Wage and Hour Claims: What They Are, and How They Can Affect Your Business, with Guest Blogger Christine Davis

This week, the ladies of Smith Shapourian Mignano LLP are proud to collaborate with Christine Davis, CPA, CFF, CVA, CGMA, Director of Forensic and Financial Accounting at OnPoint Analytics, Inc.

OnPoint Analytics, Inc. is an economic, finance and statistical consultancy specializing in expert testimony for complex, high-stakes litigation.  Attorneys and clients retain Ms. Davis as a consulting or testifying expert in complex commercial litigation and regulatory matters. As a financial, accounting or damages expert, she assists in all phases of litigation by providing calculations, analytical insight and expert testimony by deposition and at trial.

For the purpose of this blog, we collaborate with Chris to discuss wage and hour claims from both a legal and financial analysis perspective.

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Wage and Hour Claims: What Are They and How Can They Affect Your Business?
By: Smith Shapourian Mignano LLP

Businesses with employees may face exposure for violations of wage and hour laws.  Cases alleging wage and hour claims present a variety of allegations, such as unpaid overtime, employee misclassification, missed meal or rest breaks, improper deductions, and failure to pay the minimum wage.  Wage and hour claims can be brought in conjunction with unfair competition claims.  They can be brought by an individual or by many individuals in the form of a class action.

Nearly a century ago, the California Legislature responded to the problem of inadequate wages and poor working conditions by establishing the Industrial Welfare Commission ("IWC"), and delegating to it the authority to investigate various industries and promulgate wage orders fixing for each industry minimum wages, maximum hours of work, and conditions of labor.  In 1916, the IWC began issuing industry and occupation-wide wage orders specifying minimum requirements with respect to wages, hours, and working conditions.  In addition, the Legislature has from time to time enacted statutes to regulate wages, hours, and working conditions directly.  

Modern wage and hour claims in California are governed by two complementary and occasionally overlapping sources of authority: (1) the California Labor Code; and (2) a series of  wage orders, adopted by the IWC.  The Labor Code consists of a series of civil statutes that address topics including, but not limited to, employment regulation and supervision, employment relations, worker's compensation and insurance, retraining and rehabilitation, and safety and employment.  The statutory provisions are liberally construed.  The IWC wage orders regulate the wages, hours, and working conditions in certain industries or occupations.

Federal wage and hour claims are governed by the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq.  The FLSA establishes minimum wage, record-keeping, overtime pay eligibility, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments.  We previously discussed the FLSA and recent changes to the FLSA in 2016 in our blog article here.

Wage and hour cases constitute the highest exposure to employers under workplace laws, even more than discrimination cases.  According to some sources, companies paid an overall average of $6.9 million for the 2007 to 2015 period to resolve a claim, and federal wage and hour lawsuits are expected to hit an all time high in 2016 based on heightened public awareness due to the new overtime rules by promulgated by the Obama Administration.  

As a result, it is now more important than ever for businesses with employees to comply with the existing and new rules, and of course, to mitigate risk by engaging counsel as soon as a wage and hour lawsuit is threatened or filed.

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A Forensic Accountant Answers Some Questions about Wage-and-Hour Claims
By: Christine Davis, CPA, CFF, CVA, CGMA, Director of Forensic and Financial Accounting at OnPoint Analytics, Inc.

In wage-and-hour litigation where large amounts of documents and data are involved, a forensic accountant delivers analytical clarity while providing accounting, financial and investigative expertise regarding the amount of damages claimed by employees.  So, whether engaging a forensic accountant to measure potential damages before a lawsuit, or assisting early in the discovery process, hiring a forensic accountant to assess damages ultimately creates more time for the business and counsel to strategize as to how to best defend the case.

Some recurring, yet important questions come to mind when the topic of wage-and-hour claims come up in the course of my practice  – here are some of them:

1. What documents are used or relied upon by the forensic accountant when analyzing wage-and-hour claims? Some examples are:
   • Time cards
   • Payroll records
   • Shift reports
   • Time edit reports
   • Depositions and/or declarations
   • Employment contracts and employment records
2. What are common challenges around the documentation and data?
   • Incomplete and/or illegible records
   • Having multiple timecard and payroll systems
   • Lack of unique employee identifier
   • Pay period duration variability
   • Voluminous data that dictates the type of software to use for analysis
   • Variable workweeks
   • Multiple rates of pay in same period
3. How can the use of a forensic accountant as a consulting or testifying expert be maximized?
   • Engage the forensic accountant early in the discovery process
   • Provide good examples of documents and relevant information to the forensic accountant and disclose known imperfections in the data so she or he can reasonably estimate time and cost
   • Discuss strategy and approach to damages calculation early and often with the forensic accountant
   • Communicate frequently.

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Smith Shapourian & Mignano, LLP is available to answer any questions or concerns you may have regarding compliance with state and federal wage and hour laws, or litigation arising out of alleged violations of the same.  Feel free contact us to learn more.

This blog does not constitute solicitation or provision of legal advice, and does not establish an attorney-client relationship. This blog should not be used as a substitute for obtaining legal advice from an attorney licensed or authorized to practice in your jurisdiction. You should always consult a suitably qualified attorney regarding any specific legal problem or matter in a timely manner, as statutes of limitations may bar your claim.