The cost of ignoring compliance during growth: $3.4 million
When your company is growing rapidly, it’s easy to ignore the less-pressing business issues, such as minor compliance tasks. But as a recent DOL settlement shows, doing so can prove very, very costly.
One company that learned this lesson the hard way is benefits and payroll software provider Zenefits.
The tech company improperly classified 743 account execs and sales reps as overtime exempt, and paid them a flat salary because of this classification, according to a DOL investigation.
The DOL said these improper classifications resulted in violations of the FLSA’s overtime provisions.
CFOs’ job to keep raising questions
A big reason for the misclassification:Rapid growth.
Zenefits didn’t have anyone dedicated to compliance because it was too focused on growth, the company said.
Of course, the DOL didn’t have much sympathy for the growing software firm. In the end, Zenefits agreed to pay the 743 affected employees $3.4 million in unpaid overtime.
As the DOL Wage and Hour Division’s regional administrator in San Francisco, Ruben Rosalez, put it:
“We have put money back in workers’ wallets while also working with Zenefits to ensure future compliance with federal labor law. This case allows us to level the playing field for all of the employers who play by the rules …”
This settlement offers a very timely lesson for CFOs of all stripes, especially those in the tech sector: As finance chief it’s on you to make sure you keep raising questions about the impact of any growth initiatives on your business’s compliance processes.
Free Training & Resources
Webinars
Provided by SkyStem
Further Reading
Business and tech leaders admit their organizations aren’t looking before they leap. Fifty-eight percent of 1,000 CFOs and CIOs sa...
Time to update your systems: The Social Security Administration (SSA) has announced the 2027 Social Security taxable wage base. Next yearâ€...
Most state withholding tables coincide with the start of the calendar year. But mid-year adjustments happen too, and they can catch payroll...
Confirming when federal legal and banking holidays will occur in 2024 can help you avoid surprises on paydays, tax deposit due dates and re...
If a recent survey by payables fintech provider Tipalti is any indication, finance automation is top of mind for most of your CFO peers. ...
Exporting ERP data into Excel and manually building financial reporting processes and reports is costing your team more than just time. Man...