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|HR Headaches: Government fines present real threat to businesses|
If I sometimes sound suspicious of government agencies, consider that most state human rights commissions and the federal Equal Employment Opportunity Commission (EEOC) get some of their money to operate from the fines and penalties they issue against employers.
Every week, state and federal organizations slap businesses with fines in amounts that will make your toes curl. In recent months, the following was “touted” by the Department of Labor:
• A car wash was assessed nearly $230,000 in back wages for alleged overtime ad minimum wage violations.
• Several restaurants were sued for approximately $1 million in back wages covering 164 workers.
• A printing company was required to pay $96,335 in overtime back wages.
Some areas can be worse. For cases involving the Fair Labor Standards Act (FLSA), fines can be up to three times actual damages!
Clearly some organizations deserve what they get, but even well-meaning firms can be tripped up by some of these regulations. For example, if just one of your employees thinks he or she is misclassified as a salaried employee it could result in an investigation of your entire organization.
It works this way: If an employee feels they’ve been misclassified and unfairly cut from overtime pay, he or she alerts the DOL and the DOL begins an investigation. None of that costs the employee.
The DOL or the state human rights commission will look into the actual complaint’s argument, but they will also look at all your employees’ records to see if anyone else is in that same boat.
Let’s say they find in favor of your whistle blower and they also find 20 more employees who have also been misclassified. The total is now 21 cases, and let’s say for example the total hours of overtime lost was 400 hours. DOL would multiply the 400 hours by time-and-one-half for each of the 21 employee’s rate of pay. If, for example, they earn $30 an hour we come up with a grand total of $1,300 per employee. Multiplied by 21, that equals $27,300.
The DOL will require you to distribute the $27,300 to the 21 employees and then can require you, the employer, to pay up to $81,900 to the DOL as a fine. This amount is three times actual damage. If the DOL wanted to take some pity on you they could reduce the fine, but if they were inclined to slap you hard because you argued with them during up to two years that this process can take, they could slap you with the full measure of their authority. The not too subtle message is this: don’t mess with your employee’s overtime benefits and don’t mess with the DOL.
If you find this hard to swallow, consider that the fine for a substantiated sexual harassment complaint can go as high as 25 percent of your company’s net worth!
My conclusion from all this is that business owners and managers need the best information they can get on these types of issues. More than competition or even the economy, they can put you out of business overnight.
Steve Cohen is president/partner of Labor Management Advisory Group Inc., and HR Solutions: On-Call. He has more than 35 years of specialized experience solving HR problems in companies of all sizes. He recently wrote "Mess Management: Lessons from a Corporate Hit Man." He'll be providing insight on HR topics every month exclusively for KCBCentral.