Beyond that when in doubt, talk to a lawyer. At first glance to me (I am not a lawyer) this seems like it's probably illegal, but it's entirely possible there are nuances to which I'm not privy both in terms of legality and in terms of what's actually happening. A quick consult with an employment lawyer isn't that expensive and will give you a much better idea on how to proceed than HN ever can.
If you don't mind skipping straight to whistle-blowing, you can also talk to your State's department of labor, or the US Department of Labor. They tend to take such things seriously and will no doubt investigate.