Human Resources News & Insights

The $600 payroll mistake that cost this company almost $45K

Here’s a cautionary tale about the importance of double-checking for minor mistakes in your company’s overtime calculations.

It’s a lesson one Texas company just learned the hard way.

In the lawsuit, Castro v. Precision Demolition, a company failed to pay an employee overtime for a mere $608.05 in unpaid overtime for his travel time. It’s a fairly common and innocuous mistake when it’s caught in time.

But in this case, it was neither caught in time nor painless for the employer.

On top of the hassle of being hauled into court over an innocent mistake, the $608.05 in unpaid overtime turned into a $1,216 award by the court, an award that included penalties.

70 times more costly

But that’s not the worst part.

On top of doubling the unpaid overtime the company was on the hook for, the court also ordered the company to pay out $41,333 in legal fees for the employee. And that amount was actually the court cutting the company a break. Reason: The employee’s attorney had initially sought a reimbursement of $114,000 in attorneys’ fees.

When all was said and done, the company wound up on the hook for $42,459. That amount doesn’t even account for the company’s own legal fees.

And that huge five-digit price tag all stemmed from a simple three-digit overtime error.

Not an area to cut corners

Nobody expects HR pros to be perfect, and mistakes are bound to happen from time to time. This is especially true at companies where HR staffers are being asked to also take on the role of payroll or benefits administrator.

But the lesson here is clear: Simple payroll mistakes can wind up costing employers a fortune. So it’s worthwhile to double-check all regular and overtime hours (or have a second set of eyes take a glance) to ensure a mistake like this doesn’t happen at your company.

 

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