This blog post was authored by Jennifer Palagi.
The United States Department of Labor (“DOL”) has jurisdiction over all federal labor and employment laws, including the Fair Labor Standards Act (“FLSA”). The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. However, the FLSA is a cumbersome and often misapplied law. Indeed, just ask the San Francisco Giants who had to pay $544,715 in back wages and liquidated damages to 74 employees after a DOL investigation determined that the Major League Baseball club failed to properly pay workers over a three-year period.
The DOL’s investigation into the Giants’ compensation practices exposed violations of the FLSA’s minimum wage, overtime pay and record-keeping provisions — which affected a wide range of Giants’ employees at the major and minor league levels, including clubhouse workers and video operators. Specifically, the investigation revealed that clubhouse employees were working more hours than were recorded under an employment agreement which established a flat rate of pay of $55 for working 5.5 hours per day. Investigators found that the employees actually worked an average of 12 to 15 hours per day, and received less than the federal minimum wage of $7.25 per hour. (The California State minimum wage is $8 an hour and San Francisco has its own minimum wage of $10.55 an hour.) In addition, these employees were not paid overtime compensation for all hours worked beyond 40 hours in a workweek. Investigators also discovered the club had improperly classified a number of employees as exempt from overtime pay.
Susana Blanco, director of the San Francisco District Office of the Wage and Hour Division, said the case underscores the importance of wage protections: “[I]t was disappointing to learn that clubhouse workers providing services to high-paid sports stars weren’t making enough to meet the basic requirements of minimum-wage law.” Because of the DOL’s mission to protect wage earners and the increase in wage and hour complaints, the DOL has beefed-up enforcement efforts, targeting employers who fail to comply with the FLSA requirements. A search of the DOL website shows that in fiscal year 2011, the DOL collected nearly $225,000,000 in back wages from employers all over the country; and in 2012, it added 300 new field investigators to investigate non-compliance on wage and hour issues.
The DOL’s intensified scrutiny of employers’ compensation practices combined with the fact that a DOL audit can occur at any time mandates that employers take a close look at their compensation practices and ensure they are in strict compliance with the FLSA. Specifically, the issue of employees working off the clock hours continues to be a problem at so many employers. Therefore, it is advisable for employers to conduct an FLSA audit, implement solid overtime and time-keeping policies and periodically review how employees track their hours. It is only through a comprehensive analysis into an employer’s compensation and time-keeping practices, and an examination of whether those particular practices comply with FLSA requirements that an employer can be fully assured when up to bat against the DOL it will not strike out.