It seems, from our practice at least, that the number of Connecticut Department of Labor investigations is increasing. Indeed, the U.S. Department of Labor has collected $1.6 billion dollars in back wages since 2009 through its investigation efforts. And the Connecticut Department of Labor noted in a press release that it has ramped up its efforts at investigating the missclassification of workers as independent contractors. The acting Commissioner of the CT Agency, Dennis Murphy, no doubt will maintain those efforts in 2016. The Internal Revenue Service and the State DOL have agreed to share information to strengthen these efforts. The Boston Globe wrote about this issue here. And a case argued in October before the Connecticut Supreme Court will be significant in the independent contractor versus employee analysis – especially for companies that use other companies to perform services for their own customers. You can read the briefs for that case here, here and here. So if you operate a construction business, manufacturing, or service-related business, audit your own wage practices, or be on the lookout for a Notice of Violation, or NOV.
NOVs typically come when a disgruntled employee complains to the State Department of Labor, either about not being paid wages, or not being paid overtime. If that happens, you can expect an investigator to show up at your workplace to audit your payroll records going back 2 years. The investigator will be looking for things like hiring agreements (which are required by statute to advise the employee of things like rate of pay, hours, and pay schedule) records of hours worked and amounts paid. You can get some helpful information about these laws from the DOL website here. The investigator records the information from the audit into a transcription sheet that shows how many hours the employee worked, the wages paid, any wages due (like for overtime) and imposes interest on the past due amount. The agency can also, and most definitely will, impose fines of $300.00 per violation, for example for every week you don’t have a record of hours worked. These can add up to hefty numbers for any small business. And now, a new law in Connecticut practically mandates that in a civil action to collect back wages, an employer will pay double damages of the amount recovered by the employee for back wages unless the employer establishes a good faith belief that its conduct was lawful. Tough standard to meet.
One of the scariest things is, if your company does not have records of hours worked (get a timeclock!) the DOL essentially takes whatever the employee says as true: if the employee says she worked 50 hours a week, and you don’t have records to refute that, then the employee worked 50 hours a week. If an investigator knocks at your company door, you must let them in. And unless your wage practices are squeaky clean (in every case we’ve handled the employer has had problems). You will get a NOV from the DOL.
These NOVs are defensible. And in almost every case we’ve handled, if the employer is reasonable in trying to resolve the claim, the employer will come out of this problem better and stronger than before.