The U.S. Department of Labor recently discovered that Detroit-based Sheila's Bakery was violating the Fair Labor Standards Act's (FLSA) overtime provisions, and has agreed to pay 21 employees $63,000 in back wages, according to The Associated Press. An investigation revealed the employer was misclassifying workers as independent contractors rather than employees, which meant they were not receiving basic labor benefits.

This was bad news for both the workers and the federal government, the source reports. Individuals working in the bakery's three locations were not paid the premium rates (time-and-a-half) they were owed for overtime hours worked, and the government missed out on Social Security, income and Medicare tax payments.

According to the investigation, Sheila's Bakery paid the workers a flat salary of $340 to $400 per week regardless of how many hours they worked. The FLSA mandates that all employers pay non-exempt workers minimum wage for all their time and attendance in addition to time-and-a-half if they work more than 40 hours in a week.

If employers do not have the proper payroll processing equipment in place, they might not be accurately tracking their employees' work time and furnishing the proper pay, which can lead to violations and penalties.
 

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