The Cost of FLSA Violations = $3 Million Per Day

That’s right — $3,000,000.  PER DAY. Thanks to Robin over at Nana’s House for catching this one.  Using that number, Pennsylvania taxpayers are already on the hook for $78 million in liquidated damages.  That’s an average of $90 million for every month that this drags on.  If Judge Judy were trying this case, this is the moment when she would yell “Outrageous.  OUTRAGEOUS!  What kind of responsible behavior is THAT?”

Come to think of it, I personally would pay a large sum of money to watch AFSCME and the Rendell administration work this out in her amusing-yet-disturbing circus of arbitration (incidentally, “AFSCME & The Rendell Administration” was the name of a band at my college way back when).  But I digress.

This figure comes from a document created by the Office of Administration regarding the furloughs and how they would affect 2008-2009 fiscal year.  The document can be found by Googling “Commonwealth of PA FLSA“.  It’s the eighth entry down (if you don’t see it, sign out of everything Google and try again).  The URL begins with “www.lmsinfo.state.pa.us/portal/server.pt/…”.  It’s a Powerpoint presentation prepared on June 8, 2008, presumably to discuss implications of the then-upcoming furloughs.  It’s an interesting read in its entirety, but the most important element is on page 18:

JULY 1ST FORWARD: Budget Impasse furloughs begin if there is no signed budget. Governor’s Office decision to: 1) withhold pay – to meet legal requirements relative to expenditures after July 1st and 2) call for temporary furloughs – to avoid liability of double wages ($3 million/day).

If you whip $3 million into your calculator and assume 77,000 state employees, you’ll eventually wind up with an average annual salary of $14,220.  This is, obviously, wrong.  But if you further divide it down to the hour, it comes out to an average pay rate of $7.29 per hour.  That’s awfully close to Pennsylvania’s 2008-era minimum wage of $7.15 per hour.  I’m willing to bet that if you recalculate using the exact number of employees when this document was written, it would come out to exactly $7.15 per hour.

Algebraic shenanigans aside, this document shows that the state in 2008 was well aware of what the damages would be should wages go unpaid.  The state, if it were here for me to interview, would likely point out that this document was created June 6th, 2008 — about five weeks before the Court issued its decision in AFSCME v Rendell.  Had that decision been rendered prior to this document being created, it may say something entirely different.  And it’s worth pointing out that the Office of Administration is not responsible for us not getting paid.  Responsibility for the impasse rests solely with the legislative and executive branches of our state government, all of whom have repeatedly failed to do their jobs since, oh, April of this year.

Contact your legislators again.  Contact Governor Rendell again.  Ask them why they have chosen to cost Pennsylvania taxpayers an additional $3 million dollars every day.

18 thoughts on “The Cost of FLSA Violations = $3 Million Per Day”

  1. Actually, the potential “double wage” liability will run between $4 million and $10 million per day this year:

    Last year, there were 25,166 “FLSA Covered Non-Critical” and 52,736 “FLSA Covered Critical” employees according to another Office of Administration document. Only the “Non-critical” employees would have been working without pay, so the $3 million per day figure works out to an average pay rate of $15.89/hour (annual salary of $30,985).

    This year ALL of the FLSA covered positions are working without pay – all 77,900 of them. I’m by no means a law expert, but here are two scenarios…

    If the Feds were to only require damages in the amount of minimum wage (now $7.25/hour):
    $7.25/hour × 7.5 hours/day × 77,900 employees = $4,235,812/day.

    If the double wage penalty is based on the entire wage, you take the $15.89/hour average rate from last year, add a 2.25% step and a 3.0% raise (for those who received them), and you’re at an average hourly rate of at least $16.74 now:
    $16.74/hour × 7.5 hours/day × 77,900 employees = $9,780,345/day.

    That’s not that say that the State is going to get hit with any such penalty, but it’s much too large of a risk to be taking. Why no one is pushing a stopgap measure is beyond me…

  2. Dear Just Another…I read something yesterday on the stopgap spending measure. Apparently there is a union for the State that is not too well known and they have an article on their site to their members.

    They contend that a bill (HB 1771) has been put forth to the house, the governor said he would sign it, but the Democratic majority refuses to put them to vote because it will diminish their ability to get a budget approved and passed. I have heard various members of the Republican side of the House say they’ve introduced legislation that would get the workers paid though I don’t recall the numbers of the bills.

    You can read the article I read here: http://tinyurl.com/lrl3vu

    SO. Now I know PRECISELY who I am taking off my voting Christmas Card list. My own party.

  3. @Robin – HB 1771 has been stuck in the House Appropriations Committee since the beginning of July. Dwight Evans (D), Chairman, has been sitting on it since then.
    Rendell was saying as recently as last week he would not sign a stop gap measure as it takes the pressure off the politicians to come up with a budget.

  4. Pawn, why WOULDNT the state get hit with that large penalty? Its the law (double minimum wage x every unpaid hour worked). If they are in violation of the FLSA its what every state worker is entitled to and should recieve.

  5. I’ve followed the blog for awhile during this crisis, but never posted. One question I have is are we entitled to our regular wages AND the double minimum wage for each hour unpaid or are we entitled to just double minimum wage for each hour unpaid? Because what if the worker gets paid more than double the minimum wage? It wouldn’t make sense to have to take a pay cut because the state is being penalized, but I’m unsure of all of this legal mumbo jumbo….

  6. steve, I’m not pawn but I can think of a couple reasons. Reason one…politics make strange bedfellows. The current administrations are not likely to want to flaunt all kinds of dirty laundry such as this so I am thinking it will go quietly away. By quietely away, I mean the steps will be followed and time will pass during which the State government will be “counseled” about how to remedy the situation. And, if the State government is reasonably convinced that the Federal government can impose penalities, they are likely to have a reason to come to SOME agreement pretty quickly.

    Reason two. The Secretary has the option of seeking damages. She may decide not to…because…see reason one about bedfellows.

    Just my opinion.

  7. http://www.thepittsburghchannel.com/money/19889838/detail.html

    Pa. Budget Impasse: Rendell Seeks Alternate Pay Ideas
    Loans Available To State Employees Who Miss Paydays
    UPDATED: 1:32 pm EDT July 27, 2009

    HARRISBURG, Pa. — Gov. Ed Rendell is considering ways to pay for Pennsylvania’s government operations so that state employees don’t miss more paydays during the ongoing budget impasse.

    Rendell said Monday that he is exploring options and wants the money approved by the middle of the week.

    Pennsylvania has been operating without an approved budget in July, leaving the state without the power to pay bills and meet payroll. Many state workers only received part of their usual pay last week, which will be followed by no pay at all on Friday.

    Spreadsheet: See A Comparison Of All Budget Proposals So Far

    Pennsylvania has been operating without an approved budget this month. Many state workers only received part of their usual pay last week, which will be followed by no pay at all after that.

    Rendell and his Democratic allies favor a budget that mixes spending cuts with tax increases, while Republicans are opposed to any plan that calls for a tax hike.

    “Unless you have recurring revenue, you’re back here next year or the following year,” Rendell said.

    Related: 6 Years Later, Rendell Again Tests Senate GOP

    More than 20 banks and credit unions have agreed to help state employees who may soon have payless paydays by giving them low-interest loans or lines of credit.

    A complete list of all help that’s available to state employees during the budget impasse is posted at http://www.oa.state.pa.us.

    Related Link: Frequently Asked Questions About The Budget Impasse

    ——————————————————————————–

    Funny they are still reporting that these loans are available. Why are the not listening to the employee’s that have been telling them this isn’t so? Obviously Rendell has the media in his pocket as well.

  8. Tell me why the state workers have to take out loans so bills can be met,,, so when the pay is finally made then they now have an extra payment they have to deal with,,this is not fair by any means ,, all show up for work as usual and expect to be paid for those services, work is done and monies should be there,, some have worked hard not to go into debt,, and now a loan is the only option to put food on the table

  9. The people responsible for not doing their jobs by passing a budget should be fined $1000 a day for every day the budget is not in place!
    It should come out of their own pocket.
    Gee,how long do you think this would last?

  10. Found this in an article about DOL random investigations into FLSA violations by nursing homes: The penalties for FLSA violations are steep. Employers found guilty of violating the Act must pay employees for unpaid wages for at least the two prior years and potentially three. Since the employer is obliged under the law to keep accurate records, and since when a violation is found the records are obviously not correct, strong presumptions run in favor of the employees’ claims as to hours owed. In addition, if the DOL pursues litigation, it will invariably seek liquidated damages in an amount equal to the back wages due, effectively doubling the employer’s liability. If this is not enough to get your attention, an employer who has previously admitted to or been found in violation of the FLSA is also subject to a penalty of up to $1,000 per violation for its repeat offenses.

    Robin – You’re right on about the bedfellows. It is doubtful that the DOL would bring a suit against the Commonwealth.

  11. Read also Code of Federal Regulations Title 29, Chapter V, Part 578, which explains how the DOL decides to assess civil money penalties. Again, doubtful that this would happen.

    http://gpoaccess.gov. Click on Code of Federal Regulations, then E-CFR.

  12. Does anyone have figures on how many of these loans have been denied? We hear its around 75%

  13. How about this if we owe taxes to any level of goverment we pay heavy interest and penalties if they are not paid on time. The state should give all the state employees the same interest and pentalties as they would charge if we owed them money…..

  14. Hubby checked his paycheck today, for pay date 8/7, and it has him being paid for this pay period and the previous 72 hours of reg time unpaid and the ot that he has worked. So much for no lump sum, his deductions in taxes, union fair share, etc equal a full regular paycheck.

  15. I have been contacting FLSA for updates on Employees vs. Commonwealth, working with no pay due to the impass of the Budget. When I call I ask for up-dates to be sent to me in writing. In addition I have been asking for a claim number. As of today, I have not received anything, 7/31/09.

    Last I spoke with a live person I let them know that I felt like I was being discriminated against because I was a state employee. (ALL other claims they have accepted direct from the employee.)

    On numerous occasions I was able to give my name. However I am not happy with this. I want factual step by step information.

    I tried googling & came up with nothing on this.. However I did find some interesting reading where another state was involved in something similar:

    _____
    FLSA Suits against Virginia
    The Commonwealth of Virginia has been targeted several times by employees suing over FLSA matters, both for alleged errors in classification and for such things as miscalculating hours worked. In most instances, the state´s 11th Amendment immunity from FLSA suits filed by individuals has been upheld by the courts. For example, in just the past six years, courts have affirmed the state´s immunity from FLSA suits in Commonwealth of Va. v. Luzik, 259 Va. 198 (Va. 2000); Abril v. Commonwealth of Va., 145 F.3d 182 (4th Cir. 1998); and Taylor v. Commonwealth of Va., 951 F. Supp. 591 (E.D. Va. 1996).

    However, constitutional protection from suits filed by individuals does not confer immunity from litigation initiated by an agency of the U.S. government, such as the U.S. Department of Labor (DOL). In a recent decision, Chao v. VDOT, 157 F. Supp. 2d 681 (4th Cir. 2001), the commonwealth lost its bid for constitutional immunity from an FLSA action pursued by the DOL, although it eked out a victory because the Secretary of Labor waited too long to file suit. Had it not been for DOL´s problem with the statute of limitations, the lawsuit would have gone forward against Virginia, the 4th Circuit said, holding that the state could not claim sovereign immunity in the case.

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