Wage-and-Hour Compliance: You Are Either Fine or Fined

Total rewards (TR) professionals aren’t one-trick ponies. To succeed these days, they need to:

Think like a data analyst
Communicate like a public relations expert
Understand compensation like a financial wiz
Design benefit packages like an architect
Align strategies with business objectives like a CEO
Navigate regulatory compliance like a risk manager
Grasp legal compliance like a lawyer

This article focuses on those last two bullet points since TR compliance, particularly with wage-and-hour rules and regulations, can keep you and your team in good standing with organizational leadership, the general workforce, counsel and government agencies. Compliance slip-ups can mean lawsuits, investigations and fines — as well as brand damage and reputational damage with current and future workers.

Access a bonus Workspan Daily Plus+ article on this subject:

Guidance on How to Avoid Common FLSA Classification Errors

(Editor’s note: Upcoming Workspan Daily articles will examine specific areas of wage-and-hour compliance.)

The Price Tag for Penalties

How big of an issue is noncompliance? In the TR world, wages and hours are a major source of risk and exposure. Data released in January by the U.S. Department of Labor’s Wage and Hour Division (WHD) showed enforcement activities at American organizations during fiscal year 2024 led to the recovery of $202 million in back wages and $71 million in damages for nearly 152,000 American workers. While the back wages number was $6 million less than FY2023 and the number of affected workers was 10,000 less than a year ago, enforcement outcomes remained significant.

Crackdowns occurred across industry sectors, but those with traditionally low wages and high violations garnered strategic focus, with recovery figures exceeding:

$37.8 million for healthcare workers
$35.1 million for food service workers
$32 million for construction workers
$11.1 million for building services workers
$6.8 million for agricultural workers
$6.3 million for retail workers

Rules and Regulations

Where did organizational violations most frequently and substantially occur in 2024? The WHD data showed distinct and continuous employer misinterpretations or misapplications of elements within the Fair Labor Standards Act (FLSA). TR professionals should take note here because common errors involved:

Misclassifying employees. Classifying employees (either intentionally or unintentionally) as exempt when their duties do not fall within the qualifications and standards for an executive, administrative, professional, computer/or and outside sales employee; in doing so, affected employees unlawfully do not receive the protections and benefits within the FLSA’s minimum wage and overtime rules.
Off-the-clock work. Not paying nonexempt/hourly employees for work done after hours, such as answering emails, taking calls, etc.
Incomplete wage-and-hour records. Not keeping accurate and complete records of employee hours and pay.
Meal-break violations. Not paying hourly employees for breaks that are less than 20 minutes, or not allowing employees to be completely relieved from duty during their meal break.
Unauthorized deductions. Making deductions from an employee’s pay to a degree that it reduces their earnings below the federal minimum wage and unlawfully affects their overtime pay.
Child-labor violations. Employing and paying underage workers (the legal minimum age is dependent on industry and duty) in prohibited occupations or making them work restricted hours.

Prosecution and/or settlement of cases for employers’ FLSA mistakes led to the recovery of $149.9 million in back wages for 125,301 workers in 2024. Of this total:

Overtime violations led to $127 million in back-wage recovery for 101,043 workers (compared with $130.7 million and 106,759 workers in FY2023).
Minimum-wage violations led to $15.3 million in back-wage recovery for 21,543 workers (compared with $20.9 million and 31,150 workers in FY2023).
Tip-related violations led to $7.4 million in back-wage recovery for 10,651 workers (compared with $4.4 million and 6,645 workers in FY2023).
Retaliation-related violations led to $274,956 in back-wage recovery for 60 workers (compared with $169,878 and 60 workers in FY2023).

In addition, 736 cases of child-labor violations, which involved the employment of 4,030 minors, led to $15.2 million in civil penalties.

Take the Next Steps

To help you best comply with the FLSA, the U.S. Department of Labor (DOL) provides a reference guide to aspects of the law, including basic standards, coverage specifications, various provisions and the enforcement process. The DOL also offers an abundance of outreach resources (e.g., webinars, presentations, inquiry lines, posters, fact sheets). Last year, the agency provided more than 4,700 in-person and virtual events, with drew more than 600,000 participants.

Your organization’s legal counsel also should be a critical compliance partner. Work with them on ways to:

Develop and implement understandable and transparent overtime policies that stick to FLSA guidelines and ensure prompt and correct compensation.
Ensure employees receive fair and equal treatment to avoid discrimination claims. Apply FLSA rules to all employees without bias. Slight differences in pay or treatment within worker classifications can create legal problems.
Ensure managers are trained in the details of FLSA regulations so they can correctly apply them. Awareness, education and applied knowledge are essential to organization-wide compliance.
Conduct regular internal audits to understand the current state, identify issues and resolve them at the nascent stage.

Editor’s Note: Additional Content

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