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To Warn or Not Warn: Legislature Enacts New Law Requiring the Department of Labor to Warn Businesses Before Levying Fines for Certain Violations

Written by: Charla Bizios Stevens

In response to cries of foul from a number of businesses which found themselves in hot water with the New Hampshire Department of Labor (“DOL”) for arguably minor violations of the state’s wage and hour laws, the Legislature enacted and the Governor signed RSA 273:11-a.  The DOL is charged with the responsibility of administering these laws and among its powers is the ability to levy civil penalties and fines for violations.  Violations are usually discovered through audits of payroll records and personnel files, which can either be triggered by an employee complaint or by random selection.

Being subject to a wage and hour audit can often be an ulcer-inducing experience for an employer, even one who treats employees fairly and pays them well. The process usually begins when an Inspector with a badge shows up at the door with a list of documents he or she intends to return to review. Such documents 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 scrambles to pull the documents together and then leaves the Inspector in a room with a pile of documents, a calculator and a pen.

The Inspector exits a day or two later, notes in hand, and returns in a week or two with a lengthy report enumerating each and every violation found. What follows is a notice of suggested civil penalty with a penalty amount specified for each and every violation. The total “suggested” fine can run anywhere from a few thousand dollars to several hundred thousand dollars. The Inspector will tell the business owner not to pay the civil penalty and to avail himself of the opportunity to attend an informal conference at the DOL to “discuss” the fine; small comfort for an owner staring at a possible civil penalty which exceeds the company’s net profit for the last year!

The new law is intended to minimize some of the trauma that accompanies this process and to give so-called good employers who are trying to do the right thing the opportunity to correct minor infractions prior to the benignly named informal conference. The legislators were regaled with dramatic stories of employers facing fines of hundreds of dollars per day per employee for minor infractions of laws of which they were not even aware.  For example, many employers still do not realize that each employee must sign and date a written notification of their pay rate and of each and every change of rate. Simply sending an employee an email stating that they will be receiving an additional dollar per hour worked is insufficient to comply with the law.  For a company employing hundreds of part-time short term workers, the violations can add up quickly.

Through the old process of suggested civil penalties followed by informal conferences the DOL sought to educate the state’s employers on the law and assist them in getting into compliance by sending a shot across the bow. The legislature has now formalized that process by requiring the DOL to “issue one written warning” and allow the employer “30 days from receipt of the warning to cure the defect causing violation.” The law, however, contains a massive loophole by excepting from the warning requirement actions which, in the opinion of the Commissioner of the DOL, are intended to cause harm or pose a threat to public safety. Many more serious violations, such as those which involve failure to pay employees in full, on time and in the requisite manner, as well as those which involve employment of undocumented workers are specifically exempted from the warning requirement.

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 however are the proactive measures employers should be taking to keep themselves in compliance so as to avoid the problem in the first place. Companies can take advantage of the numerous opportunities which exist to stay current with the law including signing up for email alerts from the DOL or their attorney; conducting a self-audit of personnel and payroll records records; send the Human Resource Manager and Payroll and Benefits Coordinator to legal seminars and underwrite the cost of their membership in human resource organizations. The myriad of state and federal laws with which employers must comply present a challenging legal and regulatory minefield to maneuver. 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. She is also the State Director for the State Council of the Society for Human Resource Management (“SHRM”) Ms. Bizios Stevens practices in New Hampshire and Massachusetts and regularly consults with employers on wage and hour matters. She can be reached at 603-628-1363 or at [email protected].

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