Soft Management

The threat of wage and hour lawsuits is troubling employers more and more these days. I know first hand about this issue. In 2006, I was working for Costco in Utah and received a letter from an attorney’s office asking me to fill out a questionnaire regarding my overtime hours and mandatory breaks when I worked for the company at previous location in California over a several month period in 2004. I filled it out truthfully, I did work a lot of overtime and Costco paid me well for it, but I did miss out on quite a few mandatory breaks that I was entitled to. Several months later, after I had completely forgotten about the questionnaire, I got a check in the mail for about $1000. I though to myself, “Ouch! This really hurts for Costco.” I spoke to several other coworkers about the award and most of them made out a whole lot better than I did.

Under the Fair Labor Standards Act (FLSA), scores of cooperative claims of employee misclassification as exempt or not exempt from overtime pay, like the one I was involved in, have spiked by an incredible 77 percent during 2000-05. What’s very interesting is that these figures have actually exceeded claims under Title VII of the Civil Rights Act for equal employment opportunity. It’s critical for an employer to be aware that these FLSA claims are yielding verdicts in the hundreds of millions of dollars for employees who were owed overtime pay or misclassified as exempt.

According to the US Department of Labor, as many as 70 percent of employers are not in compliance with the FLSA in some way. Employers, like Costco, need to find out where they are making their biggest misclassification mistakes and how to fix them without getting sued. In my case, it would have helped Costco a great deal to have invested in competent front-line supervisors who allowed employees to take their legally mandated 15 minute breaks every two hours. Because Costco’s management got sloppy, supervisors seized the opportunity to oppress and it came back to hurt the company's bottom line.

Our federal government really likes to spend billions of dollars every year, often I hear people complain about its uncontrollable spending habits and the politics associated with it. You won’t hear me complaining because I like getting work from the government! Once you get all the red tape taken care of it’s very easy work and the pay is not too shabby either.

Business owners and managers of firms who have yet to capitalize on this steady stream of revenue might consider that now’s a good time to jump on the bandwagon. Why not? The economy sucks, no one’s buying anything, but the government is!

So now you’re in a meeting and the sales team is talking about all the revenues that the company could realize if they start getting government bids. With all the charisma and good news, do you dare to start talking about expenses?

There are major employment compliance costs associated with becoming a government contractor, therefore it is up to the HR and legal team to be informed so owners and executives can make proper decisions that take all costs into consideration.

It is critical to realize that the costs associated with obeying regulatory obligations are: contingent upon the size of the company, the extent and intricacy of its hiring processes, the aggregate of applicant, promotion, and termination activity, and the complexity of HR information systems.

Compliance as a federal contractor in the first year is extremely expensive, therefore the following costs need to be considered: Training payroll clerks on any existing wage rate issues, reconfiguring IT to account for additional fields that the Office of Federal Contract Compliance Programs (OFCCP) requires, analyzing job-application forms to make sure the firm is soliciting the race and gender of Internet applicants, putting into practice and publishing new policies e.g. Drug-Free Workplace Act and commitment to nondiscrimination and affirmative action, organizing annual affirmative action plans, training HR on recordkeeping responsibilities in accordance with OFCCP regulations—and the list goes on! Then with all the new piles of paperwork you’ll likely need more employees in HR to manage it.

Never rely on your sales team to read the fine print on the contract. Let’s face it; the folks in sales only have the ability to sell more products and services to Uncle Sam. As an HR professional who’s looking out for your firm’s bester interest, it’s valuable to realize that there are indeed some major benefits related to procuring government contracts, but compliance costs are real, so comply to the hilt or don’t submit that bid.