Finance News & Insights

The $1.2 million pay mistake this company made

If your company pays any employees for two different types of work, be extra careful: That opens the door for pay mistakes that can be expensive.

One North Dakota employer learned that the hard way when the Department of Labor (DOL) fined it $1,174,291 in back wages to 275 current and former employees due to overtime and recordkeeping missteps.

Take a look at where this company went wrong to make sure your company never ends up in a similar boat.

Paid workers both hourly and on a piece-rate basis

Wyoming Casing Service Inc. had some workers on its payroll who received both an hourly rate of pay and a piece-rate pay structure, based on the number of feet of casing they installed.

Which in-and-of-itself was fine. The trouble came in with overtime calculations.

The employer failed to count the piece-rate earnings when determining overtime rates. And that ran it afoul of the Fair Labor Standards Act (FLSA).

Now, not only will the company have to pay the more than $1.1 million in back wages, but it must also train its HR department and managers on the FLSA so this type of mistake doesn’t get repeated.

To participate in PAID or not?

Of course, mistakes happen. And companies pay a steep price.

So what happens if you find out your company made one of its own?

At the end of the DOL fine announcement for this case, the agency reminds employers of the federal PAID self-reporting program.

Obviously PAID’s being billed as an opportunity for employers of all sizes and in all industries to get straight on their FLSA compliance with little consequence. But you certainly want to know what you’re getting yourself into by participating.

Here are a few critical points you’ll need to understand:

  1. You’ll have to make it right fast. Once your company receives a “summary of unpaid wages” from the program, you have to pay all the money owed to employees by the end of the next full pay period. You’ll also have to provide proof of those payments to the DOL’s Wage and Hour Division right away.
  2. You’ll have to get employees to sign a waiver. This program isn’t just between you and the feds – obviously the affected employees have a major role to play. In fact, in exchange for paying them their back wages, employees will have to sign a waiver that they give up their right to take any legal action regarding this pay issue. And employees can refuse. Experts believe that the mere act of cashing the check will show folks were on board, but without the waiver they can still mount a later claim. (Though insiders believe the risk of them pursuing it anyway will be low.)

That’s what you’re in for if you do sign on. But could you be getting more than you bargained for? Naturally, when you ask the feds who should participate, it’s pretty much anyone with a payroll.

But that might not be the case. Here are a few factors to consider before you take the plunge:

Factor 1: Your state. In most cases, any FLSA violations your company corrects under the program will also take care of issues on the state wage and hour front … unless you’re located in a state with a longer statute of limitations. (And some big states have them, like California [4 years] and New York [6 years].) That can prove especially troublesome when it comes to exposure to legal claims.

Factor 2: Other potential compliance issues. Participate in this program and you’re sending up a flare that your firm has made employee pay missteps. That could lead to more employees scrutinizing everything you do and new claims down the road.

Armed with these issues, you’re ready to have a conversation with your company’s other top leaders to decide if PAID’s the right move for you.

 

 

 

 

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