Are You Prepared For “Wage Theft” Laws?

With increasing state and federal regulations – including the Fair Labor Standards Act (FLSA), the Family Medical Leave Act (FMLA), Sarbanes Oxley (SOX) compliance has become more complex and challenging to manage.

Without an efficient employee time and attendance system, employers are now more at risk than ever.  An increasing trend of “new” wage and hour legislation and enforcement is gaining momentum.  In the past year, multiple cities, counties and states around the country have enacted their own laws against “wage theft”:  Maryland, Iowa, New Mexico, and Delaware enacted “wage theft” laws in 2009, followed by Washington in 2010.  Miami-Dade County, San Francisco, Los Angeles, New Orleans, Austin, Houston, and El Paso have or are considering local ordinances dealing with wage and hour provisions.

In New York State current law allows an employee to collect back wages and to recuperate an additional 25 percent of all wages lost.  A proposed law would increase that amount to 200 percent.  It would also protect workers from retaliation by employers by forcing companies to pay $10,000 fore ach retaliatory offense, and cases more than $25,000 in wages would be considered felony offenses.

What is “Wage Theft”

Wage Theft is the underpayment or non-payment of workers’ ages, typically overtime pay.  It may also occur when employees who clock out, yet eat lunch at their desk as well as answer the phone during their lunch break.  The trend toward enforcing laws against “wage theft” are targeted more to smaller employers that might not otherwise be subject to the requirements of the federal Fair Labor Standards Act (FLSA).  These state and local laws often impose wage and hour requirements that are more stringent than federal law.

As an employer, you should carefully review your pay practices and be sure that your classification of workers meets current legal requirements.  Increased wage and hour enforcement from the federal government is already underway, and state and local governments are joining in by enacting their own wage theft laws.

Recent announcements from the IRS and Department of Labor indicate that these agencies also see wage and hour compliance as a significant problem.  Both agencies are stepping-up enforcement of federal laws designed to protect workers.  Employers should be prepared for increased scrutiny of pay practices.