Legal Blog

Failure to Pay Overtime Can Lead to Criminal Consequences and Extensive Penalties

timesheetIt is hard to imagine that, as a company owner, you could be criminally prosecuted for failing to pay proper minimum wage and overtime compensation to employees.  However, this is exactly what happened recently to the owner of nine Papa John’s pizza franchises in New York. In this particular case, the franchise owner failed to pay workers in his pizza parlors minimum wage and overtime premiums.  The owner tried to avoid paying overtime premiums by paying his employees in cash for overtime.  The owner also created fake employees so that actual employees could have their hours shifted in order to avoid paying time and a half for overtime.  On top of this, the owner filed fake tax documents consistent with this deception.  As a consequence, the owner was forced to pay over $500,000.00 in back wages and penalties and is expected to be sentenced to sixty days in jail. While criminal prosecutions over unpaid overtime are extremely rare, it is important to note that the Fair Labor Standards Act (FLSA) does contain criminal penalties for repeat offenders.  In addition to criminal penalties, and far more common, are monetary damages which are punitive in nature.  In general terms, it is very easy under the FLSA for a claimant to obtain liquidated damages in an amount equal to the unpaid minimum wage and/or overtime wage.  Similarly, it is common for claimants to recover their attorneys’ fees as well.  Thus, a claimant who has a $10,000 claim for unpaid overtime actually has a $20,000 claim for unpaid overtime and liquidated damages and, on top of that, also has a claim for thousands of dollars in potential attorneys’ fees.  Some states allow for the tripling of damages. Given the potential exponential exposure resulting from failure to maintain wage and hour compliance, not to mention the potential criminal consequences, it is critical for employers to understand their obligations and to adopt and implement practices that minimize these risks.  To this end, there are steps an employer can take to ensure compliance with the law. As a corporate employment-attorney, I frequently advise employers in several industries on wage payment issues. Think you may be calculating overtime incorrectly? Arrange a private consultation with Russell Berger.  


Russell Berger | 410.209.6449 Russell Berger is an experienced labor lawyer and litigator who is well versed in both state and federal court proceedings. He has received the honor of being named as a Rising Star by Super Lawyers in both 2012 and 2013. In addition to handling general litigation matters, Mr. Berger’s practice focuses on labor and employment disputes. Working as a labor attorney, Mr. Berger handles many different labor issues, including minimum wage and overtime litigation (under the Fair Labor Standards Act), wrongful termination claims, non-compete agreements, employment agreements, and severance agreements.   You can also connect with Offit Kurman via Facebook, Twitter, Google+, YouTube, and LinkedIn.