By: Sean F. Darke, Esq.
Wage and hour lawsuits under the Fair Labor Standard Act (FLSA) once again increased during 2011. Most readers are probably scratching their heads thinking "how hard is it to pay your employees the minimum wage or proper overtime?" Unfortunately, the FLSA is a complex law with numerous exemptions that create a need for businesses to continually update their pay structure. Over the past seven years, wage and hour violations have dominated the judicial system and companies are still not paying attention to the severe ramifications. Perhaps this will grab your attention - personal liability! That's correct. The FLSA allows employees to collect damages from the officers, owners, presidents, vice presidents and other executives if those individuals have "operational control" of the business, among other requirements.
Because owners, presidents, vice presidents, etc. can be personally liable under the FLSA, it is imperative that companies begin to audit their workforce immediately to make sure that each individual is being paid correctly. The major reason why this law is so devastating to companies is because an employee can act as a class representative and bring his claim on behalf of all similarly situated employees. In addition, the monetary damages for which a company will be responsible include the employee's back wages, liquidated damages (equals the back wages owed) and - to top it off - the employee's attorney fees. Just think about that for a moment - if the company is liable, it would have to pay the employee's attorney to sue the company. And, did I forget to mention that the company still has to pay its own attorney to represent it?
The first place a company should start is making sure that they are maintaining the proper records under the FLSA. More and more employers continue to violate this simple requirement. Employers are obligated under the FLSA to maintain the following records:
- Personal information, including employee's name, home address, occupation, sex and birth date (if under 19 years of age);
- Hour and day when workweek begins;
- Total hours worked each workday and each workweek;
- Total daily or weekly straight-time earnings;
- Regular hourly pay rate for any week when overtime is worked;
- Total overtime pay for the workweek;
- Deductions from or additions to wages;
- Total wages paid each pay period; and
- The date of payment and pay period covered.
Companies must pay attention to the pay structure and the records that are being kept; otherwise, it risks violating a simple requirement which could lead to a costly violation.
Companies cannot risk being liable under the FLSA because the ramifications could be catastrophic, and personal liability can attach. But more and more companies are failing to begin an internal audit to make sure that they are still in compliance. It is not good enough that the company looked into the issues five years ago, because the law changes and the courts have provided further guidance on how to analyze these exemptions. Companies need to start with the simple record requirement and then move into the more complex areas. Although the FLSA seems simple, it is a very complex law and a violation of the Act could cost your company its business - or even worse - cost you.
Questions? Please contact Sean F. Darke a Wessels Sherman Shareholder at (312) 629-9300 or sedarke@wesselssherman.com
