August 25, 2014

Just How Costly is FLSA Noncompliance?

Just How Costly is FLSA Noncompliance?

By Kit Dickinson on August 25, 2014

Just How Costly Is FLSA Noncompliance?FLSA noncompliance is biting employers in the pocketbook.

The U.S. Department of Labor estimates that at least 70% of employers are not in full compliance with the Fair Labor Standards Act (FLSA). Noncompliance can result in heavy fines, lawsuits and even criminal charges. Companies that contract with the government can be debarred from government contracts for three years.

Meanwhile, FLSA lawsuits have increased more than 500 percent since 1991. Companies that think they’re safe from litigation should think again.

Noncompliance Is Costly

Often, companies unknowingly fall out of compliance due to using manual calculations to determine pay. Sometimes it’s due to misapplying complex, confusing laws.

For example, Central Florida Investments, an Orlando time-share operator, was ordered to pay $868,000 in back wages due to miscalculations of overtime pay. Though there was no intentional wrongdoing--commission-based sales involves complex calculations--the miscalculations proved to be a costly mistake.

In another case, Raceway Petroleum was ordered to pay $3.9 million in back wages and $100,000 in fines for violating FLSA overtime regulations. The company was unable to provide accurate employee time records and had no audit trail to substantiate their actions.

RadioShack was also recently found in violation of Pennsylvania law for calculating overtime wages and will pay at least $5.8 million in back wages. Although RadioShack complied with federal regulations, it failed to comply with the state’s more expansive Minimum Wage Act. The lawsuit is the result of a failure to correctly interpret differences among various laws and regulations.

Like these companies, if you use manual calculations and adjustments when running payroll, you’re placing yourself at greater risk of noncompliance and heavy penalties.

Automation Helps Keep You Safe

Integrated Design’s (IDI) Time Bank integration application can help mitigate the risk of potential fines and violations. Time Bank automatically integrates your time-and-attendance and payroll systems to apply complex payroll calculations, including average overtime rate logic for different pay periods (including semi-monthly). Time Bank can also be configured to apply bonus or commissions earnings against a prior period when the overtime earnings occurred. This “look-back” logic is common with financial services companies (e.g., mortgage lenders) and is an often overlooked requirement of FLSA.

Time Bank works with time-and-attendance and payroll systems to automate critical business rules and pay policies that help you stay in compliance. Companies that continue using spreadsheets and manual processes potentially expose themselves to significant lawsuits, fines and other violations.

Protect Your Pocketbook

Don’t let your company take on that risk. The cost of automation is a far cry from the cost of FLSA violations. Contact us to see how we can get you off a spreadsheet system and help you avoid heavy penalties.

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