions with youth that otherwise wouldn’t be hired. Regardless of the challenges, employers need to strictly adhere to youth employment laws and regulations.
Recommendation: Employers should not employ workers under age 18 unless they strictly comply with these laws and regulations. If a worker is under age 16, an employer must obtain a Youth Employment Certificate within three business days of his or her first day of employment. If a worker is age 16 or 17, the employer must obtain written permission from the worker’s parent or guardian before the worker can begin employment. All workers under age 18 must be restricted in the number of hours, days of work and types of work, as established under state and federal law. Occupations, hours of work, days of work and working conditions are especially limited for those under age 16.
6. Failure to pay all wages due for hours worked, including paid short breaks, overtime, shift differentials and fringe benefits due. (RSA 275:43 and Lab 803.01). In other words, take several of the other violations on this list (timekeeping, short breaks, meal breaks and reporting time) and failure to comply with any of those usually resulted in the employee not being paid all wages due for hours worked.
Recommendation: If time isn’t properly recorded, how can the proper amount of wages be paid? Also, with the advent of smartphones and remote access, employees are working more time off the clock that should be counted as hours worked. Finally, as the courts continue to focus on preliminary and postliminary activities, as well as donning and doffing issues, employers in NH still have issues knowing when the clock starts and stops. Therefore, some employers don’t always pay all wages and fringe benefits due to some employees based on the actual hours they worked. Requiring employees to seek approval in advance for extra work is helpful, but employees should also alert their supervisors when they perform additional work so time records can accurately reflect hours worked and employees can be paid for all that time. Supervisors should independently monitor extra hours of work (including but not limited to short breaks) to be sure that is recorded and paid as hours worked.
5. Failure to pay two hours minimum pay at the employee’s regular rate of pay when an employee reports to work at the request of the employer and work isn’t available. (RSA 275:43-a and Lab 803.03 (h),(i),(j)). This was an odd addition to the list given that many workplaces reduced workplace density with furloughs or remote work over the last two years. This issue came up, as it has in past years, when employees reported to the workplace, even for a short while, at the employer’s request, and then were sent home because there was no work for them. This also applied to remote work when an employee engaged in offsite work. This violation is tied to timekeeping issues referenced earlier.
Recommendation: This is also known as the “bad weather rule” or “show up” or “reporting pay.” This applies to hourly employees in the private sector. Employers should notify hourly employees when they are not needed at work on a particular day. If the notice is unsuccessful and the employee reports to work and his/her services aren’t required, the employer must pay the employee a minimum of two hours pay for reporting to work or put the employee to work and then pay for the hours worked. One exception is when the employee’s job regularly requires less than two hours of work that day and that is clear when the employee is hired. The employee, in those cases, only needs to be paid for the time worked but this arrangement needs to be clear, in writing, in advance.
To avoid the issue with after-hours work or remote work, employers should make it clear when the employee is required to perform those tasks. In all instances the employee should record and report all time worked. This law is due for an update given the number of remote workers and the realities of the modern workplace.
4. Employment of undocumented workers and others who don’t have proper documentation on file. (RSA 275-A: 4-a). With pre-COVID Trump immigration restrictions and enforcement, this wasn’t as much of an issue as in other years. However, immigration policies changed under the Biden Administration meaning more visa holders were available to work over the last two years. All are required to complete I-9 forms and provide acceptable support documents. As employers have been desperate to fill vacant positions, some weren’t as diligent about compliance with this state law and federal I-9 requirements. However, NHDOL didn’t relax its standards regarding the documents needed to support a legal hire.
Recommendation: While this is commonly thought of as an issue involving federal law, many states, including NH, have laws prohibiting hiring or continuing to employ someone who is not a citizen of the United States or someone who doesn’t have a valid work authorization. NHDOL audits involve inspections of I-9 forms and all supporting documents. These are required for all employees, not just those who are here on work visas. All employers should be certain that all required paperwork is completed and in place before the employee starts work, and in the case of foreign guest workers that the employee doesn’t continue to work beyond her/his visa/authorization’s expiration date. With changes to this law and to avoid confusion or misunderstanding, in case they weren’t already doing so, many employers are now keeping I-9 support information to review with a NHDOL inspector in case of an audit.
3. Written notifications of rate of pay. (RSA 275:49 and Lab 803.01(g)(1)). This paperwork was another potential COVID oversight. This information is usually contained in an offer letter, but many new hires were onboarded like standby passengers on a rushed flight. State law requires a written notice, acknowledged by the employee, that contains the employee’s wage rate, pay date, pay period and general description of fringe benefits. This must also be documented in the same manner in advance of any changes to those arrangements.
Recommendation: Make sure that all involved in hiring and onboarding are aware of this requirement and this is included in your HR compliance audit checklist.
2. Failure to keep accurate records of all hours worked. (RSA 279:27 and Lab 803.03). Not recording meal breaks taken and not paying for breaks of less than 20 minutes is a common violation, but in 2022 it took on a new dimension because of split shifts and remote work.
Recommendation: Does the NHDOL really care if employees get a lunch break? Yes, but while rest and nutrition are important, they care more about the proper payment of wages. Employers in NH must permit employees to take a 30 minute (unpaid) meal break after five consecutive hours of work in a workday. Meal breaks must be recorded on daily time sheets just like the start and end time for all hourly and salaried non-exempt employees. Meal waivers are possible, but exceptions to those waivers must be noted on time records.
Time keeping is the employer’s obligation but the daily record is kept by the employee. Employers have to be sure the daily time records entered by employees are accurate, and changes are only permitted if initialed by the impacted employee.
The issue with meal breaks is that if improperly handled, employers could face fines for not permitting the breaks as well as wage adjustment orders for unpaid overtime and other wage liabilities. If the NHDOL looks back at all of your covered employees for each workday over the last 18 to 24 months, these fines and wage adjustments can really add up. This can be both expensive and unnecessary (because the employees likely took the breaks.) If the meal periods were actually taken, there might be civil penalties for incomplete records, but wage adjustments likely wouldn’t be due.
Be careful to avoid automatic meal deductions because NHDOL usually doesn’t consider that to be an accurate time record for each employee. Employers should also educate their employees about meal breaks and time keeping policies, as well as train supervisors to monitor meal breaks, waivers and time records. Remember, while meal breaks can be unpaid, if employers don’t follow this law, NHDOL says there’s no such thing as a free lunch.
Finally, in keeping with the FLSA, work breaks of less than 20 minutes in duration must be counted as hours worked.
And the number one most common wage and hour NH violation from 2022:
1. Failure of employers to report or obtain a workers’ compensation policy. (RSA 281-A:5). Employers in NH with at least one employee need to secure workers’ compensation insurance. Failure to secure or maintain that insurance could result in civil penalties and unfunded liabilities to cover the employee’s medical bills and lost wages.
Recommendation: This item should be a top priority. The insurance should be secured, premiums paid on time and information, as required by the carrier, should be provided to avoid gaps in coverage.
Now let’s be careful out there!
Jim Reidy is an attorney and co-chair of the labor and employment group at the law firm of Sheehan Phinney in Manchester. He can be reached at jreidy@sheehan.com. For more information, visit sheehan.com.
Current Issue - March 2023