Why is the Hotel Industry a Target for FLSA Prosecutions?

By Amy Bailey VP of Finance and HR, TSheets | January 08, 2017

There's a big red bulls eye in the hotel industry. In fact, accommodation and food services ranks #1 in sheer volume for wage and hour prosecutions by the Department of Labor. That’s 24.4% of all the cases that have been brought since 1985. To put that number into perspective, hotels, restaurants, and bars—from the behemoths to the holes in the wall—have been required to pay more than $276 million in government prosecutions alone, with an average payout of $9.5k for every business affected.

Why? Does this trend represent shady business owners getting their comeuppance? Not quite. As Daniel Abrahams, employment law specialist of Brown Rudnick LLP says, "Other than the IRS, the FLSA is about the most regulated area of American jurisprudence. A dispute with the DOL or a group of employees doesn't mean you're a bad employer. It just means that you ran afoul of some very complicated rules. There's no shame to be had in not knowing all the rules offhand, or running into trouble with these requirements."

That said, not knowing all the rules offhand is very different from failing to keep a pulse on emerging trends in FLSA wage and hour lawsuits, or understanding the factors that have placed the accommodations industry on the front lines.

Several factors emerge in the search for why this industry in particular has a target on its back.

Salary Thresholds

The salary range for accommodations and food services employees varies wildly, with chefs and restaurant managers earning upward of 40K. However, hourly rates hover just above minimum wage for a large contingent of employees in the food service/accommodations industry, and hover closer to $10 per hour for positions like line cooks. The industry is filled with middle-management positions that fall between the current overtime threshold of $23,600 and the new threshold of $47,467—meaning, these workers are currently considered exempt and allowed to work until the job gets done, even if that means putting in a 70 hour workweek.  Workers who currently find themselves in this limbo between the old cutoff and the new cutoff are those most likely to pursue—and win—a wage and hour lawsuit on the basis of misclassification and owed back wages for overtime. 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 of 2016, the number of misclassification lawsuits is likely to continue its upward trend.

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