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Penalties Increasing for Violating Federal Wage and Benefit Laws

The U.S Department of Labor (DOL) has published an interim final rule adjusting for inflation the civil monetary penalties assessed for violations of a number of federal laws. As a result, penalties will increase for employers that do not comply with certain requirements under the federal Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), the Employee Retirement Income Security Act (ERISA), and the Occupational Safety and Health Act (OSH Act), among other laws.

The new penalties will be assessed by the DOL, the IRS, and the Equal Employment Opportunity Commission (EEOC) and other agencies beginning August 1st, for violations that occurred after November 2nd, 2015. Going forward, these penalties will be subject to annual inflation adjustments linked to the consumer price index, to be announced no later than January 15th of each year, beginning in 2017.

Under the FLSA, the DOL is currently authorized to impose a monetary penalty of up to $1,100 for each repeated or willful violation of minimum-wage or overtime requirements. Starting August 1, the maximum per-violation penalties for repeated or willful violation are now $1,894.

Under ERISA, a number of the penalty increases are for failures to provide information to participants and beneficiaries. For example, if you provide each of your 100 participants notice of a blackout period for their 401(k) or the right to divest employer securities, but provide them one week late, you could owe a total close to $100,000 (7 days x 100 participants x $131 penalty = $91,700).

There are a number of other penalty increases involved with the August 1 effective date, click here to view a chart listing all of the penalty adjustments made as part of the interim final rule.

Fact sheets for the new ERISA and OSH Act penalties have also been released.

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