Most employees in the U.S. are “W-2” workers, who are paid an hourly wage and are covered by the Fair Labor Standards Act, a federal law enacted in 1938. Because of its broad coverage, the Fair Labor Standards Act applies virtually to all hourly employees and all employers.

The FLSA sets minimum standards for minimum wages, overtime pay, record keeping and child labor.  Violations of the FLSA are investigated and enforced by the Department of Labor.  From 2007 to 2011, the DOL conducted 68,644 enforcement actions, found violations in 73% of its investigations and collected back wages for employees from employers totaling $681,151,513.00 or about $13,524.57 per case.  These numbers do not include statutory damages or awards for reimbursement of attorney’s fees.

There are ten, primary reasons for FLSA violations, virtually all of which are avoidable!

Number 10:     Employer’s failure to pay employees for training time.

Number 9:       Employer’s failure to pay employees who work when not scheduled to work and “volunteer” their time to the employer; if the employer permits this situation, even without authorization, it is a violation.

Number 8:       Employer’s failure to pay overtime for hours worked in excess of 40 per week or failure to pay the correct overtime rate of pay.

Number 7:       Employer’s failure to pay employees for short breaks.

Number 6:       Employer’s docking of employee time spent working on the clock;

Number 5:       Employer’s failure to pay employees who work through unpaid lunch.

Number 4:       Employer’s failure to pay employees who clock out and continue to work “off the clock.”

Number 3:       Employer’s misclassification of employees as “independent contractors” (for whom no tax and other mandatory withholdings must be made and who are not eligible for benefits), when working exclusively for the employer, at hours fixed by the employer, at a set wage, subject to the employer’s supervision and control, whether at the employer’s place of business or remotely, or there are other attributes of employee status presented.

Number 2:       Employer’s misclassification of employees as “exempt” who are paid a salary and not entitled to overtime pay.

Number 1:       Employer permitting the employee to work “off the books.”

Most often the DOL is notified of an alleged violation by a recently terminated or otherwise disgruntled employee.  The DOL will then conduct an onsite audit as to all of the employer’s employees (not just the employee who made the claim whose identify will be kept confidential).

Even if upon completion of the DOL’s investigation, the complaining employee’s claim is meritless, if any other violation of the FLSA is found as to any other employees during the investigation, back pay will be awarded to the employees and hefty penalties assessed against the employer. If the violation involves misclassification of an employee as an independent contractor or payment of an employee “off the books,” significant tax penalties will also be assessed together with assessment for all unpaid, mandatory withholding amounts and for mandated, unpaid worker’s compensation and unemployment insurance coverage.

Over the past five years, New York State has also invested heavily in additional DOL manpower to investigate these claims and changed its procedures to make it easier to prove these claims. There is even a mobile phone app available that can be used to file a claim with the DOL.

For all of these reasons, FLSA violations are best avoided.  As an employer, this means making certain that you are complying with the law and if in doubt, consulting with competent legal counsel; the legal fees to defend are significant and an adverse determination will result in payment of back pay, statutory damages and in some cases, payment of employee legal fees.

As an employee, this means knowing your rights, being proactive, communicating with your HR liaison at work (and documenting your communication) if you believe you are not being paid properly, and if dissatisfied with your employer’s response, contacting legal counsel for legal advice to prosecute your claim.

Carol Maue is a Partner and Chair of the Business Law Group at Boylan Code LLP, concentrating her practice in business and finance, intellectual property, and employment law matters. 

*This article is provided as a courtesy to our clients and friends and is not intended to, and does not constitute legal advice

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