Legal Ease PAYROLL ISSUES, PERSONAL LIABILITY–
Employers Paying the Penalty for Wage and Hour Violations
by Richard D. Alaniz When it comes to prosecuting wage and hour violations,
the stakes are getting personal. In several recent cases, the gov- ernment has gone after company owners and officers for failing to pay overtime, leading to stiff fines and even imprisonment. In one case, the president of a sheet-rocking company based in Minnesota was sentenced to two years in jail and a po- tential fine of $3.3 million for underpaying employee overtime and union pension and benefit contributions. “This sentencing shows that the Labor Department is committed to ensuring that justice is served for those who steal from their workers,” said James Purcell, acting regional director of the U.S. Department of Labor’s Employee Benefits Security Administration’s Kan- sas City Regional Office. Under the Fair Labor Standards Act, “any employer” who
violates minimum wage or unpaid overtime compensation laws may be liable for the shortfall, along with liquidated damages, which means double the damages. The FLSA definition of “em- ployer” can be very broad. Along with supervisors and high- ranking executives, it can also include officers and directors. To avoid both FLSA violations and personal liability, em- ployers need to be sure they comply with all relevant minimum wage, overtime and other salary- and benefit-related regulations and agreements. Otherwise, they may find themselves paying a steep price.
FLSA Investigations and Penalties When workers are eligible for overtime, they have to be
paid at least one and a half-times their regular rate of pay for the time they work over 40 hours in a week. But determining who qualifies for overtime versus who is exempt can be difficult, and employers often run into trouble. The Wage and Hour Division of the Department of Labor conducts investigations of alleged FLSA violations. When, pur- suant to such an investigation, the Department of Labor decides a company is not in compliance with FLSA, there are several ways employee back wages can be recovered:
• The Wage and Hour Division may supervise payment of back wages;
•
The Secretary of Labor may bring suit for back wages and an equal amount as liquidated damages;
• An employee may file a private suit for back pay and an equal amount as liquidated damages, plus attorney’s fees and court costs; and
• The Secretary of Labor may obtain an injunction to restrain any person from violating FLSA, including the unlawful withholding of proper minimum wage and overtime pay.
When it comes to the recovery of back pay, there is a two-
year statute of limitations except in the case of a willful viola- tion. With willful violations, the statute of limitations is three years. When employers are found to willfully violate FLSA, they can also face criminal prosecution and fines up to $10,000. Upon a second conviction, employers could face imprisonment.
Staying Out of FLSA Trouble In order to stay out of trouble, employers should do the fol- lowing to ensure they are paying workers properly:
Classify Employees Properly The U.S. Department of Labor and the Internal Revenue Service have recently teamed up to make it easier for the Labor Department to track down companies that misclassify employ- ees in order to avoid paying overtime and violate other areas of the law designed to protect employees. “The misclassification of employees as independent contractors is an alarming trend,” Secretary of Labor Hilda L. Solis said recently. “The practice is a serious threat to both workers, who are entitled to good and safe jobs, and to employers who obey the law and are undercut when others use illegal practices. The Department of Labor is committed to remedying employee misclassification and ensur- ing compliance to protect and enhance the welfare of the na- tion’s workforce.”
Know State Laws Along with federal laws, some states also have broad defi-
nitions of who qualifies as an employer under state wage and hour laws. This could increase liability at the state level. For ex- ample, under New Jersey’s Wage and Hour Law, an “employer includes any individual, partnership, association, corporation or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee.” Employers should consult with legal counsel to understand
who may be liable for overtime infractions, so they can plan accordingly.
84 February 2012
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