One of the many problems with the Fair Labor Standards Act (the federal law that requires most employee be paid at least a minimum wage and overtime) is that it provides little incentive for employers that discover honest wage and hour mistakes such as a misclassification or a failure to correctly calculate overtime to fix those mistakes. In many cases, where an employer discovers it has made an honest violation (usually through a wage and hour audit) and fixes the mistake, the employer is then subjected to lawsuits over the mistake for an additional year of pay, liquidated damages and attorney’s fees.
Rather that potentially subjecting the employer to potential wage and hour collective actions, lawsuits and attorney’s fees, employers should be incentivized to identify and correct wage and hour mistakes. Doug Hass at Wage and Hour Insights proposed earlier this week that the Secretary of Labor should provide employers with a safe harbor “for those employers who want to remedy a wage or hour violation committed under a good faith belief that they were complying with the law. . . [and] pay any wages lawfully owed within a reasonable amount of time.” I like Doug’s idea but think it is unlikely that a democratically appointed Secretary of Labor will provide any safe harbor for employers. Building on the idea of a safe harbor provision, I suggest that Congress should act to provide a statutory safe harbor or immunity from collective action lawsuits for employers that discover, and unilaterially fix, wage and hour mistakes by correcting the pay practice on a going forward basis and paying back pay. Indeed, Congress could further incentivize employers to identify and make these voluntary corrections by providing that safe harbor immunity would exist for employers that self-report violations to the DOL and provide voluntary back pay to employees for some period short of the limitations period (e.g., one year) that would exist if the violation were discovered and a lawsuit was filed by private plaintiffs’ attorneys or the DOL itself. Providing the employer an economic benefit in self-disclosing and remedying the violation rather than sitting back and hoping the violation is never discovered would increase the likelihood that employers would engage in self-audits and make voluntary corrections. Moreover, it would provide back pay to employees for honest mistakes that might otherwise go undiscovered (albeit for a shorter limitations period than if the employer didn’t self-report and voluntarily correct).
Just an idea.
Follow me on Twitter @RussellCawyer