Labor Law Compliance in Construction and Field Service Industries

A federal agent arrives at your place of business and asks to speak to your employees and see all your payroll records over the last two years. Her credentials prove she is an investigator for the U.S. Department of Labor’s Wage and Hour Division. What do you do?

It can happen. And for many businesses like yours, it already has.

As your business grows, so do your compliance risks. Staying compliant becomes a major challenge when you have employees scattered across multiple job sites to track. And even small violations can add up to significant fines.

These are some of the most successful prosecutions of wage and hour violations under the Fair Labor Standards Act (FLSA) since 1985*.

  • CA: $34M
  • FL: $26M
  • AZ: $21M
  • NY: $29M
  • TX: $19M
  • IL: $15M
  • NV: $14M

*Most of these cases involved claims from 1,000 or more employees. Data made available by the Department of Labor’s Wage and Hour Division (WHD).

In order to reduce your risk of liability, it is your business’s responsibility to stay up-to-date and in compliance with all federal and state labor laws.

In this guide, we will cover the most common wage & hour compliance risks, state laws, audits and the audit process, recordkeeping guidelines, cautionary tales, and some key pointers in the labor law compliance game.

Compliance in the construction and field service industries

When you run a construction or field service business, staying wage and hour compliant is far from simple. For example, confusion over state laws can come about when companies do business across jurisdictions.

The Department of Labor (DOL) oversees and enforces 180 federal labor laws that affect the workplace. In addition, some states have their own labor laws which must be adhered to. Government regulations like the Fair Labor Standards Act (FLSA) require precise record-keeping to track hours to prove compliance. Labor law and employment regulations can change every year at the state and federal level, and the onus is on business owners like yourself to be aware of these changes.

Another labor law that construction and field service businesses need to know is FMLA, the Family and Medical Leave Act. The size of your business affects the status of FMLA coverage and the eligibility of your employees. The statutes do not cover employers with less than 50 employees.

Difficulties in interpreting these federal laws and widely varying state requirements, coupled with the challenge of accurately tracking the regular and overtime hours for large crews of field-based employees, combine to make compliance burdensome for construction businesses.

Most common wage and hour compliance risks

Here’s a refresher of common compliance risks for any size business that should already be on your radar.

Timekeeping

You should review your time rounding procedure to be sure it is in compliance with state and federal regulations. For example, California state law says you should not round down a meal break for a non-exempt employee, as 30-minute meal breaks are required.

Overtime

You must abide by the new and ever-changing federal or state overtime rules. You must determine the rule to follow based on which offers more protection or greater benefits for employees.

Misclassification

It’s essential to know the laws pertaining to exempt and non-exempt employee classifications. How employees are classified by the company is coming under scrutiny by the Wage and Hour Division (WHD)—for example, incorrectly labeling an employee an independent contractor.

Compensable and non-compensable hours

You must be up-to-date on state and federal guidelines regarding which hours spent on transportation and travel are to be considered working hours.

Recordkeeping

Your records are required to contain certain specific information—for example, wage information, meals and rest breaks for non-exempt employees. Also, the records must be kept for a certain number of years depending on your state’s laws.

Timekeeping

You should review your time rounding procedure to be sure it is in compliance with state and federal regulations. For example, California state law says you should not round down a meal break for a non-exempt employee, as 30-minute meal breaks are required.

Overtime

You must abide by the new and ever-changing federal or state overtime rules. You must determine the rule to follow based on which offers more protection or greater benefits for employees.

Misclassification

It’s essential to know the laws pertaining to exempt and non-exempt employee classifications. How employees are classified by the company is coming under scrutiny by the Wage and Hour Division (WHD)—for example, incorrectly labeling an employee an independent contractor.

Compensable and non-compensable hours

You must be up-to-date on state and federal guidelines regarding which hours spent on transportation and travel are to be considered working hours.

Recordkeeping

Your records are required to contain certain specific information—for example, wage information, meals and rest breaks for non-exempt employees. Also, the records must be kept for a certain number of years depending on your state’s laws.

Working hours, defined

Did you know that certain state regulations count time spent traveling to the airport or to the bus station as work time, while others don’t?

Sometimes the simplest deviations create confusion when it comes to compliance, like workers who commute between work sites, report remotely, take business trips, or travel across time zones.

Your state may have its own regulations which you must stay abreast of. Meanwhile, the Department of Labor (DOL) has a few basic guidelines. Here’s some of what the DOL has to say about working hours:

Waiting time

Whether waiting time counts as hours worked depends upon the particular circumstances. Generally, the facts may show whether the employee was engaged to wait (which is work time) or was waiting to be engaged (which is not work time). For example, a secretary who reads a book while waiting for dictation and a fireman who plays checkers while waiting for an alarm are still on the clock during such periods of inactivity. These employees have been engaged to wait.

On-call time

An employee who is required to remain on call on the employer’s premises is working while on call. An employee who is required to remain on call at home, or who is allowed to leave a message where he/she can be reached, is not working (in most cases) while on call.

Rest and meal periods

Rest periods of short duration, usually 20 minutes or less, are common in the construction industry and are customarily paid for as working time. These short periods must be counted as hours worked. Meal periods (typically 30 minutes or more) generally need not be compensated as work time.

Travel Time

The principles which determine whether time spent in travel is compensable time depends upon the kind of travel involved.

Home-to-work travel

An employee who travels from home before the regular workday and returns home at the end of the workday is engaged in ordinary home-to-work travel, which is not work time.

Special one-day assignment in another city

Let’s say an employee who regularly works at a fixed location is given a special one-day assignment in another city and returns home the same day. The time spent traveling to and returning from the other city is work time, except that the employer may deduct time the employee would normally spend commuting to the regular work site.

Travel that is all in a day’s work

Time spent by an employee in travel as part of their principal activity, such as travel from job site to job site during the workday, is work time and must be counted as hours worked.

Travel away from home

Travel away from home—overnight travel—is clearly work time when it cuts across the employee’s workday. But the way the time is counted also depends on whether the work is done during normal business hours/days or not. The Division will not consider work time hours that are spent as a passenger on an airplane, train, boat, bus, or automobile.

Time zones

If an employee travels over two or more time zones, the time from the starting point of the trip should be used to determine compensable hours.

State laws

States generally follow the FLSA (again, the Fair Labor Standards Act) when it comes to wage and hour regulations, but each state has its own set of laws that need to be considered.

Larger businesses with more remote workers and independent contractors in states other than where they’re headquartered may need to interpret and adhere to multi-jurisdictional laws.

Audits and the audit process

Wage and Hour Division audits can be random, but often occur because employees report an alleged violation. Violations can result in back wages as well as multiple fines, depending on the auditor’s assessment. The WHD collected more than $1.3 billion in back wages from employers between 2014 and 2018. The most common violation is misclassifying an employee’s status.

The construction industry was second only to the food services industry last year in total back wages collected, according to the U.S. DOL. These are the figures for back wages collected in the two industries over the past five years:

2018:

Food Services – $42.9 Million

Construction – $38.8 Million

2017:

Food Services – $42.9 Million

Construction – $49.3 Million

2016:

Food Services – $39.8 Million

Construction: $41.7 Million

2015:

Food Services – $38.1 Million

Construction – $42.3 Million

2014:

Food Services – $34.4 Million

Construction – $45.2 Million

Recordkeeping

Accurate records are usually a business’s only true defense against lawsuits and penalties, and the FLSA requires you to store employee records for a minimum of three years.

You must keep these records on all non-exempt employees in order to comply with federal regulations:

  • Employee name, gender and birthdate
  • Employee social security number
  • Employee address
  • Employee occupation
  • Time and day when the employee’s work week begins
  • Number of hours the employee worked each day
  • Total hours the employee worked each week
  • How the employee was paid (hourly, salary, commission, etc.)
  • Employee’s regular hourly pay rate
  • Total daily/weekly straight time earnings
  • Total weekly overtime earnings
  • Any additions to or deductions from the employee’s wages
  • Total wages paid to the employee
  • Dates that the given pay period covers

An attorney’s advice

Elizabeth H. Murphy, an employment defense lawyer and a principal at law firm Jackson Lewis, assists companies who are being audited by the DOL. She emphasizes that if you get notified of a coming audit, the worst thing you can do is nothing. There’s a chance that you can correct the problem immediately if you examine your practices—and get in a few good payrolls before the auditor appears.

Murphy recommends that you call the auditor in advance. “Find out who your auditor is and reach out to them,” says Murphy. “Then you can ask if they’ll push out the date, which will give you more time to amend any issues.”

Additionally, she advises that if you have a good defense, use it. Companies who are able to show a good faith reason that they made a mistake are often able to avoid all fines and penalties. However, “ignorance of the law is never a good faith defense,” warned Murphy.

Her other advice? Get the names, if you can, of any current or former employees your auditor plans to talk to. Then call and reassure them that they are not in trouble and that they only need to be honest (a task best handled by your lawyer).

Lastly, Murphy has no sympathy for companies that don’t monitor their own compliance to ensure they are on the right side of the law. “Don’t wait for the auditor to send you a letter,” Murphy advised. “Every employer should know if they are complying with wage-hour law or not—and if they’re not, they should fix it.”

Real-world examples

Here are a couple examples of U.S. businesses that have been audited and fined, and their offenses.

Industry: Construction
Company: RDV Construction, Inc.
Offense: The company bounced checks to approximately 1,000 employees and failed to pay them proper minimum wage or overtime for hours worked over eight hours per day (part of California’s overtime law). The company also failed to give employees proper rest breaks.
Fine: The California Labor Commissioner’s Office ordered the company to pay more than $12 million in overtime back wages and damages to 1,125 affected employees.

Industry: Construction
Company: Salinas Inc.
Offense: Employees worked as much as 70 hours per week without earning the requisite time-and-a half pay for weekly hours exceeding 40.
Fine: The DOL ordered the company to pay $342,856 in back wages and damages for failing to pay overtime to 22 workers over two years.

Technology as an aid

The point is clear: You can’t afford to neglect wage and hour compliance. Relying on paper time cards or another fallible system to maintain accurate records for a large group of employees is obviously risky. Investing in the right technology to handle your large business needs could be a change worth looking into.

The good news—maintaining foolproof, verifiable compliance for a large team can be simple, and it is within your reach.

A cloud-based time tracking software would ensure bullet-proof accuracy and safe storage of your employee records, so your data is always available for easy retrieval when you need it. The ability to self-audit is also crucial and should be included in your labor law compliance strategy.

Here’s what to look for in a digital time management solution, should you decide to go that route:

  • Anytime, anywhere access to your labor tracking data
  • Automatic data storage in the cloud
  • Employee clock in and out app with activity codes
  • GPS timestamps and geofencing
  • Seamless integration with your payroll program
  • Ability to apply sets of policies to work shifts
  • Easy retrieval of exact records of regular and OT hours worked

Making the move from risky business to easy compliance is key to ensuring your company can continue to grow, unhindered.