For landscaping companies, there's no time like spring and early summer. The sunshine. The flowers. The fresh mulch. The demanding customers. The busy schedule...The Department of Labor Investigator? 

​

It's true. It's the busiest time of year for landscaping companies. But the Department of Labor is also busy looking at landscape companies and investigating their pay practices. From my perspective, there has been a severe uptick in Department of Labor investigations of Michigan landscape companies. These investigations can create massive liability for companies and their owners. Owners can even be held personally liable.

​

The best time to prepare for a Department of Labor Investigation is before an investigator arrives at your business. That way, you can voluntarily correct any mistakes and avoid expensive penalties. But no matter what stage you're in, an employment attorney can help you avoid some of the common pitfalls. 

​

What are some of the most common mistakes landscape companies make regarding pay practices, and what can you expect the Department of Labor to look closely at during an investigation? Here are five significant issues to consider.

​

1.    Exemption Claims
 
Almost always, the Department of Labor will look at your exemption claims. In other words, who do you claim is not entitled to overtime? The Department of Labor is not going to be impressed by fancy titles. They want to know what your employees do and how you pay them.
 
Do they meet the definition of an exempt employee? There are ambiguous legal tests. If you don't clearly meet the exemption requirements, you'll probably be asked to pay back wages plus an equal amount of liquidated damages. Don't expect to get the benefit of the doubt. If an argument could be made one way or the other, you're running a risk. One problem can quickly evolve into a collective action where multiple employees must be paid. 

​

The best way to look at this issue is with an attorney. That way, you are protected by attorney-client privilege, allowing you to correct problems without creating evidence against yourself. Plus, even if the Department of Labor disagrees with your attorney’s assessment of who is exempt, getting a written legal opinion beforehand gives you a much better chance of avoiding liquidated damages and fines.

​

2.    Independent Contractor Claims
 
If you use independent contractors, you can bet the Department of Labor will be very skeptical. Why does this matter? If someone is an independent contractor, he or she is not protected by employment laws, including those requiring timekeeping, overtime, and minimum wage. You're also not paying payroll taxes. So if you incorrectly claim someone is an independent contractor when he or she is an employee, it can be incredibly costly. You could owe overtime, taxes, penalties for delinquent taxes, liquidated damages for unpaid wages, etc.
 
What makes someone an independent contractor vs. an employee? To oversimplify, it comes down to how much control and time the person spends with your company. The more time he or she spends with your company and the more control you have over him or her, the higher the likelihood that the Department of Labor will think you misclassified the person.
 
You can still be liable for fines and damages even with a written agreement. The best way to combat this issue is to avoid classifying individuals as independent contractors whenever in doubt. And when you use individuals as independent contractors, ensure there is a written agreement, the person has an LLC or other corporate entity, and the level of control is minimal. 

​

3.    Timekeeping Practices
 
The Department of Labor will look hard at your timekeeping practices. You know that time when employees load or unload gear or get instructions at the beginning of the day? Make sure they clock in for it. You know that lunch break? You might want to pay employees for that time. If you're not going to, ensure the lunch break is at least 30 minutes, and employees can use the time however they want with no work being done. You know how some companies occasionally round down for time? I don't recommend it. 
 
But most importantly, many landscaping companies get in trouble for not paying employees for driving from the company to the job site and then from job site to job site during the workday. Don't make this mistake. Pay employees for this time. Ensure you put the right policies in your handbook, too.

​

4.    Bonus Practices
 
If you're going to pay a bonus to employees, you need to be aware that this can affect how overtime is calculated for non-exempt employees. Suppose the bonus is non-discretionary. In other words, the bonus is tied to some metric, performance incentive, or guarantee. In that case, you need to calculate that bonus into the normal pay to determine the employee’s “regular rate” for overtime calculations. If you pay $15.00 per hour but a bonus makes the effective rate $20.00 per hour, overtime should be $30.00 an hour rather than $22.50 (1.5 times the regular rate). 

​

Most companies see this as a technicality. But to the Department of Labor, it's much more than that. It's a form of wage theft. Many employers opt to make all bonuses purely discretionary because of this. If you take this path, clearly articulate it in writing. Likely, your employee handbook is a good place for you to address this issue. 

​

5.    Child/Youth Labor 
 
Finally, something you need to be especially cautious about right now is standards for youth employment. Many landscape companies forget that these standards limit when youth can work, what kind of equipment they can use, and what kind of manual labor is acceptable. Given labor shortages, some landscape companies rely more heavily on youth labor. That's fine. But beware, something as simple as using power tools, working more than 8 hours a day, or unloading heavy materials from the back of a pickup truck, could be the sort of issue that puts your company in a position where you find yourself accused of child labor violations. That's not the headline you want on the paper's front page. 
 
Conclusion 

​

Landscape companies need to be aware of plenty of other issues when it comes to wage and hour compliance and Department of Labor investigations. For instance, please ensure you have current posters in a breakroom or location where employees can easily see them. Ensure quality timekeeping and pay records that are easy to provide at the Department of Labor’s request. Never retaliate against an employee who reports a wage and hour issue or participates in an investigation.

​

No matter what you do, don't lie to the Department of Labor. That's a recipe for even more problems. You might even turn a civil case into a criminal one. Instead, work with an attorney, preferably before the Department of Labor shows up, to audit and correct your wage and hour issues. If the Department of Labor shows up at your doorstep (and eventually it probably will), consider the above issues and work with counsel so you don't inadvertently say or do something that could make a bad problem even worse. 

For help auditing and correcting your pay practices or working through a Department of Labor investigation, contact Anders at agillis@parkerharvey.com.