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$1.75 Million Penalty Newest Evidence of Wage and Hour Crackdown

When it’s necessary to get a drink of water, quickly text a spouse or even answer nature’s call, most employees don’t think about tracking the time they spend seeing to these personal needs. However, this was not the reality for the employees of one Pennsylvania company, that required workers to clock out for “any time not spent working,” including trips to the restroom and other breaks lasting just two to three minutes. At the end of the week, break times would be deducted from employees’ hours worked. As a result, some employees’ earnings dropped below minimum wage.

In 2013, the U.S. Department of Labor filed a lawsuit citing that the practice, and its effect, violated the federal Fair Labor Standards Act (FLSA). On Dec. 16, 2015, a federal judge ruled the company and the company’s owner were liable for up to $1.75 million in back wages and liquid damages. A payment proposal is currently in the works. USA Today reported the business owner plans to appeal the decision.

While it’s clear why the minimum wage issue is problematic, the rules surrounding employee breaks may be less so. According to the department’s website, the law doesn’t require employers to offer breaks. However, it does govern the process once employers choose to do so. The law describes breaks lasting anywhere from five to 20 minutes as “rehabilitative,” which means they are compensable time that should be included in an employee’s total number of hours worked.

Implications for employers

According to one attorney at the U.S. Department of Labor’s Philadelphia office, “This action underscores how aggressively we plan to enforce the law to ensure that workers receive the proper wages.” Employers in every state should take this warning to heart as the department continues to crack down on all manner of wage and hour violations.

In the past, the agency typically acted in response to employees who claimed they were not receiving overtime. However, the Wage and Hour Division (WHD) has increased the number of investigations that are launched independently of an employee complaint. The department reported that “in the fiscal year 2014, more than 43 percent of investigations were agency-initiated, up 35 percent from just five years ago.”

Additional statistics provided by the U.S. Department of Labor illustrate the agency’s recent increase in wage-recovery efforts and its intent to continue aggressive enforcement of the FLSA:

  • Since 2009, the agency has recovered $1.3 billion in back wages.
  • The WHD found wage violations in 78 percent of agency-initiated investigations, up from 65 percent in fiscal year 2009.
  • In the fiscal year 2014, WHD collected an average of more than $659,000 in back wages every day.

Unfortunately, the scrutiny employers face regarding their timekeeping and payroll practices will only be compounded by the proposed implementation of overtime expansion. Now’s the time employers should consider examining company policies, auditing their workforce and looking at how payroll and HR technology can help them manage the increasingly heavy burden of complying with all aspects of the FLSA.

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