Employers who neglect to pay court-ordered restitution face hefty fines and penalties under both California and federal law.
In a recent California case involving Southern California Cleaning Service, a federal judge ordered the company to pay an additional penalty of $2,400 per day, for each day that the payment is delayed.
Even worse, the court also found the two owners of the company in contempt, and ordered them each to pay an additional $200 per day penalty. Further violations could result in them being jailed for contempt of court.
Both the fines will continue on a daily basis until the employees are paid in full.
In addition, the company was ordered to pay $227,701 in interest – 4.4% — on unpaid back wages of almost $3.5 million, plus $1 million in liquidated damages to workers.
The company’s troubles began in 2007 when the U.S. Department of Labor won a lawsuit against the southern California employer.
A California trucking company faces action by the U.S. Department of Labor (DOL) to recover some $1.4 million in back wages for 80 current and former employees. In addition, the complaint seeks to bar the company and each of its owners from receiving government contracts for three years.
The action charges that Alan Berman Trucking of Woodland Hills, California is in violation of federal regulations that require federal contractors to pay “the prevailing wage and benefits” to their workers. The prevailing wage is a floating amount set in each geographic area, based on the average pay for similar work. The prevailing wage was established so that federal contractors didn’t underpay local workers.
Alan Berman Trucking has approximately $10 million in contracts with the U.S. Postal Service. During the time under investigation, the company provided hauling services for mail between the Los Angeles and San Francisco Bay areas.
“Federal contractors have a responsibility to pay workers in accordance with federal law,” said U.S. Secretary of Labor Elaine L. Chao.
The complaint requires the company to pay $1,369,870 to 80 truck drivers who are current or former employees.
Investigators with the DOL’s Wage and Hour Division found that the company violated the law on eight different contracts, by treating drivers as independent contractors. Drivers were required to use their own trucks and assume all costs. The company paid drivers by the mile or by the trip, but failed to pay fringe benefits as required by law. The company also made illegal deductions to the employee’s pay for fuel, and failed to reimburse the drivers for maintenance, and wear and tear to their trucks.
The company also failed to keep accurate records of the hours the drivers worked, as required by law.
Alan Berman trucking is a repeat offender. The DOL has investigatged the company nine times, and found violations in eight of those investigations. The suit specifically names the owner, Alan Berman of Woodland Hills California, as well as Vice President Osvaldo “Ozzie” Tarditti of Northridge, California, as defendants. The current suit covers violations between June 2004 and February 2007.
While this is the first prevailing wage violation in some time, it is by no means the first violation to federal wage laws.
In August, five jointly-operated restaurants in Long Island, New York were ordered to pay almost $1 million to 191 low-wage workers. The employees had been forced to work long hours for wages less than the minimum wage, without overtime pay. The court ordered that if the employers did not pay up, their restaurants could be sold and the proceeds used to pay the employees.
The Fair Labor Standard Act requires that most U.S. employees be paid at least the federal minimum wage, which is currently $5.85 per hour. The FLSA also mandates that employees must be paid 1.5 times their usual hourly rate for each hour over 40 in a single work week.
Many employers mistakenly believe that any worker paid by salary is exempt from overtime. The FLSA does provide a number of exemptions to the overtime law for bona fide executive, administrative, professional and outside sales jobs. In general, employees must meet job duty and salary tests, to be exempt from overtime.
The U. S. Department of Labor Wage and Hour Divison collected more than $171 in back wages for some 246,000 employees in 2006. Thos wages were a result of 31,987 “compliance actions” in 2006.
Earlier this year, under a voluntary agreement to prevent a federal suit, Wal-Mart, Inc. agreed to pay $33 million in unpaid overtime wages to 86,680 employees throughout the nation. An internal audit revealed that the company had incorrectly classified some employees as “salary-exempt” when in fact they were entitled to overtime pay. In other cases, the company admitted that it had based overtime pay on the employee’s base hourly rate, not including incentives and bonuses in the employee’s average rate as required by law.
The Trans Bay Steel, Inc. of Napa and Los Angeles, California was fined $1 million for slavery and human trafficking. In the suit, the EEOC alleged that 48 Thai welders were exploited and discriminated against due to their national origin. The EEOC took the allegations one step farther, arguing that Trans Bay was actually guilty of slavery and human trafficking. Eventually, the judge agreed.
Sadly, a number of companies have been accused of discrimination recently—but few have been charged with slavery or human trafficking. When the EEOC receives a complaint of discrimination, they launch a full investigation. Only if the investigation turns up evidence of wrongdoing, does the EEOC file a suit. Not surprisingly, most companies choose to settle out of court, rather than fight the lawsuit.
Officials at Trans Bay probably wish that they had settled with the EEOC, but they fought the charges…and lost.
Trans Bay had obtained H2B visas for the employees through a third party agency. The EEOC charged that the employees were held against their will. Their passports were confiscated and their movements were restricted. The employees were forced to work without pay. In addition, some were confined to cramped apartments without electricity, water or gas.
At least 17 of the workers were told that if they attempted to leave, the police and immigration officials would arrest them. The EEOC contends that all the workers were forced to pay enormous fees to the recruiting company, which effectively kept them in involuntary servitude.
Eventually some of the workers escaped the slave-like conditions and were able to alert authorities.
The men were working to retrofit the Bay Bridge under a sub-contract won by Trans Bay, Inc. Trans Bay contracted with Kota Manpower Co. to bring skilled workers from Thailand. Eventually, 9 of the 48 workers were employed by Trans Bay. The remaining workers were forced to work without pay in Los Angles and Long Beach, in Thai restaurants owned by Kota Manpower. Some were also forced to work other menial jobs without pay.
“The issues of human trafficking and slavery are an enforcement priority for the Commission,” said Anna Y. Park, Regional Attorney in EEOC’s Los Angeles District Office, which has jurisdiction for the southern half of California. “The EEOC is committed to the protection of all workers, particularly those most vulnerable in our society. The workers in this case sought out the American dream, but instead faced a nightmare.”
After an extensive investigation, the EEOC won the suit against Trans Bay and was awarded up to $1 million. This award includes a monetary payment to each worker, with guaranteed employment on the Bay Bridge Project. The company also agreed to provide a housing stipend for workers.
In one of the most comprehensive awards in recent history, the company is required to pay the workers relocation expenses to Napa, California. They will also train and certify the workers as welders.
The company will also pay for tuition and books at a local college for the unskilled workers to train as welders. The company agreed to guarantee minimum pay and a base pay once the claimants complete their training period.
The judgment for the U.S. EEOC vs. Trans Bay Steel, Inc. includes continued monitoring by the EEOC, training of Trans Bay employees on anti-discrimination laws, changes to Trans Bay’s policies and procedures, and developing a company-wide complaint procedure.
EEOC Los Angeles District Director Olophius E. Perry said, “Through the cooperative efforts between the federal government and non-profit organizations, a just resolution was reached that is a win/win for the workers and for the employer.”
The EEOC worked closely with non-profit organizations such as the Thai Community Development Center, the Coalition to Abolish Slavery and Trafficking, and the Legal Aid Foundation of Los Angeles.
How do you calculate overtime pay for your employees?
The national retail giant Wal-Mart learned a lesson in overtime pay the hard way recently. It learned that overtime must be calculated on “average hourly compensation,” not “base rate.” The lesson has cost it $33 million.
Wal-Mart has agreed to pay that $33 million in back wages to more than 86,680 of its employees nationwide.
The reimbursement puts Wal-Mart in compliance with federal and California overtime laws.
The U.S. Labor Department alleged that Wal-Mart violated the Fair Labor Standards Act, or FLSA. The retailer under-calculated the overtime for the employees by using their “base rate” rather than their “average hourly compensation,” which is a larger number. All employees must be paid 1.5 times their pay for any hours over 40 hours. It’s customarily called “time-and-a-half.” But the law says the 1.5 must be calculated according to the employee’s base pay plus premiums and incentives – in other words, the “average hourly compensation” The “base rate,” which Wal-Mart was using, is the pay without premiums or incentives. For example, if $6 an hour is the base rate but the employee gets, on average, $7 with premiums and incentives, then $7 is the figure that must be used for overtime payment.
“This settlement provides $33 million in back wages, plus interest, to Wal-Mart workers, and the company has taken corrective action to prevent this from happening again,” said Victoria A. Lipnic, Assistant Secretary of Labor for Employment Standards.
The incentive behind the settlement may have been provided by a court judgment supporting the agreement. The Labor Department filed a complaint in U.S. District Court against Wal-Mart alleging violations of the FLSA overtime regulations and state minimum wage laws. The court issued a consent judgment ordering Wal-Mart to pay the back wages, and it directed the retailer against future violations. The consent decree includes not only payment of the back wages, but has Wal-Mart agreeing to pay interest on the amount.
The Labor Department says that should act as a deterrent to similar violations.
California overtime law is, simply put, one that says that employees should not be required to work more than eight hours in a workday or 40 hours in a workweek unless they receive special compensation for it.
We should note that employees in this case are defined as nonexempt employees who are 18 or older, or any employee aged 16 or 17 who is not lawfully required to be at school or prohibited from doing the work in question.
And, of course, we should also define what special compensation means in California. In this case, the special pay is 1.5 times the worker’s normal rate for all the hours that he or she works over that eight hour cutoff in a day or 40 hour cutoff in the week.
California law makes it clear that its definition of a legal day of labor is eight hours, and that workweeks go for six days. If an employer has an employee work beyond these eight hour and six day limits, then they must compensate that employee that 1.5 times pay rate for any time of the day in excess of those eight hours, up to 12 hours, and for the first eight hours of a seventh day worked in a week.
We should also be sure to know that special overtime compensation in California jumps up to double normal pay for any time in a day over 12 hours of work, along with any time spent working on a seventh day in a week over eight hours.
Like most states, though, these rules in California have exemptions, or employees who don’t get the overtime rates that we discussed above. Some of these exemptions include so-called executive, administrative, and professional employees. Certain employees in the computer software field who get paid on an hourly basis are also exempt.
And like most states, California also exempts employees of the state or any city, county or other government district. Other exemptions exist, which perhaps when we have a second later, we could go into.
As for now the California Complete Labor Law poster reflects all of the overtime laws as well as all of the rest of the state and federal labor laws for employees to view.