Is your company in an industry that is likely to be targeted by the Department of Labor (DOL) for FLSA violations, or by the California Labor Commissioner for California Labor Code violations? A review of the Department of Labor’s Wage and Hour statistics for fiscal year 2014, in connection with California’s Division of Labor Standards Enforcement most recent reporting for 2012-2013, establishes a clear pattern of industries that are targeted for wage and hour violations:
- Restaurants
- Garment manufactures
- Guard services
- Car washes
- Agriculture
Here is a summary of the DOL’s statistics:
Here is a summary of California’s DLSE’s most recent statistics:
While there are some differences between the two agencies’ statistics, restaurants lead both lists. It is also important to note that not every business can fit into these predetermined categories (note that the “other” category in the DLSE’s lists is very large), so there are many other industries affected.
It is also important to note the amount collected from the various industries that the DLSE found was due. According to the DLSE, the worse collection efforts was in the garment industry, with only 2.8% of the wages found to be due were actually collected. The next lowest collection rate per industry was in the car wash industry at only 10% collection rate. It is important to review these collection rates, because it is informative about how the DLSE or DOL will view your particular establishment when investigating potential claims. The lower collection rates are probably due to the result of the employer’s simply going out of business or taking other steps to avoid collections of the penalties and fines, or what I refer to as the bad actor presumption (rightly or wrongly).
Bad actor presumption (rightly or wrongly)
Imagine if you were in charge of collecting the penalties issued by the DLSE or DOL, these collection figures would color your view of employers operating in these industries. Going into the investigation, the government already has a predisposition that certain employers are more likely to have violations, and then when told they must pay fines, the employer likely to still simply refuse to abide by the determination. I’m not making a presumption that these penalties and fines were rightly or wrongly issued, but am only commenting about how these numbers skew the view from the perspective of the governmental agency. The agencies go through the process of making a determination and issue a citation, and then even after the determination has been made and the employer had an opportunity to appeal the agencies’ determination, the employer still refuses to pay the citation. In effect, employers therefore are harming the reputation of every business operating in that industry, and make it more difficult to overcome the predisposition the investigator has about the particular industry.
This illustrates the importance of companies operating in these targeted industries to be especially vigilant about compliance with Federal and California employment laws. An employer can gain a higher level of credibility with the investigator if they can show compliant policies, good record keeping, and proper payment of wages. Next week I will discuss violations most likely to be assessed by the DOL or the DLSE.