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FLSA and FMLA penalties are also adjusted higher
The U.S. Department of Labor (DOL) announced increased penalty amounts for violations of the Employee Retirement Income Security act (ERISA) effective Aug. 1, 2016. Inflation adjustments to these penalties will now be announced annually, no later than Jan. 15.
The new penalty rates were specified in an interim final rule published in the
Federal Register on July, 1, 2016.
The Employee Benefit Security Administration (EBSA) enforces ERISA's fiduciary, reporting and disclosure provisions, which provide that civil monetary penalties can be assessed for various compliance failures.
The Federal Civil Penalties Inflation Adjustment Act of 1990 (Inflation Adjustment Act) established a mechanism for updating various penalties to reflect inflation in an effort to maintain their deterrent effect, but adjustments were historically infrequent because of certain rounding rules. On Nov. 2, 2015, Congress enacted the Federal Civil Monetary Penalties Inflation Adjustment Act Improvements Act to require federal agencies to make a "catch-up" inflation adjustment. The catch-up increase, effective for penalties assessed after Aug. 1, 2016, is capped at 150 percent of the Nov. 2, 2015 level. The Improvements Act also replaced the previous rounding convention for penalty inflation adjustments with rounding to the nearest dollar for all penalty amounts.
DOL will issue subsequent cost-of-living adjustments under the Improvements Act, determined by fluctuations in the Consumer Price Index for all Urban Consumers (CPI-U).
DOL Interim Final Rule with Inflation "Catch-up" Adjustment Amounts
The interim rule specifies that the catch-up inflation adjustments will apply to penalties DOL assesses after Aug. 1, 2016, if the associated violation occurred after Nov. 2, 2015. Violations that occurred on or before Nov. 2, 2015, and assessments made on or before Aug. 1, 2016, will be subject to the old penalty amounts in effect prior to the inflation catch-up adjustment.
After this initial catch-up adjustment, agencies must adjust their civil monetary penalty amounts annually for inflation. The inflation adjustment will be determined from October to October using CPI-U, and the adjusted penalty amounts will be announced on the agency's website no later than the following Jan. 15. Annual inflation adjustments will not be subject to the usual regulatory agency notice and rulemaking process.
Although the DOL does not typically assess the maximum penalty permissible under the law, the threat of larger penalties may provide plan sponsors and administrators with stronger incentives to pay careful attention to compliance deadlines.
Marjorie Martin, EA, FSPA, MAAA, is a principal at Xerox HR Services' Knowledge Resource Center. Fred Farkash, CEBS, Fellow-ISCEBS, is a senior consultant at the firm. This article originally appeared in the July 18, 2016 issue of For Your Information, produced by Xerox HR Services' Knowledge Resource Center. © 2016 Xerox Corp. All rights reserved. Republished with permission.
DOL Hikes FLSA and FMLA Penalties
The Department of Labor’s July 1
interim final rule also significantly increases penalties under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and other laws its agencies enforce. Here, too, the increases will apply to penalties assessed after Aug. 1 for violations that occurred after Nov. 2, 2015—the date the Inflation Adjustment Act was enacted.
Penalties assessed on or before Aug. 1 will be subject to the civil penalty amounts currently in place.
The FLSA and applicable DOL regulations provide for the assessment of civil monetary penalties for any person who repeatedly or willfully violates federal minimum wage or overtime requirements. Last adjusted for inflation in 2001, the current maximum penalty is $1,100 per violation. Under the interim final rule, the penalty for repeated and willful violations of the FLSA’s minimum wage and overtime provisions will increase by roughly 72 percent to $1,894.
Because penalties are normally assessed on a per-employee basis, employer liability may escalate quickly if noncompliant pay practices affect a number of workers.
Every employer covered by the FMLA is required to conspicuously post a notice explaining the statute's provisions and providing information for filing complaints of violations with the DOL’s Wage and Hour Division. Currently, an employer that willfully violates the posting requirement may be assessed a civil money penalty of up to $110 for each separate offense. The DOL is increasing the maximum penalty for violation of the FMLA’s posting requirement to $163 for each separate offense.
Although the DOL has invited comments by August 15, the final regulations are unlikely to materially change from the interim final rule. Employers should review their pay practices, postings and safety protocols to ensure compliance.
-- By Nancy Vary, JD, director of the Knowledge Resource Center at Xerox HR Services, and Abe Dubin, JD, a consultant at Xerox HR Services. This content is excerpted from the July 14 issue of
For Your Information, produced by Xerox HR Services' Knowledge Resource Center. © 2016 Xerox Corp. All rights reserved. Republished with permission.
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