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What Happens When You Make a Payroll Mistake

Doing a payroll mistake could involve getting proclaimed to the Department of Labor. It could mean that you will get prosecuted, penalized, ordered to pay back payments, and forever fear the DOL. It will be an unpleasant mess over an honest mistake, right?

Well, not certainly. If companies honestly try to understand the rules and don’t consciously try to decrease over time, the DOL may be soft with a payroll mistake. At least that is how it has emerged in a recent case.

Employer Wins Wage and Hour Lawsuit

Sandra Ellis accused her employer, J.R.’s Country Stores, Inc., alleging that the company reduced her salaried paycheck which withdrew her salaried status (therefore making her eligible for overtime remuneration). Sandra normally got a paycheck for $625 but, a week, after working fewer hours than her set schedule expected, she got $593.80. She quickly resigned & demanded $42,000 in back wages. She then contended that deductions couldn’t be made to salaried workers just because they work under their set timings. This is somehow true. Salaried workers make a set amount despite the time they put in. Sandra, however, didn’t win the case. Here’s why:

The courts checked that County Stores made every attempt to follow the FLSA. The Country Stores worker handbook stated the FLSA rules on salaried workers. It asserted that they intended to follow those rules & compensate for any accidental deductions. This was one bit of “evidence” that Country Stores employed to prove its case. All that happened with Sandra was a payroll mistake & not an intended deduction. Mistakes do happen and, since the business could prove that they knew and followed the laws, the 10th circuit used the FLSA’s “window of correction” regulation and rejected the employee’s claim.

Window of Correction

The window of correction proffers employers a small window to fix FLSA errors so that workers don’t miss their salaried status. Losing salaried status can cause the employers to owe employees for unpaid overtime wages. The window of correction may implement when a company usually makes every effort to follow the FLSA but makes a payroll error anyway, resulting in a write-off from a salaried employee’s paycheck. To fit for the window of correction, employers must compensate the employee as soon as they find out about the error.

In the case asserted above, Country Stores promptly corrected their mistake when Sandra reported them and paid her more than she was owed. The DOL used the window of correction in this case. Country Stores was not seen as guilty of any wage and hour breaches.

Be Careful With Overtime Violations

Employers do sometimes win wage & hour lawsuits. Most of the time, though, the courts rule in support of the employee. Employers need to be familiar with the FLSA or hire someone who is so they can stay compliant.

The significant majority of wage & hour cases are linked with overtime (as shown in the image above). This is certain because overtime can get botched up in so various ways.

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