The contractor incurred the Labor Department’s wrath
because the company paid its workers on a piece-work basis, but because it did not keep accurate time records to show that the wages paid satisfied minimum wage and overtime requirements.
In 2020, while the Labor Department’s lawsuit was pending, Judge Snow issued an injunction ordering the contractor to:
stop maintaining false records;
implement a reliable timekeeping system under which employees would clock and clock out each day;
maintain accurate and complete records of wages paid and to stop paying wages through non-payroll accounts;
stop listing false regular rates of pay on payroll records;
provide a Court-approved notice to employees with their paycheck and by mail;
provide all time and payroll records to the Labor Department; and
every 30 days, provide a list of all current employees with current contact information to the Labor Department.
In an apparent attempt to convert to hourly wages, the contractor trained its superintendents on new time-keeping procedures, under which employees were to:
complete their own time sheet;
accurately document the time they worked, including the correct days of the week and times worked;
document their time contemporaneously as they worked it; and
total the number of hours worked at the end of the week, including by documenting any hours over forty in the box on the timesheet marked “Total O/T Hours.”
After the conversion, the contractor’s laborers began documenting time using a paper and pencil system. In reviewing the raw timesheets, the Labor Department noticed discrepancies and other issues with this timekeeping system, including wide variations in individual employees’ hourly rates. Also, some timesheets displayed the wrong name and signature, resulting in some employees not getting paid. Other timesheets had hours, and even whole days, erased.
The problems with the contractor’s wage calculations and payroll procedures did not end there, and in March and April 2022 the parties were back in court for evidentiary hearings to determine whether the company violated the court’s injunction.
In the end, Judge Snow ruled that the contractor “failed to substantially comply with the preliminary injunction,” finding that the company continued to maintain false records, failed to maintain a reliable timekeeping system, and provided false regular rates of pay on payroll records.
For more details, read
Judge Snow’s May 5, 2022, order
, which imposed a $10,000 weekly fine that helped prompt the contractor to settle with the Labor Department for $2.6 million – $1.3 million in back wages and $1.3 million in damages.
Piece Work Done Right
Piece work requires employers to legitimately keep “two sets of books”:
hours worked and
work units (or “pieces”) completed.
Reconciling those sets of records with actual compensation paid allows you to demonstrate to workers and the Feds that, while you paid by the task, you also complied with the Fair Labor Standards Act.
The contractor incurred the Labor Department’s wrath not because the company paid its workers on a piece-work basis, but because it did not record and maintain accurate, contemporaneous time records to show that the wages paid by the yard also satisfied the FLSA’s minimum wage and overtime requirements.
When the contractor realized that it was in legal trouble, it resorted to falsifying time records – a doomed-from-the-start strategy that Labor Department investigators can detect before their second cup of coffee.
Also, a non-compliant employer that considers rolling the dice on avoiding a wage-and-hour investigation should be aware that any assessment for unpaid wages and the associated payroll taxes is a burden not just for the company. In most cases, the owners and any managers who have authority or responsibility for the payment of wages, withholding, and FICA are personally liable for unpaid amounts. That liability is “joint and several” – that is, each liable person is on the hook for the entire amount owed.
As Lang & Klain attorney Mike Thal explains in his popular article, “
Piece Work, Construction, and the Fair Labor Standards Act
,” piece work is a legal and permissible payment method (if properly executed and documented) that employers can use “to motivate workers who heighten their productivity beyond what a mere hourly wage would yield.”
Mike’s article includes a practical section, “Paying for Piece Work the Right Way,” that provides useful guidance for any employer that pays for piece work or is planning to do so.
If your reading through the litany of the contractor’s offenses evoked even one
that should be a trigger for you to carefully review your pay methods and record-keeping and, if needed, bring in a wage-and-hour professional to help protect you against an FLSA claim.