As the economy continues to struggle, many current and former non-exempt (hourly) employees are paying closer attention to their wages and wondering whether they have been paid correctly for all hours worked. Unfortunately, the answer is often “no” and the result is increasingly more often:

“John Smith, on behalf of himself and those similarly situated

v.

ABC Company and its President (individually)”

The federal Fair Labor Standards Act (“FLSA”) establishes overtime pay and record keeping requirements. For non-exempt employees the FLSA requires the payment of overtime at a rate of not less than one and one-half times a non-exempt employee’s regular rate of pay after 40 hours in a workweek established by the company. The workweek is a fixed and recurring period of 168 hours. The FLSA prohibits employers from averaging hours over a two-week period to avoid paying overtime. In addition, the FLSA also requires every employer to maintain records that include specific information about the employees’ hours worked and wages earned.  

Unfortunately, many employers are not (1) properly compensating non-exempt employees for overtime and/or (2) maintaining accurate time and pay records resulting in U.S. Department of Labor (“DOL”) enforcement actions. As we reported in our last Update, in August 2010 alone, the U.S. Department of Labor (“DOL”) announced the recovery of over $1.82 million dollars in wages and overtime wages. In addition to DOL actions, an increasing number of current and former employees are also filing private actions in state and federal courts.  

Although litigation is often costly, wage and hour litigation is particularly costly for employers because (1) the required time and pay records are either inaccurate or do not exist leaving few strong defenses and (2) the applicable statutes often allow the plaintiff to recover (a) all unpaid wages, (b) liquidated damages in the amount of the unpaid wages due and (c) the plaintiff’s reasonable attorneys’ fees and costs incurred in pursuing the action. As a result, there is a strong incentive to file a private action.  

In response to the increased enforcement efforts by the DOL and the actions being filed by current and former employees, all employers should review their job classifications (non-exempt vs. exempt) and audit their payroll records to ensure compliance. This preventative measure is even more important because the case law indicates that a corporate officer (president, human resources manager, controller) who exercises operational control over the corporation’s day-to-day functions, including compensation, can be held personally liable for any damages (back pay, overtime, etc.) incurred by the employee if the officer made the decision that caused the violation of the statute.