St. Patrick’s Day may be just around the corner and you may be feeling lucky, but wearing green and carrying a four-leaf clover won’t protect you from this threat: wage and hour litigation. It’s one of the fastest growing and costliest threats to your construction business in recent years, and many experts think it’s the biggest employment litigation threat to American businesses today.
And that’s on top of the federal government’s crackdown on wage-and-hour noncompliance. The Department of Labor’s Wage & Hour Division has beefed up its enforcement activity in recent years, and they’re targeting employers suspected of minimum wage and overtime violations under the Fair Labor Standards Act (FLSA) – with certain sectors of the construction industry directly in their crosshairs.
FLSA litigation has exploded, with more than a 300 percent increase in filings over the last decade according to the Federal Judicial Caseload Statistics. Some of the biggest violations are:
- Misclassification of workers as independent contractors instead of employees
- Misclassification of exempt vs. non-exempt status
- Failure to pay overtime due to misclassification as exempt
- Requiring employees to work off the clock
- Regular rate and minimum wage issues
These disputes are increasingly resulting in multimillion-dollar judgments against construction firms. So make no mistake – if you lose a wage-and-hour lawsuit, the plaintiffs will be enjoying their pot of gold at the end of the rainbow at your expense. You could be liable for:
- Unpaid compensation
- Liquidated damages equal to the unpaid compensation
- Attorneys' fees and other costs incurred in bringing the lawsuit
- Pre- and post-judgment interest on damages, including potential statutory penalties
Are you feeling lucky?
The U.S. Department of Labor estimates that as many as 10 to 30 percent of all independent contractors are misclassified and more than 70 percent of employers are not in full compliance with the FLSA. And of course, there are companies who intentionally misclassify employees to skirt their tax obligations and boost profits. Others aren’t aware their subcontractors are committing payroll fraud. And many construction firms make the mistake of thinking their Employment Practice Liability Insurance (EPLI) policy will defend them in a wage and hour suit, even though most EPLI policies exclude wage and hour coverage.
How to proactively improve compliance:
- Thoroughly review your recordkeeping and employment practices to make sure you’re complying with state and federal requirements. Consider getting advice from a Human Resources consultant with expertise in wage-and-hour recordkeeping and compliance.
- Talk to your lawyer about your potential liability and steps you can take to protect yourself.
- Take advantage of the Department of Labor resources at http://www.dol.gov/compliance/ and http://www.dol.gov/whd/ to educate yourself on wage-and-hour compliance.
- Consult your insurance agent to explore coverage options for these types of violations
For more ways to ward off wage-and-hour suits, see the New York construction insurance experts at BNC Insurance and Risk Advisors. And, while you’re at it, don’t forget to request a construction insurance quote for all your business insurance and workers’ compensation insurance needs.