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Small Business Lay Off & Vacation Pay

I am an Office Manager of a small business with only 8 employees, including the Vice President. Business is very slow and the owner is talking about closing the doors as our cash flow projects are not enough to make payroll for the last two weeks of this month. We are not a very successful business and usually have to borrow from the owner of the company. He is a very successful businessman with 25 companies. It’s near Christmas and my employees have vacation time they have accrued, yet the Vice President claims we will not have to pay them neither their vacation pay nor their wages if we don’t have the money. I strongly disagree with this. I have been researching like crazy and nothing seems to pertain to such a small number of employees. Please help clarify so I ensure this is handled legally.

Wages for hours worked must be paid to employees in accordance with the federal Fair Labor Standards Act (FLSA).

The FLSA applies to employers whose annual sales are at least $500,000 or who are engaged in interstate commerce. Examples of employees who are involved in interstate commerce include those who: produce goods (such as a worker assembling components in a factory or a secretary typing letters in an office) that will be sent out of state, regularly make telephone calls to persons located in other States, handle records of interstate transactions, travel to other States on their jobs, and do janitorial work in buildings where goods are produced for shipment outside the State. So, the FLSA applies to nearly all employers regardless of the number of employees.

Under the FLSA, employers are required to pay each non-exempt employee at least the applicable minimum wage for all hours worked and pay overtime wages for any hours worked over 40 in a given workweek. Exempt employees must receive the predetermined salary for just about any workweek during which work is performed regardless to the quantity or quality of their work.

Some states of their own wage payment laws to be considered.

Employees who fail to receive their due wages can file a wage claim with the Department of Labor. Keep in mind many states allow employees to file claims for free. Further, not only will the employer be liable for paying the employees their due wages but he may be responsible for monetary penalties as well.

Vacation time is not regulated by federal law. Some states have adopted regulations on the administration of vacation time. Some states consider earned vacation time as earned wages while other states simply require employers to follow their own established practices or policies. So, even in the absence of state law requiring the employer to payout accrued unused vacation time, if you have a policy entitling employees to such time or even a past practice of paying out such time then you may be legally required to as part of an implied contract with employees.

Some states allow employees to include due vacation time in their wage claim while in other states employees may have to actually sue the employer. Either way, they may be awarded their due wages and then some.

Another point to discuss with the VP is that it’s simply good business to pay employees for their time worked and the potential for negative publicity may not be worth the cost savings. Though you may only have 8 employees, each one of them may file wage claims or sue the employer and every single one them will absolutely tell others about the way they were treated. In our social media age, those 8 people may very well tell thousands of people about their experience with the company, specifically the VP. Now, someone who runs 25 other companies should be wise enough to see not only the ethical issues in his decision to not pay employees but also the potential for severe damage to his and his other company’s reputations.

Further, if the VP doesn’t want to pay his own employees then he’s probably not going to pay payroll taxes either. He risks being responsible for the penalties and fines from the IRS for this.


This entry was posted on Sunday, December 11th, 2016 at 1:46 pm and is filed under
Benefits, Compensation, Labor Laws.
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