The construction industry has a target on its back. New research into wage and hour prosecutions has revealed that construction is among the top five worst affected industries, attracting almost one in 10 of all the cases brought by the U.S. Department of Labor under the Fair Labor Standards Act (FLSA) since 1985.
Construction companies have paid out more than $155 million in back wages and fines as a result of these prosecutions, at an average cost of almost $14,000 to each business. When legal fees and the impact of private prosecutions are added, the real damage is greater still.
Why has construction been so hard hit? The multifaceted answer mirrors the complicated, encompassing nature of the FLSA’s wage and hour provisions. But several critical characteristics emerge as ways in which the construction industry is particularly vulnerable to wage and hours lawsuits.
The average construction worker earns $14 per hour, or an annual salary of about $29,000, placing these workers just a few thousand dollars above the current salary cutoff for overtime exemption. Because the salary cutoff hasn’t been updated since 2004, workers just above the current cutoff who don’t meet the job duties test are especially likely to bring lawsuits for misclassification against employers. And with the threshold nearly doubling in December 2016, the number of misclassification lawsuits is likely to continue its upward trend.
Accurately keeping track of employee hours across multiple jobsites can quickly devolve into a guessing game or a white-knuckle exercise in trust. Unfortunately (when it comes to lawsuits), the construction industry is filled with mobile workers instead of in-office employees. Keeping a real-time pulse on who’s on the job, when they arrived and departed, what they worked on during a shift and whether overtime came into play are all factors that can mean the difference between a brewing lawsuit and business as usual.
The majority of construction companies (65 percent) still use paper or spreadsheets to keep track of employee hours. However, these manual processes easily lead to lost or incomplete records, he-said-she-said disputes, inaccurate hours for payroll, and a significant recordkeeping challenge (companies are required to keep employee time records for two years). Paper processes also increase vulnerability to FLSA lawsuits for the fact that speed is of the essence if a lawsuit threatens. Failing to respond to an employee’s complaint in the short window of time allotted can mean that the statute of limitations (typically two years in an FLSA case) gets thrown out the window—meaning higher damages and back payments.
The disconnect between policies that govern overtime, PTO and bonuses—and the procedures that enforce these rules—is prime territory for a lawsuit, and construction is especially vulnerable. With a long chain of contractors, supervisors, subcontractors, temporary employees and so on, the chain of communication regarding wages and hours can be shaky, and enforcing policies uniformly can be incredibly difficult.
Around 80 percent of all wage and hour lawsuits prosecuted by the Department of Labor revolve around overtime. With big projects to complete on tight deadlines, construction and overtime are natural bedfellows—and a significant vulnerability to lawsuits. Whether it’s failing to calculate an employee’s overtime rate correctly because of discretionary bonuses, encouraging off-the-clock work, or misclassifying employees to avoid paying time and a half, overtime is a hot-button issue at the intersection of the FLSA and the construction industry.
Understanding the wage and hour-related vulnerabilities in the field of construction is an important step—but taking the next step to address those vulnerabilities and prevent lawsuits is just as critical.