Back in January, the U.S. Department of Labor published its annual report detailing the accomplishments of its Wage and Hour Division. The “WHD by the Numbers 2023” report revealed several key things. One was the cost of employers’ failure to comply with the Fair Labor Standards Act. In 2023 alone, employers paid out more than $151 million to the WHD due to overtime and minimum wage violations. This should tell readers that FLSA non-compliance can be a substantial – and often unnecessary – drain on a business’s revenues. To ensure your business is fully compliant with all the FLSA’s demands, be sure you’ve consulted an experienced Atlanta wage and hour lawyer.
Overtime and minimum wage compensation are areas where misclassification often plays a major role. Overtime non-compliance can arise from misclassifying an employee as an independent contractor or misclassifying a non-exempt employee as an exempt employee. Misclassification-related minimum wage violations often are the result of erroneously classifying an employee as an independent contractor.
The report highlighted some other noteworthy information, including:
One: the cost to employers of FLSA non-compliance hasn’t gone up… but hasn’t gone down substantially.
The latest report announced a total FLSA back wages recovery of $156.1 million in fiscal year 2023. That was up about $100,000 from 2022. Those two $156 million figures are the lowest in the last 10 years, with the highs coming in 2018 and 2019 ($227 million and $226 million, respectively.)
Two: Unpaid overtime is the primary source of FLSA non-compliance.
In 2023, the WHD recovered $130.7 million in back-owed overtime compensation. That means that 83.7%, or more than 5/6, of all FLSA non-compliance was overtime-related. Part of the reason is that overtime non-compliance can occur in many different ways. It can be the result of failure to pay time-and-a-half for hours worked above 40 in a week or forcing workers to work off the clock or, as noted above, it could arise from misclassification.
Of the remaining $25.4 million, more than 80% ($20.9 million) came from minimum wage violations. That figure is up from 2022 ($17.9 million) but down from 2014-2021 (ranging from $25.9 to 38.4 million.)
Three: Non-compliance was highest in three industries.
The WHD report also revealed that employers in three specific industries by far shelled out the most for their violations. Of the total sum the WHD collected, more than 60% came from employers in construction ($35.5 million,) healthcare ($31.8 million,) and food service ($29.6 million.) According to the WHD, misclassification of workers is a major cause of FLSA non-compliance in the construction and healthcare industries.
In addition to misclassification, other problem areas in construction that the WHD has identified include: not paying for all hours actually worked (including work done before or after the shift, as well as compensable downtime or meal breaks,) “banking” (a/k/a converting overtime hours into “comp time,” and failing to pay for travel from the shop to the work-site and back. In food service, the WHD identified compliance problems related to charging workers for work uniforms (such that it drops “the employee’s wages below the minimum wage or cuts into overtime compensation,”) along with tip credit issues.
FLSA violations can carry with them not just a requirement to pay back wages but also to pay “liquidated damages,” which is an amount equal to the back wages. In other words, a violation can cost your business double the amount of the error. With these stakes, it pays to check your FLSA compliance before you encounter a problem. The knowledgeable Atlanta wage and hour overtime attorneys at the law firm of Parks, Chesin & Walbert can help ensure you’re not in violation by thoroughly investigating your situation, determining if you have any compliance issues, and recommending corrective action as needed. We also can provide skillful representation to workers harmed by misclassification or other overtime/minimum wage violations. Get started today by contacting us at 404-873-8048 or through this website to schedule a consultation.