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Failing to Pay Your Workers Properly Could Land You in Jail

Employers by now are well aware of the high cost of wage and hour suits. Failure to properly pay overtime or minimum wages can result in not only compensatory damages (back pay), but also liquidated or double damages, and the Plaintiff’s attorney’s fees. A $10,000 case can easily result in more than $50,000 in damages, not including the cost of defense counsel. Worse still, the Fair Labor Standards Act (FLSA) allows for collective actions which means numerous employees can easily join a suit, resulting in six or even seven figure lawsuits. Employers often have a difficult time defending these suits where the company failed to maintain proper payroll records. There is a presumption that the employee’s allegations of hours worked are correct, therefore plaintiffs often grossly exaggerate their hours worked, resulting in increased liability – in addition to penalties for record keeping violations.

A wage and hour suit can thus be financially devastating for a business and the individuals who own and manage it. The FLSA and New York Labor Law hold business owners who supervise employees personally liable for violations. The financial effect of a wage and hour case is well known amongst employers, but what many do not know is that it may cost you your freedom as well. Both the FLSA and New York Labor Law impose criminal penalties for failure to pay minimum wage and overtime. Now the Attorney General and Governor of New York are vowing to enforce these laws more strictly.

Penalties for violations can be stiff. Under the FLSA first time violators can be fined up to $10,000 and sentenced to up to 6 month in prison. Under New York Labor Law first time offenders face $20,000 fines and up to one year imprisonment. The penalties become still harsher for repeat offenders. It is not just owners of large businesses with egregious violations who are facing prosecution. A Queens’ restaurant was required to pay $400,000 in restitution for failing to pay minimum wages. A Long Island diner paid over $500,000 in restitution, and a tortilla factory owner was sentenced to pay $450,000 in restitution and 90 days in jail for overtime violations.

The recent increase in criminal prosecutions for wage and hour violations highlights the importance of compliance with the law. Even if employees are paid above the minimum wage and are paid overtime, without proper records employers may still face civil and criminal penalties. If you have any concerns about your payroll or recordkeeping practices it is essential that you contact an HR professional immediately. This is especially true in the construction and hospitality industries as these trades are on the DOL’s radar screen.

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