A restaurateur in Santa Fe, NM learned the hard way that it’s a bad idea to try to fool the Wage & Hour Division (WHD) of the Department of Labor (DOL). In this case, it was a bad idea to the tune of over $50,000.
Famous Wok franchisee Lixin Zhang was originally found to have underpaid two workers based on the results of a WHD investigation. According to the WHD press release, his employees worked 72 to 80 hours per week with no overtime pay. (Oh, and he apparently also didn’t keep accurate records of their hours worked. Because, of course, then he’d know they were working all that unpaid overtime, I guess?)
But, you know, investigations happen all the time and barely register as news. It was what Zhang supposedly did next that caught the attention of the Feds.
Most employers will pay the back wages, review their recordkeeping and payroll practices to make sure it doesn’t happen again, and move on with life. Reportedly, Zhang had another idea.
He allegedly made his workers endorse blank checks, then used the checks to try to make federal investigators believe he had paid the necessary back wages.
This turned out to be one spectacularly bad idea.
Of course, the investigators eventually learned the truth. The U.S. District Court granted summary judgement against him and ordered him to pay his employees $25,168 in back wages and an equal amount of liquidated damages, for a total of $50,336.
In a news article, Zhang was quoted as saying that his employees couldn’t possibly have worked 80 hours in a week because the mall where his franchise was located wasn’t even open that many hours.
Of course, as all my gentle readers know, just because the business hasn’t opened its doors to the public, that doesn’t mean the employees aren’t working. If they arrive early to prep food for the day, or stay late to clean up after the restaurant has closed, that’s work time and they need to be paid for it. So the fact that the mall might not have been open for 80 hours a week doesn’t mean his employees couldn’t have worked 80 hours a week.
Beyond that, the law says overtime-eligible employees need to be paid at least time-and-a-half for overtime worked over 40 hours a week. And I’m pretty sure the mall was open for longer than 40 hours in a typical week, so the old “but the mall wasn’t even open” ploy wouldn’t necessarily get him off the hook in any case.
You know what’s one of your best defenses in the case of wage and hour audits — what might have saved Zhang from overtime trouble in the first place?
Accurate time records.
Yep, it’s as simple as that. Keep accurate time records, and pay your employees according to those records. It sounds like such a simple thing, and it really is. If more employers did this, there would be a lot fewer back wage awards coming out of these investigations.
PRO TIP: If you’re not tracking employee work time now, you need to start. If you’re still using manual timesheets, it’s probably time to upgrade.