In a groundbreaking ruling, a federal court jury has recently ordered East Penn Manufacturing Co. to pay a staggering $22.25 million for violating wage and hour regulations. This decision marks the highest recorded jury verdict under the Fair Labor Standards Act (FLSA), declared by the U.S. Department of Labor (DOL). The implications of this case are significant, as the DOL now seeks not only to secure an equal amount in liquidated damages for the affected workers but also to obtain a court order mandating future compliance with the FLSA by the manufacturer.
East Penn Manufacturing Co.
Diving into the backstory, East Penn Manufacturing Co. was founded in 1946 by DeLight Jr., an Air Force Veteran who embarked on a battery business venture with his father. During the war, battery materials were scarce, but the demand for rebuilt batteries was high, particularly among returning soldiers in need of functioning vehicles.
Fast forward seven decades, and East Penn has evolved from a modest one-room shop with five automotive battery offerings to a global powerhouse. Today, the company boasts an impressive workforce with over 10,500 full-time employees, 515 product designs, worldwide operations, and hundreds of awards for industry excellence.
The Allegations
However, a troubling legal battle has damaged East Penn’s success story. The DOL has filed a lawsuit against the company, alleging that it failed to compensate 11,400 employees who worked at its battery plants in Lyons Station, Pennsylvania, between November 2014 and September 2021. The root of the issue revolves around East Penn’s failure to pay workers for the time spent putting on protective clothing before their shifts and the time spent undressing and showering after their shifts. According to the DOL’s claims, instead of paying employees based on their actual clock-in and clock-out times, the company manipulated the timesheets to only account for scheduled shifts, resulting in withheld wages.
Timekeeping Systems And Discrepancies
East Penn had two timekeeping systems in place to track employee attendance. The first system, the time and attendance system, recorded when employees swiped in and out of their shifts. The second system, the Human Machine Interface (HMI), logged the precise moment when an employee started work on the production line. The company calculated hourly pay rates, overtime, and bonuses by utilizing the HMI data. Employees were instructed to swipe in no more than 14 minutes before the start of their shift and within 14 minutes following their shift.
Compensation For Changing Clothes And Showering
To account for the inherent risks associated with exposure to hazardous chemicals, East Penn granted its employees a five-minute grace period at the beginning of each shift to change into their uniforms. Similarly, they were given a 10-minute grace period to change clothes and shower at the end of their shifts. However, despite these allowances, the FLSA specifies that any activities deemed “integral and indispensable” to an employee’s principal duties must be compensable. Consequently, the DOL argued that East Penn should be obliged to pay workers for the actual time spent on these tasks at the worksite.
How A PEO Can Be The Solution
In the wake of high-profile cases such as East Penn Manufacturing Co.’s recent wage and hour violations, small businesses must take proactive measures to avoid similar costly mistakes. This is where a professional employer organization (PEO) such as Group Management Services (GMS) can prove invaluable. By partnering with us, small businesses gain access to comprehensive HR expertise and resources that can ensure compliance with complex employment laws and regulations.
A PEO specializes in managing payroll, benefits administration, timekeeping, employee relations, and more, ultimately relieving businesses of these burdensome tasks. Our experts deeply understand labor laws, allowing us to help small businesses navigate potential pitfalls, implement accurate timekeeping systems, and establish proper compensation practices.
Hannah Shoemaker, GMS' HR Account Manager, expressed, "Partnering with GMS not only offers efficient timekeeping systems options and advanced payroll software but also the HR knowledge to keep you compliant and focusing on what you know best, your business! We start every relationship with an FLSA audit to ensure proper pay practices and classification of your workers. Then, ongoing collaboration with our hands-on HR and payroll experts reduces your liability for wage and hour errors that could cost you millions of dollars in fines or back pay."
By entrusting HR responsibilities to GMS, small business owners can safeguard their operations, protect their employees, and avoid the devastating consequences of wage and hour violations. Contact us today to learn more.