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What Happens If Employers Violate Labor Laws?

Labor law is one of the thorniest issues with which employers must comply. Specifically, most businesses are subject to a host of regulatory and legal requirements at the federal, state, and local levels.

These regulations collectively aimed to protect workers. For instance, the Civil Rights Act of 1964 protects workers from discrimination. While the Fair Labor Standards Act of 1938 establishes federal minimum wage and overtime pay for certain employees. Labor or employment law refers to any and all regulations of this sort.

CoAdvantage O Dot - Secondary Logo Consequences of Violating Labor Laws

  1. Financial Penalties
  2. Legal Costs
  3. Unfavorable Legal Rulings
  4. Reputational Problems 

The government takes these laws seriously, regardless of their onerous or challenging nature for employers. Failure to comply can lead to a range of serious consequences. What do employers who violate labor law risk?

Financial Penalties

Most labor laws allow for penalties. 

For instance, the Department of Labor states that employers who willfully violate minimum wage laws may face a civil penalty of up to $1,000 for each violation. Violations of child labor protections carry a civil penalty of up to $10,000 per employee subject to a violation.

Based on the specific compliance requirement, employers may compensate employees with back pay, the value of lost benefits, and interest payments. The exact compensation will depend on the specific compliance requirement in each case.

Legal Costs

Further, violations of employment law may lead employees to file private lawsuits against the employer. This means the employer may be responsible for legal fees and, if they lose the case, damages.

The Society for Human Resource Management reported that an employer's "failure to maintain accurate time records" led to a $5.8 million FLSA jury award. The Supreme Court later upheld this jury award.

Unfavorable Legal Rulings

In addition to court costs, settlement fees, or jury awards, litigation that results from violations of employment law can have other legal consequences for employers. For example, in 2018 the National Labor Relations Board (NLRB) urged its regional offices to more “aggressively pursue temporary injunctions to stop categories of potentially unfair labor practices.” in other words, legal findings can infringe on an employer’s ability to conduct business as normal. In extreme cases, courts can even effectively shut businesses down.

Reputational Problems

Some labor law violations can even attract the attention of the media and result in increased public scrutiny of business conduct. For example, Starbucks made national news after complaints about some of its labor practices. The impact of this media coverage can vary widely, but no employer wants to find itself in a public relations crisis that could potentially disrupt business and discourage customers.

Key Takeaways

It's crucial for employers to follow labor laws to avoid serious consequences. These laws protect workers at the federal, state, and local levels. Violating them can lead to financial penalties, legal costs, unfavorable rulings, and damage to a company's reputation.

Employers who break labor laws risk significant financial penalties. For instance, the Department of Labor may impose civil penalties for willful violations of minimum wage and child labor laws. Depending on the specific requirement, employees may also have the right to receive compensation, such as back pay, lost benefits, and interest payments.

Furthermore, employment law violations may lead to private lawsuits filed by employees. This can make employers liable for legal fees and potential damages. Additionally, in certain instances, labor law violations can attract media attention, adversely affecting a company's reputation.

Businesses must follow labor laws to maintain a good work environment, protect their reputation, and avoid legal issues.

CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with outsourced HR services. We provide a wide range of services, including HR administration, benefits, payroll, and compliance. To explore how our strategic HR function can drive business growth potential in your company, contact us today.