Everyone knows that the FLSA requires that employees be paid overtime when they work over 40 hours in a work week and that the Act provides for penalties and attorney’s fees when an employer fails to do so. However, many employers are not aware that they can also do jail time for violating the FLSA.
Case in point-Papa John’s franchisee Abdul Jamil Khokhar decided that he was not going to pay his employees overtime. To make matters works, Mr. Khokhar created fictitious employees to take credit for the overtime hours worked by his “real” employees. He would then pay his “real” employees their regular rate of pay regardless of how many hours they actually worked.
As one would expect, one of his employees, probably a “real” one, dropped a dime to the U.S. Department of Labor, who initiated an investigation into Mr. Khohkar’s creative payroll practices. Under the Fair Labor Standards Act any person who purposely violates the law is subject to a misdemeanor charge and fines. Mr. Khokhar eventually pled guilty to the crime and he was sentenced to 60 days in jail in addition to paying $230,000 in restitution to his employees. His company pled guilty to falsifying records, which was a felony.
If Hillary Clinton is elected President, employers may see more of an emphasis on criminal prosecution for FLSA violations. When Hilda Solis, a Barack Obama appointee, was the Secretary of Labor, she stated that “employers were thieves” and made her intention to punish them clear. Candidate Clinton has expressed a similar position, saying “I’m going to make sure some employers go to jail for wage theft.”
While I am certain that none of you reading this article would engage in the type of conduct perpetrated by Mr. Khokhar, we all need to be very careful to ensure that we are properly classifying workers as independent contractors or employees and as exempt or non-exempt and that we are properly paying them for all of the time to which they are entitled.
This process becomes even more complicated when one considers an employer’s obligation to pay employees for time spent “off hours” using electronic devices (iPhones, iPads,…) for company business.
All employees should start the new year with an audit of their payroll policies and practices. It could save you a stint in jail in addition to a civil suit.