The 7 Paycheck Failures that DOL Targets Most

DOL’s action against Lettire Construction Corp., which was punctuated by the substantial fine, was based on the seven failures listed below.

DOL’s investigation, which included several days of surveillance, found numerous violations of the Davis Bacon and Related Acts and and Contract Work Hours and Safety Standards Act CWHSSA by Lettire Construction and 16 of its subcontractors. Let’s look at the failures the investigation found:

1. Failure to insure that subcontractors follow the law

In particular, DOL’s action against sent a strong message that general contractors are responsible not only for their own violations of federal labor law, but also for those committed by their subcontractors.

In a more general sense, that message really goes for all employers—just because you’ve outsourced some activity, you haven’t relieved your company of its legal obligations.

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2. Employees working more than 60 hours per week without proper payment

The most egregious problem with workers who work over 40 hours a week (not necessarily the workers in the Littire case) is failure to pay at all for all hours worked. It’s not unusual to find workers who are paid for 40 or 50 hours but essentially forced to work 60 hours.

The worst cases typically involve entry-level workers who have few if any other options for employment. However, the same type of infraction is common in many workplaces, for example:

• The restaurant manager who says to the waitstaff: “Clock out and then set up for breakfast.”
• Similarly, the plant manager who tells the machinist to get in before clock-in to sharpen the blades and adjust tolerances for the morning shift.
• The loyal admin assistant who, knowing that the company is in difficulty, says, “Don’t worry; I’ll take those reports home and process them tonight.” (This case seems less disturbing, but it’s still illegal—those hours have to be paid.)

The other common infraction in this category is failure to pay overtime, which must be paid on all hours worked over 40 hours in a workweek.

Furthermore, proper payment requires that the employer pay overtime based on the “regular rate,” which includes extra payments, for example, shift differentials and production bonuses. It’s a pain and it’s often only a small amount of money involved, but you have to go back and recalculate the overtime when those extra payments are made.

For example, say a worker makes $10.00 an hour, works 50 hours one week, and is paid $550.00 (50 hours at $10.00 and 10 hours of overtime premium of $5.00/hr). Then say the person receives a bonus payment of $40.00.

Now the overtime must be recalculated using the new regular rate of $10.80 per hour: ( $500.00 plus $40.00 divided by 50 hours). Therefore, the overtime premium should have been $5.40/hr, not $5.00/hr, or a total of $54.00 of overtime premium.

Since the employee was only paid $50.00 in overtime premiums, he or she is owed $4.00.

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3. Failure to pay required prevailing wages and overtime compensation

Prevailing wage is generally interpreted as the union wage for the area. Of course, any overtime earned must be paid at the prevailing wage rate.

In tomorrow’s Advisor, failures 4 to 7, plus an introduction to a simple-to-use guide some call “The FLSA Bible.”