Civil penalties for willful or repeat violations of minimum wage and overtime provisions of the FLSA have increased, which means avoiding them is more important than ever. The U.S. Department of Labor (DOL) has increased penalties from $1,100 to $1,894 per occurrence beginning August 1, 2016. According to the DOL, the large size of the increase, based on an adjustment for inflation, is because not such adjustment had been made for the last 15 years. Increases of this size are not expected to happen again because federal agencies have been instructed to make penalty adjustments based on inflation on an anuual basis.

The DOL defines "willful violations" as reckless disregard for the rules or knowingly violating the law. While the exact determination of what constitutes reckless disregard or what demonstrates knowingly violating the law is somewhat unclear, the law firm Brunini, Grantham, Grower & Hewes PLLC points out that a U.S. Court of Appeals for the 5th Circuit ruling held that failure to maintain adequate records of overtime hours worked by an employee was a willful violation of the law.

Proper Payroll Systems and Classifications re Critical

To help avoid violations of wage and hour laws, employers are well-advised to have time and labor managment systems in place. One way to do this is to compute hours worked, help ensure minimum wage requirements are met, recognize when overtime status is reached for each applicable pay period and adjust withholding appropriately. You could also use these systems to help track the work of employees who are considered exempt from the FLSA's minimum wage and overtime rules in case it is later determined the employees are not exempt. The employer can then make amends quickly rather than going through the costly process of trying to reconstruct the time worked weeks, months or even years later.

The DOL recommends four ways to avoid violations.

1. Pay overtime (time and a half) in addition to an employee's current salary when necessary.

2. Limit work to 40 hours per week.

3. Raise the pay of salaried workers over the threshold for exempt employees — so they don't qualify for overtime.

4. Some combination of the above.

By working with a service provider that can help automatically track and recognize overtime triggers, and ensuring that you properly classify employees at the outset, an organization can minimize violations of, and civil penalties for, willful or repeat violations of FLSA overtime and minimum wage rules.

Tags: Payroll FLSA