Penny Wise--Pound Foolish: Wage & Hour Pitfalls: Comply with labor laws now to save later.

• Author: Saade, Renea I.
• Position: Legal Speak

It's no secret--staying in compliance with all the laws that apply to employment relationships is like trying to round up a herd of cats. Or, here in Alaska--a family of lynx. Employers have to remain vigilant and monitor the constant influx of changes in federal, state, and local laws all while remaining mindful of employee expectations for the employment relationship and staying true to their company's core values, mission, and business goals. The one area of compliance that routinely presents a challenge for most employers is wage and hour law. In recent years, the US Department of Labor (DOL) has routinely estimated that 70 percent to 75 percent of employers operating in the United States are not in full compliance with the Federal Labor Standards Act, the primary federal wage and hour law. DOL's annual report for fiscal year (FY) 2017 disclosed that over the past five years it has recovered back wages due to more than 1.3 million workers. To put that in perspective, that is more than the population of Las Vegas, Nevada; Orlando, Florida; and Cincinnati, Ohio combined.

Over the course of the past five years, the DOL has purportedly recovered more than $1.2 billion (yes--that's billion with a "b") on behalf of those workers. The agency asserts it recovered more than $270 million in FY 2017 alone. That equates to an average of $740,000 a day. And, by all accounts, these enforcement efforts at the federal level are on the rise. DOL conducted 3,200 outreach events in FY 2017 in order to educate workers of their wage and hour rights. The agency's website has undergone significant upgrades and now contains a substantial amount of information to help both workers and employers better understand their rights and obligations; it was visited more than 35 million times in FY 2017. These educational efforts, while welcomed by most employers as they often help clear up misunderstandings employees and employers alike may have about applicable law, are inevitably also going to result in additional claims. In Alaska enforcement is also on the rise. The State of Alaska Department of Labor's enforcement efforts continue to focus on identifying misclassifications of workers, unpaid overtime and payroll taxes, and unlawful disparities in pay practices. According to DOL, the industries with the most frequent violations continue to be healthcare, construction, agriculture, hospitality, temporary help, and retail. Needless to say, all of these industries are key components to Alaska's economy. Thus, wage and hour compliance is an important issue for Alaskan employers.

If an employer is found, after a federal or state agency audit or investigation of an employee raised claim, to have violated a wage and hour law, the economic consequences are significant. In addition to any back wages found to be due, the employer often is required to pay interest on the wage assessment, a statutory penalty (that can equal the wages owed essentially doubling the amount due), and, to the extent the employee retained the services of a...