Don’t become the next target. As you read this, hundreds of employers are facing employee lawsuits for alleged violations of the Fair Labor Standards Act (FLSA) and state wage laws.
“One source reported that FLSA lawsuits now outnumber federal employment discrimination suits,” says Blake Burgan, partner at Sommer Barnard PC. As the filing of FLSA lawsuits mounts at an ever-increasing pace, employers must ensure they fully comply with FLSA and state wage laws.
Smart Business discussed with Burgan the significance of knowing and following wage and hour laws.
How do state and federal laws affect employees’ wages and hours?
The FLSA generally governs the payment of minimum wage and overtime to certain employees. Covered employers must pay a nonexempt employee overtime wages for the hours that exceed 40 hours in a work week. Indiana law also contains very specific requirements regarding the timing of wage payments and the deductions allowed from employees’ wages.
What consequences can result from noncompliance with labor laws?
The penalties for failing to comply with both state and federal wage-and-hour laws can be quite severe. Where a violation of the FLSA has occurred, an employer may be required to pay any back wages owed to employees for a period of up to three years. In addition to these back wages, the employer may have to pay liquidated damages in an amount equal to the amount of back wages.
Accordingly, a failure to accurately pay minimum wage or overtime wages, even if the failure is an accident, can result in an award totaling twice the amount of back wages due. The affected employees in an action to recover unpaid minimum wage and overtime wages may also be awarded their attorney’s fees and other costs associated with bringing the lawsuit.
Employers who are found to have intentionally violated the FLSA may be prosecuted criminally and face substantial fines. Significantly, in addition to the company itself, certain employees of the company may also be held individually liable for FLSA violations.
Indiana law also contains harsh penalties for employers that fail to comply with the wage statutes. For example, where an employer fails to make a timely payment of wages as required by Indiana law or makes an improper deduction from an employee’s wages, the employer will be required to pay an amount equal to three times the amount that was originally due to the employee (or three times the amount that was unlawfully deducted from the employee’s wages). Like the FLSA, Indiana’s wage laws also allow an employee to recover his or her attorney’s fees.
How can employers determine if they are following wage-and-hour laws?
Employers should audit (or have their counsel audit) their general payroll practices to ensure compliance with federal and state laws. Many lawsuits arise from claims that employers have improperly classified certain employees as exempt under the FLSA, and as a result have failed to pay proper overtime wages. Employers should have their counsel review how they have classified any salaried exempt employees to ensure that they have complied with the Department of Labor’s regulations.
Employers can also find useful information on the FLSA on the Web site of the United States Department of Labor, www.dol.gov. Information on Indiana’s wage laws is available at the Indiana Department of Labor’s Web site, www.in.gov/labor and at www.in.gov/legislative/ic/code/title22.
What should businesses do to remedy areas of noncompliance?
Recognition of a potential wage-and-hour problem is the first step to remedying any noncompliance.
Employers should be careful not to be lulled into a false sense of security that minor transgressions of wage-and-hour laws can be ignored without consequences. Seemingly minor, technical violations of the FLSA or Indiana wage laws can, if ignored, suddenly blossom into class-action lawsuits involving hundreds of employees and thousands of dollars in liability and legal fees.
Employers can help prevent such lawsuits by remedying any known problems. The nature of the remedy depends on the particular violation, but it commonly involves modifying payroll practices, eliminating or modifying certain timekeeping practices, and reclassifying employees as exempt or nonexempt.
After reviewing their wage-and-hour practices, employers should consult with their counsel about any problems and the proper remedial measures to be taken.
Do you have any closing thoughts?
Employers should continuously train and instruct their managers and supervisors on the FLSA’s requirements, and they should review and revise other payroll policies and practices (including certain wage deduction practices) to ensure that they are in compliance with the FLSA and Indiana wage laws.
BLAKE BURGAN is a partner in the Labor and Employment Department at Sommer Barnard PC. Reach him at (317) 713-3596 or [email protected].