Posted 12-14-2011

This time of year, Santa finds out who’s naughty and nice. But the U.S. Department of Labor’s Wage and Hour Division makes its list all year round.

To support its commitment to intensify enforcement of federal wage and hour law, the WHD hired 300 new investigators in 2009 and 2010. That increased staff helped the agency collect nearly $225 million in back wages for workers around the country during fiscal year 2011 – a record amount. The two biggest sources were overtime violations and misclassifying employees as independent contractors. As examples, all of the Big Money items this month are based on overtime violations. And, in September, 2011, WHD and the Internal Revenue Service entered into a “memorandum of understanding” to work together to end the practice of misclassifying employees as independent contractors.

State labor and taxation departments have stepped up their enforcement efforts, too. To date, 11 states have joined in the WHD-IRS agreement, which will enable the federal and state agencies to share information and coordinate the enforcement of both tax and wage and hour laws. While increased enforcement of these laws protects the rights of employees and levels the playing field for compliant employers, there is another powerful incentive for this effort: Employee misclassification generates substantial losses to the Treasury and the Social Security and Medicare funds, as well as to state unemployment insurance and workers compensation funds and income tax receipts.

The penalties for violating the laws on employee classification and overtime can be substantial. If the company’s conduct is found to be “willful”, the court can award a judgment for double the amount of back pay liability, in addition to payment of the employee’s attorneys’ fees and costs. Further, any owner, officer, board member, or supervisor responsible for the company’s unlawful worker classification and compensation policies and procedures can be held individually liable for back pay and civil money penalties assessed by the WHD against the employer, or the amount of any final judgment rendered by a court. By the way, in bankruptcy, wage claims have priority over secured and unsecured creditors, and most EPLI (employment practices liability insurance) policies do not cover wage and hour audits, lawsuits or judgments.

What this means to you: The Fair Labor Standards Act sets minimum wage and overtime pay standards for workers and employers in the private sector as well as federal, state and local governments, and also specifies an employer’s responsibility for accurate timekeeping, record retention and employee classification – duties which can often fall on managers and supervisors. Ensure management team members understand FLSA and recognize their part in keeping the organization compliant. More information and fact sheets about FLSA can be found at In addition, the Department of Labor offers an online Compliance Assistance program to help employers meet federal employment regulations (including all FLSA provisions) at

Information here is correct at the time it is posted. Case decisions cited here may be reversed. Please do not rely on this information without consulting an attorney first.