The U.S. Department of Labor’s Wage and Hour Division (WHD) recently finished several investigations aimed at employers. The agency announced that seven different employers had violated federal laws involving minimum wages, overtime calculations, family and medical leave, the tip credit and work visas.

Here are brief descriptions of the cases.

1. Minimum wage violations.

A Tennessee motel company owes $58,894 in back wages to four employees for minimum wage and overtime violations. The employers provided homeless individuals with rooms in exchange for front desk work without pay.

The maximum lodging credit allowed for the rooms totaled less than the required federal minimum wage of $7.25 per hour. Overtime hours weren’t accounted for because compensation consisted of housing only. The employer also didn’t maintain accurate records of hours worked.

2. Overtime calculation errors case #1.

A lighting manufacturer failed to include employees’ shift differentials when computing their overtime pay by basing the time-and-a-half calculation only on the workers’ hourly base rates. Failure to use shift differentials resulted in lower overtime than required by law.

In addition, the employer failed to maintain complete and accurate records of the hours that employees worked. The employer must pay $138,753 in back wages and liquidated damages to 829 employees.

3. Overtime calculation errors case #2.

A continuing care retirement community failed to include workers’ shift bonuses when calculating their overtime rates. The employer also failed to maintain accurate records of employee bonuses and hourly rates.

4. Tip credit violations.

WHD investigators uncovered willful violations of the Fair Labor Standards Act (FLSA) at a Pennsylvania restaurant chain. The employers shorted employees and pocketed 15 percent of customer tips charged on credit cards — well in excess of the 4 percent charged by credit card processors.

Additionally, the employers failed to notify tipped workers that they were using the tip credit against the minimum wage, a violation of the FLSA. The employers also paid some workers flat daily rates for all hours worked, even when their time records clearly showed them working upwards of 50 to 60 hours per week.

The employers agreed to pay $935,000 in back wages and liquidated damages and $65,000 in civil penalties to 201 employees for the willful violations.

5. Infringement of family and medical leave law.

An Alabama medical services company will pay lost wages to an employee for violating the Family and Medical Leave Act (FMLA).

The FMLA allows qualifying employees to take up to 12 weeks of unpaid leave for a serious health condition. WHD investigators determined that an employee who had taken time off to seek medical care for an FMLA-covered condition was unlawfully terminated. The company must pay lost wages of $1,859 and reimburse the employee $4,729 in medical expenses incurred due to losing her health insurance coverage when the employee was terminated.

6. Work visa violations case #1.

An owner and operator of two horse training facilities must pay $1,270,683 in back wages and damages to 30 employees for work visa and wage violations. WHD investigators discovered the employers had failed to pay prevailing wages required under the H-2B visa program and the promised rates under the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).

Violations also included: 

• Collecting kickbacks from H-2B visa fees;
• Impermissible deductions for transportation costs to and from the workers’ home countries;
• Unsafe and unhealthy housing conditions
• Failure to record overtime worked and deductions from wages.

A consent judgment filed in a federal district court requires the business to pay back wages and damages, plus an additional $100,000 in civil penalties. The company and its owner are enjoined from applying for any labor certification applications, including under the H-2B temporary visa program, for one year.

7. Work visa violations case #2.

In another work visa violation case, an administrative judge ordered an employer to pay an engineer employed through the H-1B visa program $43,366 in back wages and interest for failing to pay required wages as stated on the H-1B visa application. Additionally, the employer was found to have failed to maintain required records.

The judge denied the employer credit for $14,150 in cash payments to the worker because it had failed to report the payments on its payroll records and to report the wages to the IRS as required for the credit.

________________________________________________________

Court: Off-Duty Officers Were Entitled to Overtime

A federal appeals court recently ruled that a group of off-duty police officers who held side jobs with a private security company were employees of the company. Therefore, they were entitled to overtime pay under the Fair Labor Standards Act (FLSA).

What the Law Requires.

• The FLSA requires employers to pay overtime to employees who work more than 40 hours a week. Courts commonly use a “six factor” test to determine whether a worker is a contractor or an employee: 
• The degree of control exercised by the employer over the business operations;
• The relative investments of the employer and worker;
• The degree to which the worker’s opportunity for profit and loss is determined by the employer;
• The skill and initiative required to perform the job;
• The permanency of the relationship and
• The degree to which the worker’s tasks are integral to the employer’s business.

Facts of the Case.

The company provided private security and traffic control services to customers. It generally employed sworn law enforcement officers, although some had no police training. The company paid sworn officers more per hour than it paid nonsworn workers, but the duties performed by both groups were the same. A scheduler kept track of customer work requests and offered assignments to the security workers.

The company told workers when and where to report, and whom to report to upon arriving at a job. Occasionally, depending on the job, the workers were provided with equipment such as reflective jackets, stop/go signs and badge-shaped patches.

Workers who weren’t sworn police officers were required to buy police model vehicles. They followed customers’ instructions, complied with the security company’s standard policies and sometimes were supervised by other workers from the company. Sworn police officers wore their official police uniforms. Nonsworn workers wore police-style uniforms that bore branded patches from the company. At the end of assignments, workers submitted invoices detailing the hours spent on the job. The workers, both sworn and nonsworn, were treated as independent contractors and were never paid overtime. 

Appeals Court Ruling. The U.S. Court of Appeals for the Sixth Circuit found that all the workers were employees and should have been paid overtime. (Acosta v. Off Duty Police Services, Inc., Dkt. No. 17-5595/6071, 2/12/19)

Cautionary Tales

These recent cases serve as a warning to employers about the implications of failing to comply with employment laws. When it comes to labor and payroll laws, there are many ways that your organization can get into trouble. Call or email us to see how we can help you stay in compliance, 434.296.2156 or info@hwllp.cpa.