The Cost of Not Paying Employees Correctly

You may have noticed that Wage & Hour audits and lawsuits are on the rise.
In August of 2004, new changes to the Fair Labor Standards Act (FLSA) occurred and resulted in opportunities to increase wage claims. One change in particular is the portion of the regulations allowing for attorneys’ fees and the ability for complainants to go directly to the courts with their grievances.

So what does that mean for you and your business? An inappropriate employees setup structure for classification and payment of wages can be costly. The following items tend to be just a few of the areas employers are least likely to address correctly:

  • Whether someone should be classified as an employee or an Independent Contractor (based on IRS criteria)
  • Whether an employee should be classified as exempt or non-exempt for overtime payment under the FLSA
  • If the method of payment of an employee’s wages meets FLSA requirements
  • What pay deductions are allowable (based on federal and state laws)
  • When an employee who leaves the company has to be paid (based on state law requirements)
  • How vacation or PTO should be paid at termination (based on state law requirements)

The Department of Labor looks back over two years for violations of back wages. If it is determined that the violation is willful, the period increases to three years with fines and penalties. Some claims may include all employees that are “similarly situated,” so it doesn’t necessarily mean it is a one-person claim. If time records are not kept accurately, the employer must prove what the employee is stating is inaccurate, so timekeeping systems should be evaluated to ensure correct recording.

Costly fines, penalties and payment of back pay can be very detrimental to any business. Fortunately, Oasis can provide our clients with the resource information they need to review these practices so they can help ensure their companies are meeting FLSA regulations.