The Hidden Costs to Avoid with FLSA
Compliance around FLSA laws and regulations is in the spotlight and will remain there for a while from the look of the current landscape. The old adage applies, ‘where there’s smoke, there’s fire.’ Anyone watching events unfold can agree, the Dept. of Labor sees the smoke. The fallout from non-compliance is costly.
The Cost of Non-Compliance
- LinkedIn paid $6M in unpaid overtime wages, plus damages, for failing to pay employees for hours worked.
- Misclassifying employees cost New Jersey business owners Thomas, Leon and Helen Andreadakis, $1.42 million in back wages and liquidated damages
- First Republic Bank paid over $1,000,000 in overtime and back wages after the bank wrongly classified employees as exempt from overtime pay.
The Proposed Changes with FLSA
The newly proposed changes should bring attention to the administrative practices required to maintain compliance. This is a smart decision for business owners that take the timeline of events in the progression of FLSA regulations into consideration…
- In 2014, the federal budget included approved funding for 300 Dept. of Labor, Wage and Hour Division investigators armed with considerable and unfettered access to employer records and tasked with uncovering noncompliance.
- In 2015, the administration has proposed significant reform increasing the standard salary level for full-time salaried workers to $47,892 annually and to $50,440, by 2016, along with an increase to the exemption level for highly compensated employees (HCE’s) to $122,148.
It appears fairly obvious that business owners can expect investigations to be on the rise. Now is the time for businesses to identify the resources needed to assess and ensure FLSA compliance.
The proposed changes have the potential to significantly increase compensation and administrative costs for employers of all sizes. The more challenging, hidden costs such as the time required to evaluate and administer adjustments will be difficult to measure. Hidden costs combined with additional overtime pay to formerly exempt employees will create pain points in budgets and in deciphering complex legal requirements. However, that pales in comparison to the back wages and damages that may result from hundreds of newly hired investigators looking to prove their value to the Dept. of Labor.
Business owners should know whether or not their employees are classified in accordance with FLSA guidelines. Unfortunately, many business owners are caught entirely by surprise that they’ve gone afoul of compliance. Particularly vulnerable are businesses, of all sizes, that fail to heed the guidance of their Human Resource department or lack an HR department entirely. It’s essential to have skilled professionals available to keep an eye fixed on compliance knowing that Wage & Hour Division (WHD) Investigators can show up, unannounced and launch their investigation on the spot.