Risk Management

Government Fines Present Real Threat for Businesses

Government Fines Present Real Threat for Businesses

I’ve been told I sometimes sound suspicious of government agencies.

Government Fines Present Real Threat for BusinessesBut consider this: most state human rights commissions and the federal Equal Employment Opportunity Commission get some of their money to operate from the fines and penalties they issue against employers. Every week, state and federal organizations slap businesses with fines in amounts that will make your toes curl. In one, two-week period the following was “touted” by the Department of Labor:

• A car wash was assessed nearly $230,000 in back wages for alleged overtime and minimum wage violations.

• Several restaurants were sued for approximately $1 million in back wages covering 164 workers.

• A printing company was required to pay $96,335 in overtime back wages.

These generally involved small businesses, where such fines can be devastating. But some areas can be worse. For cases involving the Fair Labor Standards Act, fines can be 3x actual damages!

Some businesses deserve what they get, but even well meaning firms can be tripped by regulations. And if just one of your employees thinks he or she is misclassified as a salaried employee, it could result in an investigation of your entire organization.

It works this way: if an employee feels they’ve been misclassified and unfairly cut from overtime pay, he or she alerts the DOL and the DOL begins an investigation. None of that costs the employee.

The DOL or the state human rights commission will look into the actual complaint’s argument, but they will also look at all your employees’ records to see if anyone else is in that same boat.

Let’s say they find in favor of your whistle blower and they also find 20 more employees who have also been misclassified. The total is now 21 cases, and let’s say for example the total hours of overtime lost was 400 hours. DOL would multiply the 400 hours by time-and-one-half for each of the 21 employee’s rate of pay. If those employees earn $30 an hour, the total is $1,300 per employee. Multiplied by 21, that equals $27,300.

The DOL will require you to distribute the $27,300 to the 21 employees and then can require you, the employer, to pay up to $81,900 to the DOL as a fine. This amount is three times actual damage. If the DOL wanted to exhibit some pity, they could reduce the fine. But if they were inclined to slap you hard because you argued with them during up to two years that this process can take, they could slap you with the full measure of their authority. The clear message is this: don’t mess with your employee’s overtime benefits and don’t mess with the DOL.

If you find this hard to swallow, consider that the fine for a substantiated sexual harassment complaint can go as high as 25% of your company’s net worth!

The obvious conclusion is that business owners and managers need the best information they can get on these issues, and getting advice before a crisis is best. More than competition or even the economy, these issues (government fines) can put you out of business overnight.

Category: Risk Management


About the Author: Steve Cohen

Steve M. Cohen, Ed.D., CMC is President/Partner of Labor Management Advisory Group, Inc. and HR Solutions: On-Call, both based in Kansas City, MO.Often described as a “mess management” expert for his ability to skillfully resolve people prob…

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