Not complying with overtime provisions of the U.S. Department of Labor’s “Fair Labor Standards Act” (FLSA) can lead to hefty payouts of back wages and penalties, not to mention the headache of collective action lawsuits and expensive settlements. Willful violators may also be fined and prosecuted criminally, and a second conviction may result in (gulp!) imprisonment.
Need proof of the pain we’re talking about? Here are real-life examples of what companies have had to shell out:
- $20,000 in back pay and civil penalties for repeated violations of overtime provisions
- $175,000 for willfully violating FLSA overtime and recordkeeping requirements
- $1 million in class action lawsuit for misclassifying employees as exempt from overtime pay
- $15 million to settle class action for failing to properly calculate overtime
- $87 million in class action settlement for improper overtime calculations
- I think you get the picture. Ouch!
Who Hadn’t Gotten the Memo Yet?
A California strawberry farm. A New York pizzeria. A Major League Baseball team. A husband & wife cleaning service. A private security firm. An auto shop in a hit MTV show. An iconic department store. A national power tool company. And, just this week, a prominent professional social network.
These diverse companies ― from small mom & pops, to mid-sized franchises, and large mainstream enterprises ― all have in common the fact that they’ve each breached the FLSA overtime provisions and had to cough up what jointly amounts to millions of dollars. And the thing is ― they are far from isolated incidents.
The Curious Case of the Missing Overtime Payments
In a nutshell, the FLSA says that business owners must pay employees classified as ‘nonexempt’ at 1.5 times their regular rate if they work over 40 hours in a work week. It also requires them to keep accurate records of employees’ wages and hours. Sounds doable, right?
So what led these companies to skirt the overtime requirements? The reasons are startlingly mundane, and run the gamut from error-prone recordkeeping, to employee misclassification, to the employees’ own acquiescence. Some business owners and execs ― who are used to being kings of the castle ― think that they can simply waive away the overtime requirements. [Hint: they can’t.]
Pause a Moment and Consider This
- FLSA Wage & Hour lawsuits have increased by more than 77% since 2004
- The number of FLSA collective action lawsuits has increased by nearly 500% in that time
- Overtime violations represent almost 88% of all FLSA back wages recovered for non-compliance
- More than $280 million in back wages were collected for over 308,000 employees in 2012 alone
If these staggering stats haven’t given you pause, this little fact should: The burden of proof is 100% with the employer to comply with FLSA regulations.
Proactive Compliance: The Buck Stops Here
Let’s say you’re slapped with a lawsuit (oh no), but you prevail (whew) ― all’s right in the world again, right? Um, not so fast. Fighting a lawsuit is über-expensive and can drag your brand name and reputation through the dirt, so even winning can damage your bottom line. Your goal should be to minimize any exposure ― and stay out of court in the first place!
Luckily, there’s a LOT you can do:
- Keep pace with wage & hour laws and regulations
- Get key influencers involved, and set a compliance safety net for your company
- Make sure to classify employees correctly
- Promulgate clear policies on timekeeping and attendance
- Train all managers and employees on proper time tracking compliance procedures
- Automate business rules around overtime to ensure overtime calculations are accurate
- Automate capture of time and attendance to stem violations that expose your company to risk
- Make sure that your time tracking software has the ability to generate reports and audit trails to demonstrate compliance in case of an investigation
Listen, we get it ― compliance with overtime regulations isn’t always easy, but boy is it worth it, literally!
To Learn More
View a recorded free webinar by a top compliance expert from the labor law firm, Littler Mendelson.
Visit the Replicon Labor Law Compliance site to review additional materials.
Visit the FLSA Overtime Calculator Advisor page for more information on your rights and responsibilities under federal employment laws.
Information about state overtime laws may be found through the state labor offices.
Contact us for more information: 1-877-662-2519