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Employers Beware: The Price of Not Knowing about the Current Minimum Wage and Overtime Laws

Author: S. Hayes Edwards Jr. Date: 11/21/2016

Categories: Employment Law & Litigation

We have written often about the pitfalls presented by wage and overtime laws, and how those laws carry severe monetary consequences for employers. Policy makers have targeted “wage theft” with these regimes, but all too often well-meaning companies are punished for systematic failures. We have seen a rash of actions taken against responsible employers who just did not know what was required.

The most severe penalty is treble damages, meaning the employer must pay the employee three times their unpaid wages. Federal law allows a court to award the employee treble damages. The law in the District of Columbia allows “less than” treble damages, but more than double damages, unless the employer can show that it acted in good faith and that the employer “had reasonable grounds for the belief” that it was not withholding wages. Maryland law allows treble damages if the employer failed to pay wages willfully and not because of a “bona fide dispute over how much is owed.” These standards are not exactly the same, but they have a similar impact: Employers who fail to pay overtime will be subject to additional penalties unless they take affirmative steps to ascertain when overtime is paid and not paid under the law. For example, an employer is required to calculate overtime based on a single week, not by averaging two weeks. An employer’s lack of knowledge of a wage/hour increase or when overtime must be paid is not a defense.

When analyzing the D.C. and federal wage/hour standards, courts look specifically at whether employers have sought advice from professionals (or government-produced materials) regarding the particular requirements of these laws. Without a reasonable inquiry, an employer who intended to pay overtime as required but failed to do so could still be assessed treble damages. Similarly, courts applying the Maryland “bona fide dispute” standard have looked at whether the employers made some “effort” to “determine if their method of payment was consistent with controlling law.” The clear intent of these laws is to force companies to take note of the specific requirements and make any appropriate adjustments to their payroll practices.

I would be happy to help your company review its wage/overtime policy as well as the relevant state or local laws. A small investment now could prevent big expenses down the road.