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Wage Violations can be a Costly Mistake

Written by: Linda S. Johnson

(Published in the NH Business Review, Friday, December 5, 2008 http://nhbr.com/apps/pbcs.dll/article?AID=/20081205/INDUSTRY04/812039910&SearchID=73338457103548)

Last week, Sue, a long-time employee of Burger Barn reported to Janice, her supervisor that she made a mistake on her time card. Janice made a correction and submitted the time card to payroll. Yesterday, Joe, a new employee of Builders, Inc. found out that steel-tip boots are required for the job, which he can't afford. Joe asked the company for a loan to cover the cost, and Builder's management team agreed to pay for the boots upfront, with Joe's agreement to have $25.00 deducted per week from his paycheck until the company is fully reimbursed. This morning, Jake, a new employee of ACME Manufacturing was thrilled to be hired and to hear from his new boss, Henry what his hourly rate of pay will be. Is there anything wrong with what each of these companies has done in these cases?

You may be surprised to learn that all three situations violate New Hampshire wage laws. Read on and find out how one company learned the hard way that failure to know and comply with these laws can be a costly mistake.

On October 31, 2008, the New Hampshire Supreme Court affirmed a decision of the New Hampshire Department of Labor imposing $18,000 in penalties against a company for making deductions from an employee's wages for loans, advance wage payments, and other purposes without proper documentation on file, and for failing to notify its employees in writing as to their rate of pay, day and place of payment as required by New Hampshire law. This case is yet another reminder that companies should become familiar with New Hampshire wage laws, and bring their pay practices into compliance. Failure to do so can result in costly penalties that could easily have been avoided by a little proactive education and compliance self-audit.

Initially, the New Hampshire Department of Labor, ("DOL") cited Dan's City Auto Body with 994 violations and imposed fines totaling $100,500. The owner of Dan's City disputed the violations and requested a hearing. Following the hearing, the penalty was reduced to $20,000. Dan's City appealed the hearing officer's decision and requested a de novo hearing before the DOL Penalty Appeal Board, ("PAB"). Following the appeal hearing, the PAB imposed a total fine of $20,000. Dan's City then appealed to the New Hampshire Supreme Court.

The New Hampshire Supreme Court found that, as to some of the violations found by the DOL, the DOL inspector had failed to provide specific factual evidence (such as a specific employee's name or specific day of violation) to support the conclusion of the wage violations so it reversed $2,000 of the $20,000 penalty. The Court also refused to grant the State's request to remand the case back to the DOL for further proceeding ruling that remand is not the proper remedy when the record lacks sufficient evidence.

It is worth taking a look at the wage violations cited by the DOL following its audit of Dan's City Auto Body as a lesson to all companies about some of the many New Hampshire wage laws that a company must follow.

  1. Violation: The employer did not keep records of hours worked by employees.

    !Legal Requirement: Employers are required to keep a record of hours worked by all employees except employees exempt under the Fair Labor Standards Act.
  2. Violation: Employee time records for hours worked show additions and charges without employee signatures or initials.

    !Legal Requirement: Any time record with an entry that is altered must be signed or initialed by the employee whose record was altered.
  3. ! !
  4. Violation: Records showed indications of lunch hours not being taken but time was possibly deducted for those periods.

    !Legal Requirement: Employers must grant a thirty-minute meal break to any employee who works more than five consecutive hours, unless it is feasible for the employee to eat during the performance of work and the employer permits him or her to do so. Also, pursuant to federal wage law, breaks of 20 minutes or under must be paid.
  5. ! !
  6. Violation: Employer wrongfully made deductions from employee's wages for loans, advance wage payments and other purposes without proper documentation on file.

    !Legal Requirement: An employer may not make deductions for loans, advance wage payments and most other deductions unless the reasons for the deduction are specifically authorized under New Hampshire law or DOL regulation, and it is authorized in writing by the employee.
  7. ! !
  8. Violation: Employer did not notify employees in writing as to their rate of pay, day and place of payment.

    !Legal Requirement: Every employer shall, at the time of hiring, notify employees in writing as to their rate of pay or salary, whether by day, week, biweekly, semi-monthly, or yearly, or commissions, as well as the day and place of payment and the specific methods used to determine wages due. Likewise,any change in wages must also be communicated in writing to employees prior to the effective date of such change.

The violations cited against Dan's City are examples of just some of the many requirements set forth in New Hampshire's wage and hour laws and DOL regulations. Employers should become familiar with these requirements and ensure that their company's pay practices are in compliance. The New Hampshire Department of Labor website has a link to all of the relevant laws and regulations. As Dan's City Auto Body learned the hard way, failure to do so can result in costly penalties.

Linda Johnson chairs the firm's Employment Law and Education Law Practice Groups at the law firm of McLane, Graf, Raulerson & Middleton, Professional Association. Linda can be reached at [email protected] or (603) 628-1267. The McLane Law Firm is the largest full-service law firm in the state of New Hampshire, with offices in Concord, Manchester and Portsmouth, as well as Woburn, Massachusetts.

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