FIXING OVERTIME AND MINIMUM WAGE MISTAKES
The Fair Labor Standards Act’s minimum wage and overtime laws are complex. The complexity means that even the best-intended companies violate the FLSA.
The FLSA is largely interpreted through a complex regulatory framework. Common mistakes include misclassifying employees, improper deductions, or failing to understand what time is compensable. The FLSA’s record-keeping requirements can be especially challenging to comply with when employees work remotely or outside regular work hours.
But ignorance and complexity is often no excuse in the eyes of aggressive wage and hour investigators or private attorneys. That’s why when violations are discovered or suspected, employers must take steps to avoid further liability. Correcting mistakes can be a difficult and painful process. But having those mistakes corrected (involuntarily) by the Department of Labor or outside counsel can be much more painful and expensive. So what should a company do when it suspects minimum wage and overtime violations?
Hire an Employment Attorney
The moment you suspect potential wage and hour liability is the moment you need attorney-client privilege. Everything you say, write, or communicate about the potential liability is a potential trial exhibit against you if you don’t have attorney-client privilege. The attorney should specialize in employment law. The FLSA is an archaic and complex law. It was enacted in 1938 before the internet or smartphones. Much of the law is driven by a complex regulatory framework. An attorney who specializes in employment law will be able to assess liability and take steps to mitigate the potential damages. You’ll sleep better at night knowing there is someone you can talk to, and figure out solutions with, without creating additional liability.
If it Returns, Consider the PAID Program
In 2018 the Department of Labor introduced the Payroll Audit Independent Determination (“PAID”) program. The program allowed employers to self-report potential overtime and minimum wage violations. Employers who self-reported could work in good faith with the Department of Labor to resolve those problems. The advantage of the program was that it helped employers correct mistakes while avoiding liquidated damages and penalties. Unfortunately, however, the PAID program was taken away under President Biden. But there is some push to get it back.
If it returns (or something like it), employers should consider whether voluntary correction under a government administered program makes sense for them.
Act in Good Faith
If you suspect minimum wage or overtime violations, act in good faith to investigate and resolve those issues. If an employer knows of a problem or suspects a problem and fails to take corrective action, the penalties can be severe. Failing to act in good faith could trigger liquidated damages, a longer statute of limitations, penalties, and attorney fee-shifting provisions. This can quickly turn a $25,000.00 problem into a $150,000.00 debacle.
Conclusion
The FLSA is a complex law. Even well-intended employers violate the law. This is problematic because, under the FLSA, individuals who exercise control within a company (e.g., officers, executives, and managers) can be held personally liable for unpaid wages, attorney fees, and costs. In other words, minimum wage and overtime violations can cause personal financial ruin for a company’s key personnel.
But prompt, remedial action, taken with the advice and experienced counsel, can dramatically mitigate the risks. As a result, FLSA violations should be taken seriously, dealt with promptly, and navigated in good faith with the advice of experienced counsel.
