The US Department of Labor (DOL) announced last Thursday that it investigated an Arizona painting contractor and found Fair Labor Standards Act (FLSA) violations resulting in nearly $200,000 in damages. This is yet another reminder for Arizona businesses that the DOL is aggressively on the hunt for employers who misclassify employees, fail to properly record workers’ time, and do not pay overtime.
Let’s review the facts of Arizona Painting Company case so that your company will not find itself in a $200,000 (or more) bind.
DEPARTMENT OF LABOR PAINTS AN UGLY PICTURE OF ARIZONA CONTRACTOR’S PAYMENT PRACTICES
Arizona Painting Company is a painting contractor located in the Phoenix suburb of Chandler.
Employees legally-entitled to minimum wage and overtime were paid flat weekly salaries that, when divided by the number of hours they actually worked, fell short of the federal minimum wage, currently $7.25 per hour. These employees routinely worked between 50-55 hours per week, yet the employer also failed to keep an accurate record of hours worked and failed to pay them overtime for hours worked beyond 40 per week, as required by the FLSA.
Other employees, who were paid on a commission basis without regard to how many hours they had worked, were also paid less than the minimum wage and were denied overtime.
Arizona Painting Company agreed to comply with the FLSA and will pay $165,638 in back wages and damages to 79 workers. The commercial and residential painting contractor will also pay an additional $29,546 in civil money penalties. As part of the settlement, the employer notified employees about the case and agreed to provide them with training on their rights under the FLSA.
THE DOL VOICES ITS COMMITMENT TO PROTECTING EMPLOYEES AND TARGETING BUSINESSES
“Workers in [the contracting] industry are among the most vulnerable that we see,” said Eric Murray, director of the Wage and Hour Division’s district office in Phoenix. “As the back wages, damages and penalties paid in this case illustrate, we are committed to ensuring that workers receive every penny they have rightfully earned.”
“Other employers should take note of this investigation, and ensure that they are in compliance with the law. Other employees being paid in this manner should give us a call. Our services are free, and confidential.”
COMPLY WITH THE FLSA AND SLEEP WELL AT NIGHT
How can your business avoid the painting contractor’s mistakes? Here’s how:
- Make sure you have a solid and defensible recordkeeping system that accurately records all time worked
- For FLSA recordkeeping requirements, read this previous HR Law Insider article
- Pay non-exempt employees on an hourly, not salary, basis; this way it is much easier to accurately determine any overtime due and much less likely you will miscategorize employees
- Conduct an annual internal audit with counsel; this should neither be difficult nor expensive — few employees fall into a grey area when it comes to classifying and properly paying employees
The tips listed above are but several of many measures that go into an effective FLSA compliance program. Put the proper systems in place, execute consistently, and your business needn’t fear the “dreaded” DOL audit.
Art Bourque has guided businesses and individuals in various FLSA and DOL audits and investigations. He has defended and brought claims under the FLSA and other DOL and EEOC regulated laws. Contact Mr. Bourque with any questions regarding these or other employment or human resource issues.
EPILOGUE: THE TREES
As explained in a previous article, the most effective way to avoid a DOL audit is to treat your employees well — because the number one cause of audits is employee complaints.
So, while pondering the state of your employees’ morale, enjoy The Trees by Rush. This Neal Peart creation brilliantly captures what happens when those above (the Oaks) and those below (the Maples) do not get along. Namely, “hatchet, axe, and saw” intervene (the Government). At least this has always been my interpretation of the song — one of my favorites. The lyrics appear below the video:
There is unrest in the Forest
There is trouble with the trees
For the Maples want more sunlight
And the Oaks ignore their pleas.
The trouble with the Maples
(And they’re quite convinced they’re right)
They say the Oaks are just too lofty
And they grab up all the light
But the Oaks can’t help their feelings
If they like the way they’re made
And they wonder why the Maples
Can’t be happy in their shade?
There is trouble in the Forest
And the creatures all have fled
As the Maples scream ‘Oppression!’
And the Oaks, just shake their heads
So the Maples formed a Union
And demanded equal rights
‘The Oaks are just too greedy
We will make them give us light’
Now there’s no more Oak oppression
For they passed a noble law
And the trees are all kept equal