Employers take note: DOL nets record $322M in back pay in FY 2019

With the end of the federal government’s 2019 fiscal year on September 30, the various regulatory agencies are now reporting their “results.” Think of it as earnings report season for public agencies. One agency touting its 2019 accomplishments is the Department of Labor’s Wage and Hour Division (WHD), which enforces the Fair Labor Standards Act (FLSA).

For FY 2019, the WHD collected $322 million in back pay from employers surpassing the FY 2018’s record collections of $304 million. Announcing the results, the DOL noted that more than half of the back pay amount – $186 million – came from employers who failed to pay employees time-and-a-half overtime for work beyond 40 hours in a week. Another $40 million came from back pay for failure to pay employees at least the federal minimum wage of $7.25 per hour.

The record collections come at a time of significant activity for the DOL. With numerous vacancies and leadership changes at the DOL in the first two years of the Trump administration, employers saw little change in the aggressive enforcement positions taken in the Obama era. However, in April 2019, a new WHD Administrator, Cheryl Stanton, was sworn in and is now implementing changes to WHD policies and investigation procedures that many employers expected to see much earlier in the Trump administration. Following the resignation of DOL Secretary Alex Acosta in July, the new Secretary of Labor, Eugene Scalia, took office on September 30 and is widely expected to work more collaboratively with employers.  

After years of fighting about the salary level for exempt employees, the DOL finalized a new rule in September 2019 raising the current salary level for exempt white collar status from $23,660 per year to $35,568 annually. The new rule is effective Jan. 1, 2020. Employers should take steps to implement that new rule by reviewing the classification of current exempt positions under the new $35,568 threshold.

The new salary rule also provides an opportunity for employers to evaluate non-exempt pay practices to ensure that the types of errors that resulted in $322 million in back pay do not exist in their own organizations. Common pay practice errors that can result in FLSA violations include failing to count all hours worked, failing to include bonus or incentive pay in calculating the regular and overtime rate, failing to pay for travel time, automatic meal break deductions, and rounding errors. As embedded pay practices, these errors can sometimes be overlooked for years, but can result in significant liability when they are discovered in a DOL audit.

Employers should consult with their McDonald Hopkins employment attorney for advice on implementing the new salary level rule, compliant pay practices, and other steps to avoid wage/hour violations.