Minimum Wages & Overtime Pay

Employees' claims for back wages under the Fair Labor Standards Act would be better protected if the statute of limitations stopped running--or "tolled"--at an earlier point. Although the Department of Labor claims that employees seldom lose back pay as a result of their claims expiring under the statute of limitations, the Food Lion case illustrates how an employer's liability for back wages can be reduced because of the running of the statute of limitations. Despite complaints by employees of the supermarket chain in August 1984 about unpaid overtime, the government did not start investigating these allegations until February 1986 and did not obtain a waiver of the statute of limitations for the initial period investigated. As a result, three former Food Lion workers lost nearly $12,000 in back wages. In GAO's view, changing the statute of limitations for the Fair Labor Standards Act so that it begins running when an employee files a complaint with Labor would afford the same protection for claimants as in some other labor laws. The clock on the statute of limitations now continues to tick during the time it takes Labor to begin an investigation, complete it, negotiate with an employer, and obtain payment--a process that can take months. To protect employees who Labor determines are owed back wages but have not filed complaints, GAO believes that the statute of limitations should begin running as of the date that Labor notifies the employer that it will be starting an investigation. GAO summarized this report in testimony before Congress; see: Minimum Wages and Overtime Pay: Change in Statute of Limitations Would Better Protect Employees, by Clarence C. Crawford, Associate Director for Education and Employment Issues, before the Subcommittee on Employment and Housing, House Committee on Government Operations. GAO/T-HRD-92-59, Sept. 22, 1992 (13 pages).

GAO found that: (1) the FLSA statute of limitations differs from the statutes of limitations for some other labor laws because different actions toll the statutes of limitations; (2) under the Portal-to-Portal Act, the statute of limitations tolls only when a suit is filed in court; (3) the amount of back wages employers are required to pay for a violation under FLSA can decrease while Labor investigates cases and negotiates with employers; (4) employers rarely agree to waive the statute of limitations for FLSA cases; (5) most waivers are obtained because employers request to pay back wages on an installment basis; (6) obtaining a waiver does not guarantee that employees will be protected from losing back wages as a result of their claims expiring under the statute of limitations; (7) in a 1986-1987 investigation, three grocery store employees lost back wages because their claims expired under the statute of limitations; (8) during the 2-year period the chain agreed to waive the statute of limitations, none of the employees involved in the investigation lost back wages as a result of their claims expiring; (9) the chain paid less than 25 percent of the back wages WHD investigators determined were owed; (10) in the case study, the amounts entered into the WHD management information system led to a substantial overstatement of the recovery rate for the case; and (11) information obtained from Labor officials indicates that overstatements may have happened in other cases.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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