With the recent increase in statutory and regulatory compliance issues for America’s employers, it is not surprising that employers often focus their human resources and legal compliance efforts solely on understanding and complying with new employment developments. As a result, compliance with current laws often does not get needed attention, even though the likelihood of significant financial exposure may be greater for violations of existing statutes. This is perhaps most true in the case of the federal wage and hour statute, the Fair Labor Standards Act (“FLSA”).
FLSA cases are dramatically on the rise across the nation. In many jurisdictions, they are now the most common type of federal claim, even surpassing discrimination lawsuits. The trend is apparent even in a conservative jurisdiction like Georgia, where the number of federal FLSA lawsuits has tripled since 2006. The Department of Labor and plaintiffs’ lawyers now are targeting not only large, well-known companies, but also mid- and smaller-sized employers. Employers often think because their business is small, they must not be large enough to be covered by the FLSA. Unlike most other employment laws, however, coverage under the FLSA is not based on the number of employees. Rather, coverage is determined by whether the work affects interstate commerce, which results in virtually all employers being covered.
Some of the most common mistakes employers make in wage and hour law -- and, accordingly, where the Department of Labor and plaintiffs' lawsuits are focusing -- are:
- misclassifying employees as exempt from the FLSA’s overtime requirements;
- misclassifying employees as independent contractors;
- failing to pay employees, when required, for meal or rest breaks, time spent “donning and doffing” (putting on and removing protective clothing or equipment), or work performed outside of working hours by email or on a cell phone; and
- offering unpaid internships to students or new workers.
These and other wage-hour violations can have significant legal and financial ramifications for employers. From a financial standpoint, small- and medium-sized employers are as much, if not more, at risk as large employers since FLSA claims literally can jeopardize the financial viability of a business. Remedies for violations of the statute add up quickly. Successful plaintiffs are entitled to unpaid wages, including unpaid overtime, liquidated (double) damages, and attorney’s fees. Last year alone, the Department of Labor collected more than $185 million in unpaid wages from employers. These damages are compounded in “collective action” cases, where similarly situated employees are given the opportunity to join the lawsuit and seek recovery for their own back pay. Even more troublesome is the fact that there typically is no insurance available for employers of any size for damages in a wage-hour case.
Given the significant financial risk, employers are well served to consider a proactive FLSA compliance audit in order to prevent or correct wage-hour violations and avoid a Department of Labor audit or a lawsuit. FMG’s Labor and Employment Law group can assist with performing an FLSA compliance audit and identifying potential violations.
For more information regarding this article, please contact Mary Anne Ackourey at 770.818.1407 or by email at [email protected] or Amy Combs Bender at 770.818.1421 or by email at [email protected].