PAYING IN CASH STILL HAPPENS

Steven Cesare, Ph.D.

A business owner from Virginia called me the other day to talk about a legal incident that occurred in his local community a couple of days ago. Apparently, the Department of Labor received some troubling information that a well-known businessman was allegedly paying his employees in cash, rather than through the standard paycheck process.

Did the lights just get dim?

The lengthy Department of Labor investigation, which included numerous employee interviews and a series of payroll audits, confirmed that the allegations were substantiated.

Are your palms getting a little sweaty?

In response to this violation, the well-known businessman was fined $250,000. American money.

Did your heart just skip a beat as you re-read that number?

Apparently, several months ago, some of his employees approached the businessman and pleaded to him for some fiscal relief. Due to rampant inflation, that no doubt many of them voted for, the employees asked the businessman to now pay them in cash instead of a paycheck, thereby granting them a modicum of financial relief to pay their bills, feed their families, and sustain their lifestyles.

For whatever reasons given, the businessman voluntarily consented to their request and began the illegal payment plan.

In case you didn’t already know: DON’T EVER DO THIS. IT IS ILLEGAL!

Don’t worry, that $250,000 was only the Department of Labor financial penalty. Just wait until one of those newly-minted 87,000 IRS agents makes a visit to the businessman’s office. And in case you forgot, that $250,000 fine is not payable by your EPLI coverage. Out of pocket, baby. Your pocket.

If at all possible, to make matters even worse, guess who tipped off the Department of Labor about the businessman’s illegal actions? You guessed it: One of the employees who made the case for the cash payments to begin with.

While the financial penalty was crushing, the voluminous public backlash was nearly as devastating as the community quickly became aware of the once-respected businessman’s transgression which manifested itself in relentless damage to the company’s brand image as well as his own personal reputation through an onslaught of negative social media posts, hyper-critical local newspaper coverage, and pejorative interpersonal commentary from residents, business partners, and “newly-former” customers alike.

Forced by necessity, let me restate the obvious key points from this tragedy. First, never pay any employee, Temp, independent contractor, etc. in cash. Never! Not for Sunday work, not for overtime work, not for any work! Never! Second, you must always pay your non-exempt employees for all hours worked (e.g., before their shift begins, during their meal period if they are driving a company vehicle or doing any work-related tasks, after their shift ends, any evening or weekend tasks). And third, have a very clear policy statement in your Employee Handbook prohibiting non-exempt employees from “working off the clock.”

Aside from this specific incident, I have heard from multiple business owners that “every now and again” a job applicant will propose a cash payment alternative at the time of wage negotiation: “No one will know,” “We do this all the time at my current employer,” “Okay, how about you just pay my overtime to me in cash?”

If and when you hear those veiled attempts at reassurance, let me know if the lights dim, your palms get sweaty, and your heart skips, right before you calmly say, “We will not need your services at our company.”

If not, re-read the number again…

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