Employers Pay $740,000 a Day

By Lehr Middlebrooks Vreeland & Thompson, P.C.

May 24, 2018

Employment litigation in general has declined as an outcome of a robust job market. However, wage and hour litigation continues to increase. According to a report recently issued by the United States Department of Labor, Wage and Hour Division, for Fiscal Year 2017 DOL collected an average of $740,000 per day in back pay. Furthermore, during the past five years, a total of 1.3 million workers received back pay through DOL Wage and Hour claims and more than $1.2 billion dollars in back pay was collected by DOL. In Fiscal Year 2017, more than 240,000 workers received over $270 million in back pay. The average pay received was $1,125 per employee.

According to DOL, the Top Ten most expensive lawsuits for employer back pay during 2017 exceeded $180 million. Leading the charge was MetLife with a $50 million settlement for unpaid overtime. T-Mobile chipped in $19 million for unpaid overtime, missed meal and rest breaks and off-the-clock work. The public sector was not left out, as the Lexington-Fayette Urban County government (Kentucky) settled overtime violations with its firefighters for a total of $17.7 million.

Wage and hour compliance is one area in employment law where employers can know whether or not they have it “right.” That is, self-audits for compliance purposes can help an employer determine whether its practices meet state and federal wage and hour requirements. Usually, a wage and hour violation does not involve one employee, but several. The following are the examples of violations we see most often, and where employers are urged to do a self-assessment for compliance purposes.

1. Misclassification of employees. That is, an employee has been misclassified as exempt or an independent contractor. Titles are the least significant factors to consider for exempt status. Most exempt employees must be paid a regular, recurring salary to qualify for the exemption, and there are rules which limit employer docking of exempt employee pay.

2. Unpaid overtime/rest and break periods. The Fair Labor Standards Act does not require the employees receive a break. However, if the break is for 20 minutes or less, the break may not be deducted from an employee’s pay. An exception is if multiple breaks have to be given as a form of intermittent leave under the Family and Medical Leave Act. In that situation, a certain number of breaks may be deducted even if they are not longer than 20 minutes.

3. Failure to include incentive payments in overtime calculations. Compensation that is intended to influence an employee’s behavior, such as production bonuses, must be factored into the calculation of an employee’s overall hourly rate for overtime purposes. In essence, if an employee receives compensation for a job duty, that must be included in the hourly rate. For example, an employee receives $20 a day to be “on call.” The employee does no work, so there are no hours to report. However, because “on call” is a job responsibility, the amount received for “on call” must be included in the regular rate to determine overtime.

Note that several states have enacted wage and hour legislation more restrictive than the Fair Labor Standards Act. In some states, such as most recently, Pennsylvania, the popular pay system known as “fixed salary for fluctuating work week” is illegal. So when you conduct your wage and hour assessment, be sure that it includes compliance with state and local requirements.