This Is Not How To Control Labor Costs
Posted on 04-Jan-12 by The Timekeeper
From the “Wrong Way To Control Labor Costs” Deparment, comes a story reported by The Buffalo News about a janitorial company that got caught trying to pull a fast one.
Knights Facilities Management, a Michigan company that provides grounds maintenance and janitorial services at Ralph Wilson Stadium in Buffalo, NY had to pay $22,000 in back wages and damages to 26 employees following a a U.S. Department of Labor investigation.
The DOL’s Wage and Hour Division found the company avoided paying overtime by maintaining multiple payrolls and switching workers to different payrolls when their hours went beyond 40 for the week. It also failed to calculate all the hours employees worked and didn’t combine hours from different duties when computing overtime.
This is actually something I’ve seen before from sweatshop operators in the garment industry. They would create separate “companies,” and have employees clock out from one, then clock in to the other after eight hours of work. This way, the employer could force the workers to put in 16-hour days without paying them any overtime. (Most didn’t even pay minimum wage, either, but that’s another issue.)
I’ve also seen similar stories from various school districts around the country, only in their case the problem was ignorance, not malice. The school officials often didn’t realize that when calculating overtime they had to combine the hours employees spent on different duties (such as coaching a sports team and teaching class, or providing administrative/secretarial support and driving a school bus). As a result, employees might put in more than 40 hours a week, but because the hours were spread among multiple duties, they would not receive overtime.
No matter what the motivation, the end result is generally the same. The employer gets found out, and they have to pay big bucks to their workers for the overtime they should have been paying all along.
Many (most!) companies are looking for ways to control their labor costs, but this is not the way to go about it. In the end, when you factor in the hassle and expense of a DOL investigation and the additional penalties that will almost certainly be imposed — especially if the violation is found to be willful — plus the cost of the overtime payments… well, it’s probably cheaper and easier to just pay the overtime in the first place.
If you’re concerned about paying time-and-a-half overtime, then either hire enough workers or structure the workload so no overtime hours are required. If you’re not willing to do that, then suck it up and pay your people according to the law.
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