Most employers are aware that violations of the Fair Labor Standards Act can result in an investigation by the U.S. Department of Labor, leading to back pay damages, as well as possible liquidated damages in an amount equal to back pay, and even civil penalties up to $1000 for each willful or repeated violation. State departments of labor may also conduct such investigations for violations of state wage and hour laws, which can result in similar monetary consequences. Employees may also bring a lawsuit against their employer in federal or state court. But what many employers don’t know is that they could even end up in jail!
Under the FLSA, willful violations can result in criminal prosecution, with a second conviction resulting in imprisonment! State laws can be even more aggressive, as a Papa John’s franchisee recently learned to his dismay.
Abdul Jamil Khokhar and BMY Foods, Inc. jointly owned 9 Papa John’s franchise locations. They failed to pay the required overtime (1 and 1/2 times the regular hourly wage for all hours worked over 40 in a workweek) to their employees – paying only straight time for all hours worked, including overtime hours. After learning that he was under investigation by the US DOL, Khokhar created fictitious names for employees to use in the computerized timekeeping system in order to hide the failure to pay the overtime premium. (In other words, it appears that once an employee hit 40 hours in a workweek, he would enter any additional time worked under a second, fictitious name). Khokar and BMY Foods also filed fraudulent New York state tax returns omitting cash payments made under the fictitious names.
New York Attorney General Eric Schneiderman and the US DOL announced on November 16, 2015 that Khokhar pled guilty to a misdemeanor failure to pay wages, and BMY Foods pled guilty to falsifying business records in the first degree – a felony under NY law! Khokhar was required to pay $230,000 in back wages to his workers, but was also sentenced to spend 60 days in jail! Khokar also entered into a settlement with the DOL to pay an additional $230,000 in liquidated damages and $50,000 in civil penalties.
So the lesson for employers here – pay overtime, don’t file false tax returns, and certainly do not make up fake employees!!!