Let's say the chief executive officer of a Fortune 500 Company is sitting down with his CPA preparing the company's annual tax return. They are deciding whether they should report all of their income to the IRS, and the CPA says, "Well, the worst thing that will happen is that we'll have to pay the taxes." The CEO responds, "Then let's not report the income and see what happens. If we get caught, we'll just pay what we owe."
If there were no repercussions to violating the law this is exactly what would happen without any financial penalty, back interest charges, and the potential threat of going to jail. The same is true for wage and overtime laws. That's why Congress wrote the wage and employment laws with two sharp front teeth: double damages and a recovery of attorney's fees.
So, let's walk through a hypothetical example. David Smith works as a police officer in the K-9 unit for Springfield City Police. As part of his job he has to train his German shepherd Max. The City requires that the dog live with David and that he take care of the dog by feeding, bathing and caring for the dog's health needs. Officer Smith spends 10 hours per week caring for Max. However, the city does not pay Officer Smith for this additional time spent taking care of Max. The city has violated the law.
This example comes from one of our actual cases. In fact, there are several reported cases on the subject and they all end with the same result: the time is compensable. This has been the law for at least the last decade. The clarity of the law is important because the city has no excuse for not being aware of it. Since the City knew or should have known that this practice violated the law, its conduct is considered "willful." (Learn about "willful" violations in Part 2 - How to Get Your Employer to Pay your Attorney's Fees.) For "willful" violations, the law requires the employer to pay the employee all wages owed during the last three years instead of the last two years form the date the claim is filed.
To simplify things, let's say Officer Smith was paid $10 per hour and normally worked 40 hours a week. So, how much is he owed?
Step 1 - Back Pay
Figure out how much he's owed each week by multiplying the 10 weekly overtime hours (spent caring for Max), by 1.5 times his normal rate. His normal rate is $10, therefore his overtime rate is $15. He worked
10 overtime hours, so he's owed $150 each week.
10 hours x $15 = $150 per week
Multiply the number of weeks he worked during the last three years to determine how much he is owed in back overtime pay. Assuming he worked every week, he's owed 156 weeks for the prior three years (3 years x 52 weeks = 156).
156 weeks x $150 per week = Back Pay: $23,400 over 3 years
Step 2 - "Liquidated Damages" a.k.a. Double Damages
Add in liquidated damages, or double damages, equal to the back pay owed. This is the penalty that encourages the employer to pay.
Liquidated damages = $23,400 (equal to total back pay)
Step 3 - Attorney's fees
The FLSA requires employers to pay for reasonable attorney's fees incurred by an employee for pursuing a wage or overtime claim. The law essentially states that the reasonable fee is determined based on an hourly rate charged by lawyers in similar cases with similar experience in the geographical area. Most courts have accepted that an experienced employment attorney in larger cities are paid somewhere in the range between $200 to $500 per hour (depending on the complexity of the case). Let's assume $250 is an average rate. A lawyer who spends 160 hours on the case would be entitled to a reasonable fee of $40,000 ($250 x 160 hours).
Attorney's fees = $40,000
To summarize, the total claim would be as follows:
Back pay: $23,400
Liquidated damages: $23,400
Attorney's fees: $40,000
You can see how an extra two hours per day or ten hours per week can quickly add up!
In case you missed them, read the other two hot tips:
Tip 2: How to Get Your Employer to Pay for Your Attorney's Fees under the Fair Labor Standards Act
Tip 3: How to add an additional year to your wage and overtime claim under the Fair Labor Standards Act