Oftentimes, violations of the FLSA are discovered either as a result of an audit/investigation conducted by the Wage and Hour Division or a charge filed by an employee for unpaid wages with the DOL (or state equivalent).
When an employer is determined to be in violation of the FLSA, an investigator representing the Wage and Hour Division may recommend changes in employment practices to bring the employer into compliance.
The FLSA provides several methods by which employees can recover unpaid overtime wages:
- The Wage-Hour Division may supervise payment of unpaid overtime wages
- The Secretary of Labor may bring suit for unpaid overtime wages and an equal amount as liquidated damages
- An employee may file a private lawsuit for back pay and an equal amount as liquidated damages, plus attorney’s fees and court costs
- The Secretary of Labor may obtain an injunction to restrain any person from violating the FLSA.
In addition, willful violations of the FLSA may be prosecuted criminally and the employer fined up to $10,000, with a second conviction resulting in imprisonment. Employers who willfully or repeatedly violate overtime pay requirements are also subject to a civil money penalty of up to $1,000 per violation under the FLSA.
In New York, an employer who willfully violates the state’s wage and hour law will be required to pay an additional amount as liquidated damages equal to 25% of the total amount of wages found to be due.
Statute of Limitations
The DOL will investigate claims going back three years from the date the claim is filed for willful violations of the FLSA, and two years for claims where no such “willfulness” is apparent.
The New York State Department of Labor will investigate claims going back six years from the date the claim is filed.
Combine these time limits with the reality that oftentimes, an entire group of employees (i.e., a “class” ) will file a lawsuit for unpaid overtime, and the lack of overtime compliance becomes extremely expensive for employers.
Safe Harbor
Employers sometimes make improper deductions from the salary of exempt employees. These deductions, like the misclassification of employees as exempt, are violations of the FLSA.
The revised 2004 DOL regulations provide employers with a “safe harbor,” which is a brief period of time in which employers have the opportunity to correct any such improper deductions. The creation and implementation of a “Safe Harbor” provision can protect the Company so long as the provision:
- Is clearly communicated to employees (i.e., by publishing it in your employee handbook)
- Prohibits improper pay deductions and includes a complaint procedure for employees to follow
- Offers reimbursement of employees for improper deductions
- Indicates that the Company has a “good faith” commitment to avoid making improper deductions in the future.
Compliance Review
If you have not yet assessed whether your Company is in compliance with the DOL regulations, you are not alone.
All employers should, at some point, conduct a “compliance review” in order to determine which employees are covered by an exemption. It is a good idea to retain legal counsel to assist in the review, as the actual DOL regulations are complex and involve more nuances than the summaries provided above. Our compliance reviews often involve:
- Determining which employees are covered by an exemption Identifying previously exempt employees earning less than $455 per week and either raising pay or converting to non-exempt statuS
- Identifying employees earning in excess of $100,000 and reviewing their duties
- Reviewing job responsibilities of employees in the “gray area”
- Revising job descriptions in accordance with the job duty review
- Working with your payroll department to ensure classifications are updated in your system and that only proper deductions are being made Issuing a “Safe Harbor” policy
- Managing the employee relations aspect of changes in status (including employee communications).
The number of Wage and Hour investigations and employee lawsuits to collect unpaid wages is on the rise, and the penalties for noncompliance are exorbitant. It is therefore essential that employers devote significant resources toward properly classifying employees.