by Michael Hadeed
As if a business owner does not have enough to be concerned with, like making payroll, maintaining a stable work force, and turning a profit, the U. S. Department of Labor Wage and Hour Division has stepped up its business audit activity. The audit is to enter and inspect your business, payroll and employee records, to interview your employees, and investigate conditions and practices to determine if your business has violated wage and hour laws. The audit may be initiated by a complaint received from an employee or other person, or may be random by local labor department investigators.
The typical “complaint initiated” investigation occurs when one or more former employees complain that overtime wages were not paid. Prior to complaining directly to the labor department, employees often seek counsel, who makes demand upon the employer to pay the alleged unpaid overtime, plus an amount equal to the unpaid overtime as a penalty, and attorneys fees, both of which are permitted by law. If you receive demand for payment prior to an investigation letter from the labor department, immediately consult with an attorney to seek resolution of the demand, even if frivolous. Remember, an unpaid overtime claim can go back three years. Even alien employees without valid employment authorization are eligible to make such claims to collect alleged unpaid overtime wages, and often do so, even though they had no right to work to begin with.
A labor department on-site investigation is initiated by receipt of a letter setting a date and time at which a wage and hour investigator will visit your business. The normal procedure is for an opening conference with the company representative, reviewing records for a 2-year period, and interviewing employees. Among the records reviewed will be payroll records, focusing on timekeeping records. It is fundamental that every employer has an obligation to keep time records, whether manual, time clock, or computerized by password or fingerprint.
The Courts have held that oral agreements for regularly weekly salary for regular and overtime hours did not comply with law where no record of hours worked overtime were kept. The labor department can assess civil and criminal penalties for failure to keep records. Moreover, an employer who has an overtime claim asserted against it by an employee cannot complain that the employee’s evidence is vague or uncertain where the employer failed to keep its own records.
An employee’s own recollection of the number of hours worked is admissible as evidence, preventing an employer who fails to maintain records to benefit from its failure to do so. In a recently decided case where an employee sued to recover overtime wages, the court ruled that the employer could not use its lack of proper records to destroy the employee’s case on the ground that the employee has not produced sufficient proof.
Whether it be the former employee seeking alleged unpaid overtime, or the labor department investigator finding violations of law to assess fines and penalties, it all comes down to costing money. For the government, and for the angry ex-employee and a willing collection lawyer, the opportunity to collect money from the unwitting, unknowing, non-compliant, negligent employer, the risk is clear. Protect your business and your money; take action to prevent others from having the opportunity to take advantage of your lack of diligence by simply practicing proper record keeping.
Willful violators may be prosecuted criminally and fined up to $10,000.00. Employers who violate the wage and overtime pay requirements are also subject to civil penalties of $1,100.00 per violation. Former employees may seek to take advantage of employers who fail to maintain records, bring claims for back wages. The labor department may also bring suit for back wages, and in either case, an amount equal to the unpaid wages may be awarded as additional damages. The attorney’s fees alone for defending these actions are burdensome for most small businesses. Be proactive, protect yourself, and if neede