The speaker describes a common payroll practice among construction firms in Wisconsin where, during busy seasons, employees work long hours but are only paid for 40 hours per week while the extra hours are "banked" for use in slower months. In the off‑season the employer continues to pay the employees a full 40‑hour wage even though no work is performed, presenting the arrangement as a benefit to workers. The speaker explains that under the Fair Labor Standards Act (FLSA) this practice is illegal because overtime hours are not compensated. He warns that a single disgruntled employee can trigger a putative class‑action lawsuit, prompting a review of all payroll records, a look‑back period of two years (or three years for willful violations), and potentially massive liability. For small contractors with thin margins, such judgments can be financially ruinous and may bankrupt the business.
Chapters
In the construction and home improvement world, I've had clients who, you know, I had a client who they had an agreement with their employees. So, it was a concrete company. And here in Wisconsin, you know, our weather's not great for a few months out of the year. And so, they didn't have the ability to put jobs out there for their employees. And so, some years ago, this was, they had an agreement with their employees that during the months where they had the work and the weather was appropriate, they would bank hours. And anybody you talk to in the construction world is familiar with this, that you talk to them, they're like, "Oh yeah, I worked for a company, we banked our hours." So, what that meant was during the great months when there was a ton of work to be had and the weather was great and, you know, it was sunup to sundown was a good 14 hours, 15 hours a day, they would work as many hours as they could. They would just get paid for their 40 hours a week and all the extra hours would get banked. And what this company then did was in the months where they didn't have work to give these people, they still paid them their 40 hours per week. So people weren't getting laid off. They knew they had consistent source of income coming in. The employees were thrilled with this arrangement, right? They get a couple months off in the winter, go deer hunting. If there's a job that comes up, they'll go in and do it. Like, but they were getting a couple months off but still getting full-time pay. Under the Fair Labor Standards Act, which people also call the FLSA, that is illegal. You cannot do that because you're not paying people overtime. And what really sucked for this company was it's not just a small problem if one, one employee, disgruntled employee, sues you in the future. That law firm that's going to represent them is now going to come and they're going to do a putative class action. They're going to seek to look at all your records to see how many employees you did this with. They're going to reach out to all those employees, get them part of the class action. It's a 2-year look back, generally speaking, But it can be a 3-year look back too if there's willfulness in what you did. And so, you're looking at massive amounts of money. And for a company that's margins aren't, you know, crazy, you're not Amazon, you're not, you know, you're not some of these big corporations, that kind of a judgment against you will kill your company. You know, it can ruin you.
