Deliberate Or Not, They’re Still On The Hook

In my last post, I mentioned a lawsuit filed by the Department of Labor (DOL) against a group of related NY-area companies. Apparently, one of the things they were supposed to have done was to avoid paying overtime for employees who worked more than 80 hours in a two-week period by splitting the hours up among “related businesses” to make it look as though the employee had worked no overtime for any given individual business.

The problem, of course, is that when the companies are in the same line of work, and share a common management and ownership, and their corporate headquarters share the same address, they’re very likely going to be seen as a single entity for the purpose of calculating overtime hours.

I’ve run across several stories lately of companies getting tripped up by the overtime issue. It’s not always clear whether the company owners were deliberately trying to avoid paying overtime, but in a lot of cases it certainly seems suspicious. For instance, here are a few things I’ve come across recently that made me go “Hmmmm”:

  • The operators of 70 hotels in Michigan, Ohio and Indiana agreed to a judgment entered in Detroit’s U.S. District Court following a DOL investigation that found workers at 7 of their hotels were underpaid because the operators didn’t combine hours for employees who worked at more than one location during a single workweek. In addition to paying back wages, the operators were required to make changes to their business practices to insure FLSA compliance (including revising their employee handbook and establishing a toll-free number for workers to seek guidance and report violations) and to hire a director of FLSA compliance who will train and direct regional and general managers.
  • A Rhode Island restaurant chain had to pay over $100,000 in wages and damages following a U.S. DOL investigation found they had employed a variety of methods to avoid paying overtime to their cooks and servers. For instance, they entered overtime hours under a different payroll code, failed to combine hours worked at different locations, and paid hours worked over 40 in cash (at straight-time rates). With that many different methods used to avoid the overtime, it’s hard to believe it would have all been accidental.
  • A Santa Clara, CA manufacturing company was assessed over $280,000 in back wages and damages when a U.S. DOL investigation found the company would pay workers for overtime at the straight time rate, while listing the extra pay on the employee pay records as a “bonus,” instead of recording the overtime hours and paying the required time-and-a-half. To me, this, too, seems purposeful, and according to Michael Eastwood, assistant director of the Wage & Hour Division’s San Jose office, the DOL agreed.

The takeaway I got from this? It’s dangerous to think a fancy scheme will work to cover up a failure to pay overtime. After all, the only thing necessary is for one employee to complain or to spill the beans while being interviewed by the WHD inspector, and the whole thing could unravel. So much better (and easier and cheaper in the long run) to simply pay people correctly to start with.

But that can get tricky, unless you’ve got an accurate method of time recording and a solid payroll system. Fortunately, Acroprint has just the thing to help you track employee time and ensure their paychecks are correctly calculated. If tracking time and calculating pay is giving you headaches, check out AcroTime. Our cloud-based subscription service gives you access to high-end time tracking, payroll and HR management features at budget-friendly rates.

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