On May 9, 2013,the U.S. Department of Labor obtained a consent judgment in federal court ordering Bowlin Group LLC and Bowlin Services LLC to pay 196 employees a total of $1,075,000 in back wages and liquidated damages.
This very issue is the subject of Sperry Law Office’s next training class, sign up now! The following is excerpted from the DoL’s Wage and Hour news release:
The judgment resolves a Labor Department investigation conducted by the Wage and Hour Division which found that the defendants misclassified 77 employees as independent contractors and violated the Fair Labor Standards Act by denying those workers and others overtime compensation, and failing to maintain accurate payroll records. The judgment also permanently enjoins the defendants, as well as former Bowlin Group Vice President James “Jay” Martin, from violating the FLSA in the future.
“This judgment rightfully provides wages to the workers who earned them,” said acting Secretary of Labor Seth D. Harris. “The misclassification of employees as independent contractors cheats workers of wages and benefits to which they would otherwise be entitled to under the law, subsequently hurting our economy. It also leads to unfair competition because businesses that play by the rules operate at a disadvantage to those that don’t.”
An investigation by the division’s Louisville District Office found that this employer classified some of its cable installers as employees but misclassified other installers doing the same work as independent contractors. The agency’s investigation found that all nonexempt employees, regardless of their classification by the employer as either an employee or independent contractor, were paid based upon the pieces of equipment they installed rather than at an hourly rate. They were thereby denied overtime compensation, which should have been time and one-half their regular rates of pay for hours worked beyond 40 in a workweek. Additionally, the employer failed to keep accurate records of the number of hours worked by each installer as well as employees performing fiber optic splicing, and falsified payroll records to minimize the numbers of hours worked.
“The misclassification of workers as something other than employees, typically as independent contractors, presents a serious problem for affected employees and employers, and to the economy,” said Mary Beth Maxwell, acting deputy administrator for the Wage and Hour Division. “Misclassified employees often are denied access to critical benefits and protections to which they are entitled, such as minimum wage and overtime, family and medical leave, and unemployment insurance. Misclassification of workers may also generate losses to the U.S. Treasury, and Social Security and Medicare funds, and to state unemployment insurance and worker compensation funds.”
The Department of Labor and the Internal Revenue Service, through an interagency memorandum of understanding, are working together and sharing general information to reduce the incidence of misclassification of employees, reduce the tax gap and improve compliance with federal labor laws.
Memorandums of understanding with the IRS and state government agencies arose as part of the department’s Misclassification Initiative, with the goal of preventing, detecting and remedying employee misclassification. In addition, under the terms of the information-sharing agreement, the department may share specific case information with the IRS. This case is typical of those the department may refer to the IRS. More information is available on the department’s misclassification Web page at http://www.dol.gov/misclassification.
The FLSA requires that covered employees be paid at least the federal minimum wage of $7.25 for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Employers also must maintain accurate time and payroll records. The FLSA provides that employers who violate the law are liable to employees for their back wages and an equal amount in liquidated damages. Liquidated damages are paid directly to the affected employees.