The Importance of Environmental Scans: Ensuring Compliance with Compensation Laws

Environmental scans can help you ensure that your company’s pay structure complies with federal and state compensation laws. Key federal compensation laws include the Fair Labor Standards Act (“FLSA”) and the Equal Pay Act (“EPA”).

The FLSA is a broad compensation statute establishing minimum wage, overtime pay, recordkeeping, and child labor standards for full-time and part-time workers. See The Fair Labor Standards Act, 29 U.S.C. § 201-219 (1935) (last amended 2010). Environmental scans can help employers identify two common issues under the FLSA: (1) whether employees are exempt from the overtime provisions and (2) whether workers are properly classified as independent contractors. Under the FLSA, all non-exempt employees are entitled to overtime pay for hours worked over 40 in a workweek. See 29 U.S.C. § 207. Employees can be exempted from the overtime requirements if they qualify under one of the FLSA’s exemption categories. See 29 U.S.C. § 213. Experienced employment counsel, like ELS, can help you determine which of your employees qualify. Whether workers are employees or independent contractors is determined based on the job duties performed by the employee and the employer’s ability to control the worker’s performance—not the job title. Again, ELS can help you identify any issues with misclassification.

The EPA requires employers pay equal wages to men and women who perform jobs that require substantially equal skill, effort and responsibility, and that are performed under similar working conditions within the same establishment. See 29 U.S.C. § 206(d); Arrington v. Cobb County, 139 F.3d 865, 876 (11th Cir. 1998). Two jobs are substantially equal if they have sufficiently similar job duties, not if they have similar titles. 29 U.S.C. § 206(d)(1). Pay differentials are permissible when it is based on seniority, merit, quantity or quality of production, or any factor other than sex. 29 U.S.C. § 206(d)(1)(i-iv).

Environmental scans help companies avoid claims based on compensation because the scan can reveal pay discrepancies of which company leaders may be unaware. The objectives of any HR-focused environmental scan should include: (1) a comparative view of the demographics of compensation for each job title and (2) an understanding of the actual duties performed by each employee and independent contractor. Employment counsel, like ELS, can review the information obtained by the environmental scan to determine whether your company may be violating compensation laws. In addition, if the environmental scan reveals any issues, your employment counsel will work with you to craft solutions to these issues.

~ Author: Holly McDaniel, 2018 ELS Extern, Emory University School of Law, 3rd Year Law Student