Wage and Hour Issues to Keep in Mind as Your Practice Goes (or Stays) Virtual
Almost one year after COVID-19 surfaced in the United States, New Jersey businesses, including accounting firms and their clients, have adapted in ways previously unimagined. To continue business within this “new normal,” many accounting firms and white-collar businesses have gone remote. However, managing a remote workforce comes with its own challenges, especially in the wage and hour context and even more so in the state of New Jersey, which has one of the strongest wage theft laws in the country.
High Stakes for Wage and Hour Violations
New Jersey’s Wage Theft Act (WTA), enacted in 2019, substantially expanded exposure for wage and hour violations by significantly increasing damages and penalties, extending the statute of limitations to six years and criminalizing certain violations. Absent an affirmative defense, an employer faces liquidated damages of 200 percent in addition to the unpaid wages owed for failing to properly pay its employees. Furthermore, under the WTA, successor entities can be liable for the wage violations of their predecessors. Therefore, as businesses change ownership, liability under the WTA, and the hefty penalties and potential damages, remain. The risk of successor liability is especially acute in these uncertain economic times.
Wage and Hour Considerations for Remote Work
- Compensate employees for all time worked. A significant challenge with remote work is ensuring that non-exempt employees are paid for all time worked, even if not scheduled. This means that employers should have reasonable time-reporting systems and documentation. The duty to pay for all time worked applies when the employer knows (or has reason to know) that time was worked after hours — even when the employee does not report the extra time. Notably, the U.S. Department of Labor recognized the importance of flexibility in these challenging times. As a result, where a non-exempt employee works a flexible schedule, such as with time off mid-day to attend to the demands of their school-age children, an employer is not required to pay for time not worked even during “normal” business hours. The key to success, as well as wage and hour compliance, is proper communication and record-keeping.
- Implement a remote-work agreement. A remote-work agreement provides employees with guidance regarding their job responsibilities and the company’s expectations for employees who work remotely some or all of the workweek. As a best practice, the agreement should set forth the company’s time-keeping requirements while working from home and should be acknowledged and signed by the employee. As part of the agreement, non-exempt employees should be required to report all hours worked, even if worked outside of the normal workday or in excess of those that they were scheduled to work. Additionally, the agreement should make clear the extent to which the company will or will not be reimbursing employees for the use of personal phones, computers, printers, internet, etc. Employers are required to reimburse non-exempt employees for expenses incurred on behalf of their employer to the extent that those expenses “cut into” the minimum wage earnings.
- Maintain accurate records. Recordkeeping has always been essential to wage and hour compliance and even more so in the remote work environment. Employers must maintain accurate records of hours worked (on a daily and workweek basis) and wages paid to employees as a matter of New Jersey law, and these records are critical to avoid significant penalties and defend against potential litigation. Businesses should keep these records accessible so they can be produced upon request by the New Jersey Department of Labor and Workforce Development. If a company fails to provide sufficient records during an investigation, there is a rebuttable presumption that the employee actually worked for the period of time claimed. The absences of accurate time and pay records can be very costly.
Remote work arrangements have become common in the wake of COVID-19. To protect your firm and clients from the significant damages and penalties under New Jersey’s wage payment laws, take the time to review pay and record-keeping practices, and consider implementing a remote work agreement.
This article appeared in the January/February 2021 issue of New Jersey CPA magazine. Read the full issue.