HR Management & Compliance

7 Paycheck Failures, Avoid $1,000,000 Fine

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Rafael, Amanda, Denise, Steve, Meredith, Allison, Paul

The failures of a major construction company make a great checklist of legal infractions every company should strive to avoid. (Not to mention avoiding the near-$1,000,000 fine the company will pay to settle the case.)

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

1. Failure to insure that subcontractors follow the law

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.

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.

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.

3. Failure to pay required prevailing wages

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.


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4. Providing inaccurate or falsified payroll records to the government

Obviously, providing falsified records is not a wise practice. However, many submitted records are merely inaccurate. In fact, most experts admit that probably no organization has perfect pay records.

5. Failing to keep accurate records of hours employees worked

Records must be detailed. For example, “8 hours” today is not enough. Note time in, time out for lunch, time in from lunch, and time out at the end of the day. Have employees sign that their time card or other record is “an accurate and full accounting of hours worked for the period.”

6. Failing to pay for all hours employees worked

This failure usually arises from people taking work home or being requested to work before clocking in or after clocking out.

One important point: If employees do work extra hours, you have to pay them, even if you have specified that they can’t work extra hours without permission. (You can discipline them for doing the work, but you still have to pay them for it.)

One new twist here is the rise of cell phone/e-mail use outside of work hours. If non-exempt employees are answering phone calls or dealing with e-mail off hours for more than a de minimus time frame, they are probably working and need to be paid for those hours.

7. Improperly classifying employees, resulting in the underpayment of wages and fringe benefits.

Misclassifying (calling employees exempt who should be classified as non-exempt) is a sticky problem. There is a lot of grey area in the supervisory ranks. The general rule is that it’s better to sort out these difficulties before work begins. After the fact, there are lawsuits, class actions, and other expensive challenges to be dealt with.

Failure to pay? Overtime? Prevailing wage?Mobile devices after hours—the list of compensation-realted challenges just gets longer and longer.

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