Payroll violations are no laughing matter for any company, but they bear far worse ramifications for small businesses. Fines are assessed not on company size but according to violation and that can hit a small business owner hard. Compliance with Fair Labor Standards Act mandates (FLSA) and knowing the answer to these commonly-asked questions, could avert a potential disaster.
FLSA General Payroll Compliance Questions
If all workers are paid above minimum wage, does the federal minimum wage poster have to be on display?
Absolutely. While there is no citation or penalty for not posting the federal minimum wage poster, it is still a violation of FLSA law and will get a business firmly placed on the FLSA's radar. Every private, federal, state and local government employer with any employee is subject to the Fair Labor Standards Act, 29 USC 211, 29 CFR 516.4 posting of notices. Definitely not worth the risk when all it takes is a dedicated wall space.
What are the consequences of willfully violating an FLSA law?
Willful violations can cost a company up to $10,000 per breach and a business can also be prosecuted depending upon the nature of the violation. Finance Regs reports on a situation involving the Family Dollar Stores. The company was ordered to pay more than $35 million to more than 1400 current and former store managers after violating overtime pay regulations. Financeregs.com (Accessed Apr. 13, 2010). A second violation is not even worth entertaining; besides additional fines, a business owner could face a troubling court case and potential jail time.
Payroll Laws and Employee Questions
If a terminated employee never collects his last paycheck and cannot be contacted, how long does an employer have to wait before the pay can be reclaimed?
This one depends on the state in question. In Texas for example, a paycheck must be held for 12 months. See Texas Property Code § 72.1015. After that time, an employer can contact the Unclaimed Property Division of the Texas State Comptroller's Office for instructions on disposition of the wages. Check individual state laws for compliance times.
What is the statute of limitations for recovering back pay under normal circumstances?
In this instance, an employer typically makes up the difference between what the employee was paid and what the employee should have been paid. Under normal circumstances a two-year statute of limitations applies to the recovery of back pay but if the violation is willful, a three-year statute of limitations may apply.
If a Family Support Order is taking 25% of an employee's disposable wages (after legal deductions), can additional garnishments be added?
The Consumer Credit Protection Act (CCPA) and Title III limits the amount an employee's wages can be garnished in any given week. The United States Department of Labor says that limits are the "lesser of 25% of disposable earnings or the amount by which disposable earnings are greater than 30 times the federal minimum hourly wage." However, additional Family Support Orders, Federal Tax Levies or a Bankruptcy Order can be added regardless of the percentage already being taken.
Payroll Laws and Ongoing Training
Payroll mistakes are going to happen even with the best of payroll software, for behind the programs are human beings and nobody is infallible. Small mistakes can be readily dealt with, violations of payroll law however, can be an arduous and costly path that all companies should strive to avoid. Payroll laws are readily accessible to all small business owners. Researching and learning them should be a constant part of ongoing training for any company, small or large.
Sources:
Fair Labor Standards Act; Flsa.com; Accessed Apr. 13, 2010
The United States Department of Labor; Dol.gov; Accessed April 13, 2010
Elizabeth Batt - Elizabeth Batt is a former large animal nurse, certified NREMT, lover of equines and conservationist.
Join the Conversation