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Home - The Management Association
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Paying Properly: Do You Know the Legal Risks?
by Kate Bandrapalli, Legal Extern, Third Year Student at Chicago-Kent College of Law
Published Sept 7, 2010
According to the Department of Labor's (DOL) February 2010 newsletter, 250 new investigators have been added to the Wage and Hour Division (WHD) to target more employers for wage and hour audits. Organizations from a variety of industries are susceptible for an audit. In fact, the aggressive efforts by the WHD have resulted in substantial recoveries from seven different employers just within the last 45 days. Consequently, employers are highly encouraged to take proactive measures by reviewing the classification of employees as exempt or non-exempt, auditing overtime payment practices, and ensuring that accurate time keeping and payroll records are maintained. The WHD web page summarized the errors identified following investigations:
- A security and alarm service provider agreed to pay $248,000 in back wages to both current and former employees for (1) failure to properly classify employees as exempt, (2) paying straight salary without calculating the number of hours worked in a work week, and (3) failure to maintain accurate record keeping.
- $70,000 awarded in back wages to 76 current and former workers employed by an oil well equipment service company. The investigation identified errors in the (1) failure to compensate time and one half for hours worked for time traveled from the company's facility to various well sites and (2) failure to keep accurate time and payroll records.
- 1,065 time-share company employees will receive $868,443 in back wages. Following an investigation, the WHD identified errors in (1) failure to pay at least the federal minimum wage, (2) failure to pay commission in the premium pay, (3) failure to accurately compute overtime hours, and (4) failure to maintain accurate time records.
- The DOL recovered $232,773 in back wages and overtime for 110 current and former employees. The employer, an oil and gas equipment maintenance company, agreed to compensate employees for (1) failure to pay overtime hours worked beyond a 40 hour week and (2) failure to maintain accurate time and payroll records.
- 144 current and former employees of a home health care organization will receive $150,043 in back wages. The WHD investigation identified the failure to compensate at the overtime rate of time and a half for all hours exceeding 40 per work week.
- $433,819 awarded to 69 Walt Disney World employees. The investigation identified errors in the failure to compensate for (1) work activities before and after shifts, (2) working through meal times, and (3) working from home.
- $136,679 awarded to 140 current and former construction workers. Following an investigation, WHD identified errors in which both the prime contractor and subcontractor (1) failed to pay overtime and (2) failed to pay overtime to two salaried non-exempt employees.
These investigations emphasize the importance of ensuring that hourly (non-exempt) employees are being paid correctly and that accurate time and payroll records are maintained. Taking preventive steps in advance and conducting a comprehensive audit will prepare for a potential investigation by the WHD or minimize exposure if a lawsuit occurs. More importantly, reviewing records for errors in payment practices could prevent substantial financial recoveries by the WHD, save potential costs associated with legal fees, and save valuable time spent by the employer in responding to the arduous work of document requests that result from an audit or lawsuit.
At minimum, management and human resource professionals should examine these key areas: (1) misclassification of employees as exempt, (2) failure to pay overtime, (3) proper calculation of the regular rate of pay, (4) donning and doffing activities, and (5) maintaining accurate time keeping and payroll records.
