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Simple pay mistakes can cost big bucks

by on
in Small Business Tax Deduction Strategies

What’s being underpaid $44.63 worth? It netted one lucky California employee more than $10,000.

Recent case:
Michael Harrington, a police officer, devoted one of his days off to providing traffic and crowd control for the filming of the movie “Man in the Chair.”

Harrington put in a 14-hour day and should have been paid $803, but his check noted gross pay of just $758.37. He got the check, and within two weeks had found lawyers who filed a class-action lawsuit over the $44.63 underpayment. His attorneys alleged California Labor Code violations on behalf of Harrington and a class comprising all retired and off-duty police officers similarly situated.

Eventually, the judge hearing the case denied the class-action request. The parties concluded that 16 officers worked on the movie. The company responsible for calculating payments claimed it had used a formula provided by the Los Angeles Police Protective League without checking to make sure the formula was correct under California’s overtime wage laws. The total amount due the 16 officers was $714.08.

To settle the matter, the company agreed to pay the amount due plus $500 to the California Labor and Workforce Development Agency as a penalty, plus $10,000 to Harrington.

That wasn’t the end of the matter, though. Harrington’s attorneys then demanded more than $46,000 in legal fees. The court rejected the request, and the attorneys appealed—costing the company even more money in legal fees.

The Court of Appeal of California refused to further punish the company, and ordered just $500 in legal fees. (Harrington v. Payroll Entertainment Services, B198883, Court of Appeal of California, 2008)

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