Employers hear a lot about overtime violations and other wage and hour offenses. There are so many rules to learn and so many cases in the news. It can be a little scary to think about the consequences of getting an employee’s payroll wrong.
There’s some good news and some bad news for employers in this regard.
Inadvertent Pay Mistakes
When an honest mistake is made, and gets corrected as soon as the employee spots it and brings it to the employer’s attention, the mistake might fall under the Window of Correction and get pardoned by the DOL. If an employee sues its employer and the DOL recognizes that the company diligently followed wage and hour laws but simply made an inadvertent mistake which it quickly fixed, the employer might escape without getting hefty violation fees. Some common honest mistakes include:
- Making payroll deductions for exempt employees
- Possibly other minor pay errors
The DOL usually rules in favor of employees but sometimes an honest mistake is recognized as such and the employer isn’t punished. For this reason, it is important to correct mistakes when they’re spotted.
Deliberate Pay Mistakes
On the other hand, some employers deliberately violate wage and hour laws. Their reasons vary. Some are clearly just trying to save money at the employee’s expense and some are just taking shortcuts to save time. Either way, the DOL does not look kindly upon some of these common violations:
- Manually adjusting time records with intent to reduce overtime
- Paying straight time for all hours, even for hours over 40 in a workweek
- Allowing employees to finish work at home on their own time without pay
- Refusing to pay for “unauthorized” overtime
- Paying under minimum wage
- Misclassifying hourly employees as exempt or contractors
- Not paying employees for setup time, travel time, or other unconventional types of work
- Calculating overtime biweekly rather than weekly (FLSA clearly states that overtime is calculated for hours worked over 40 in a workweek at a rate not less than one-half times their regular rate)
Reducing employees’ hours and cutting out overtime is a deliberate wage and hour violation that hurts employees and benefits employers.
Some of the others can potentially hurt employees and so are also investigated. For example, an employee that is classified as exempt and paid a monthly salary that is at or above minimum wage and who never works over 40 hours isn’t actually losing anything by being misclassified but the DOL would probably prosecute anyway if the employer were investigated because this type of error could result in lost wages.
Some employers just don’t know about setup time, travel time, and waiting time. They aren’t aware that they have to pay their employees when they are ready and willing and scheduled to work even if the work they’re doing doesn’t look like work. This can be a lazy mistake when employers fail to learn wage and hour laws.
For employers that don’t use an automatic time clock system, calculating overtime is a terrible pain and if pay day is every two weeks, then calculating overtime for that two week period just seems so much easier. It’s not legal though. Overtime has to be calculated each workweek period of 7 days.
Employers that make any of these mistakes could get a knock at their door by a Department of Labor investigator.
How Violations Are Reported
Any employee can google “report pay violations” or some such term and land on this DOL page: https://www.dol.gov/whd/howtofilecomplaint.htm where they can learn all they need to know about filing a complaint against their employer.
As the DOL says themselves, most investigations are initiated by employee complaints. Being a kind, knowledgeable, and law abiding employer is the safest route these days.
How Investigations Are Conducted
A Department of Labor investigation is done anonymously and unannounced. The investigation will begin without warning. However, the employer can be represented by its attorney or accountant at any time.
When the investigation begins, “The WHD investigator will identify himself/herself and present official credentials. The investigator will explain the investigation process and the types of records required during the review”
An investigation consists of the following steps:
Examination of records to determine which laws or exemptions apply. These records include, for example, those showing the employer’s annual dollar volume of business transactions, involvement in interstate commerce, and work on government contracts. Information from an employer’s records will not be revealed to unauthorized persons.
Examination of payroll and time records, and taking notes or making transcriptions or photocopies essential to the investigation.
Interviews with certain employees in private. The purpose of these interviews is to verify the employer’s payroll and time records, to identify workers’ particular duties in sufficient detail to decide which exemptions apply, if any, and to confirm that minors are legally employed. Interviews are normally conducted on the employer’s premises. In some instances, present and former employees may be interviewed at their homes or by mail or telephone.
When all the fact-finding steps have been completed, the investigator will ask to meet with the employer and/or a representative of the firm who has authority to reach decisions and commit the employer to corrective actions if violations have occurred. The employer will be told whether violations have occurred and, if so, what they are and how to correct them. If back wages are owed to employees because of minimum wage or overtime violations, the investigator will request payment of back wages and may ask the employer to compute the amounts due.
How to Avoid These Violations
Hiring an HR consultant or having an in house HR department can help a company avoid these problems since human resources professionals are trained in labor laws.
Some small businesses cannot bear that expense and so reading up on wage an hour laws on the DOL’s website is a must. Using a time tracking service and payroll service that abide by pay and record keeping rules will also help reduce the possibility of errors.