Posted in Blog | Compliance

Riskiest Industries For Wage & Hour Compliance Issues

Wage, hour and labor compliance is tough. If you follow us on LinkedIn, you’ve probably seen us intermittently post about companies required to provide “back pay” to their employees for mishandled overtime hours and or other compliance issues. Sometimes it comes down to intentional negligence. Other times the company simply didn’t know better.

Ensuring wage and hour compliance is an important aspect of the services we offer. In 2021, employers paid a grand total of $234,280,603.96 in back wages to employees. It is far more costly and time-consuming to be caught out of compliance than it is to ensure compliance on an ongoing basis.

Part of our expertise is understanding which industries are the most at-risk to fall out of compliance. Today we’re taking a look at a report released by the US Department of Labor’s Wage and Hour Division (WHD). The report highlights what they call “low wage, high violation” industries and reported compliance violations from 2001 through 2021. Here are some of the most at-risk industries, per that report.

Food Services

The most at-risk industry, according to the USDOL’s report, is the food services industry. In 2021, the WHD found violations in almost 85% of their restaurant investigations. During that same fiscal year, the food services industry violations resulted in 4,237 cases impacting 29,209 employees. Through investigations, employers ultimately had to pay out $34,741,032 in back wages throughout the year.

Although the food service industry had the highest number of cases and impacted employees in 2021, historical data shows an interesting trend. Over the last 10 years, 2021 actually had the lowest number in both categories. The numbers have also trended downward over the past decade. This is possibly due to fewer infractions across the industry, or simply fewer reported violations by employees. Either way, the food services industry is consistently the most at-risk for wage and hour compliance issues.

Construction

Second to food services is another consistently high-risk industry, construction. The industry saw fewer cases than food services (3,034) and fewer affected employees (21,341) in fiscal year 2021. However, the construction industry actually paid out more in back wages than any other industry in the report ($36,068,080). This is a consistent trend over the last 10 years, which generally means that while there may be fewer instances of compliance violations, they’re far more costly than other industries.

Other At-risk Industries

While food services and construction are the two top offenders, there are plenty of other industries that should be wary and aware of potential compliance issues. Retail, in particular, is just behind construction in the number of violation cases in 2021, though fewer employees were impacted. By contrast, the healthcare industry saw fewer overall cases than retail, but had nearly 2,500 more impacted employees.

Some Low-risk Industries

The data definitely reflects well on a couple industries. Apparel manufacturing had the lowest number of cases in at least 20 years, with only 76 violation cases in 2021. The hair, nail and skin care services industry wasn’t far behind, with a mere 107 cases impacting only 317 people. And while landscaping had their highest number of cases since 2016, fewer employees were impacted than any other in the last 10 years. 

What We Can Learn From This

The lesson is a simple one: all companies must prioritize labor, wage and hour compliance. Whether they’re in a “low” or “high” risk industry, all companies and organizations could very easily fall out of compliance. Ensuring they’re in compliance on an ongoing basis will not only save them money, it will also save time, effort, and — in some cases — the company’s reputation as an employer. Especially in a competitive hiring environment, ensuring compliance is a good way to get yourself ahead.For additional compliance-related resources, check out our Common Mishaps in Overtime Compliance white paper and the Compliance section of our blog.

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