Violating state and federal employment laws exposes a business to significant financial risks. The agencies responsible for enforcement can impose legally mandated fines and penalties, which can quickly escalate. The extensive list of employment laws today covers crucial areas such as wages and overtime, hours worked, benefits and leave, workplace discrimination, safety violations, disability accommodations, termination practices and employee versus contractor status.
The number of penalties and fines can accumulate rapidly. Adherence to the laws is the employer’s responsibility, and government agencies are relentless in ensuring compliance. They learn of violations in different ways, including inaccurate employer reporting, employee complaints filed with agencies and government audits. Penalties and fines get expensive quickly, and there is no escaping the consequences of non-compliance with employment laws.
Government Penalties and Fines
The following is a sample of penalties and fines demonstrating that noncompliance with employment laws is expensive.
Fair Labor Standards Act
The FLSA established civil money penalties for employers who repeatedly violate minimum wage and overtime rules. At $1,000 per violation, the money adds up quickly. Violating child labor laws can lead to a civil penalty of $10,000 per worker.
In 2024, the Department of Labor’s Wage and Hour Division collected $149.9 million in back wages from employers due to different wage violations.
Occupational Safety and Health Act
OSHA and state-approved OSHA programs regulate workplace safety and health conditions. OSHA issues new civil penalty amounts each year. As of January 1, 2025, OSHA’s serious violations penalties are $16,550 per violation. If the violation is not corrected, like failing to provide fall or personal protection equipment, the penalty is $16,550 per day. If there is repeated or willful violation, the penalty is increased to $165,514. There are also penalties for less serious violations.
Equal Employment Opportunity Commission
Employment laws protect workers from discrimination. The state of Washington protects employees from being mistreated based on their race, ethnicity, religion, national origin, sex, gender identity, sexual orientation, age or pregnancy. Employment discrimination can lead to compensatory and punitive damages. The amount an employee can recover from an employer due to an EEOC violation depends on the size of the workforce.
An employee working for a business with 15-100 employees can recover up to $50,000, while an employee working for a business with more than 500 employees can collect up to $300,000. There are also fines, such as $680 assessed for failing to post the “Know Your Rights” notice.
State Workers’ Compensation
The federal government and each U.S. state have workers’ compensation laws to provide employees with benefits should they experience an injury or illness that is job-related. Employees can make injury claims for benefits, and employers are required to maintain records and submit the appropriate reports.
Delaying payments, filing inaccurate reports and failing to pay income or required benefits to injured employees are some of the violations that lead to employer fines. Insurance companies responsible for the workers’ compensation payments and reporting can also be at fault.
There are criminal and civil penalties assessed in some states. The actual fines levied per violation can get expensive, especially in a state like California. It imposes a fine of $10,000 per violation, and willful, continued violations may lead to one year in prison and up to a $100,000 penalty for illegally uninsured employers.
IRS Employment Tax Violations
The IRS, of course, is responsible for assessing and collecting employment taxes and related penalties. The agency also has the authority to determine if individuals are employees or independent contractors. Identifying an employee as an independent contractor will lead to expensive penalties and other costs.
The IRS views the misclassification as an attempt to avoid payroll expenses, like benefits. An employer will have to pay back wages and employment taxes, unpaid benefits and a variety of tax penalties and fines. There are penalties imposed for failing to collect and pay required employment taxes in full, as well as for failing to report employment taxes on time.
Legal and Reputational Costs
Government penalties and fines are just one category of costs associated with violating employment laws. An employer will likely incur substantial legal fees, which can be a significant financial burden. Estimates are that employers pay billions each year in legal fees to defend against claims. There can be court fees, mediation or arbitration fees and audit fees paid in addition to regulatory fines and penalties.
There may also be a cost in terms of reputation damage. Businesses that appear to have poor control of financial matters are not viewed favorably in the marketplace. Adhering to employment laws is just good business.
