BabyVision Inc. willfully violates federal wage and hour law, obstructs investigators and threatens employees

Poughkeepsie, New York, employer must pay more than $121K to 49 workers

A Poughkeepsie-based maker and distributor of baby apparel and accessories denied 49 workers overtime pay and then attempted to thwart federal investigators by hiding workers and threatening them if they spoke to U.S. Department of Labor Wage and Hour Division agents.

A yearlong federal probe found that BabyVision Inc. and the company's owners, Shreenivas Shah and Malti Shah, paid employees — including some not on the company payroll — straight time in cash and denied them the required overtime rate of one and one-half times their regular hourly wage when they worked more than 40 hours in a workweek. The owners also improperly classified some employees as exempt from overtime. Additionally, the Shahs failed to maintain proper payroll records.

The Shah's actions violated the federal Fair Labor Standards Act. As a result, the agency determined that the workers are due $121,349 in overtime back wages and liquidated damages.

Early in the investigation, the Shahs told employees they were to hide from investigators or provide false information. Workers were threatened with termination if they cooperated with investigators. The department responded by obtaining a temporary restraining order to protect the workers and their rights, allowing the review of the company's employment practices to continue.

A consent judgment was also secured by the department that ordered the Shahs to pay the back wages and damages, take extensive corrective action to prevent future violations and pay $13,744.50 in civil money penalties, given the willful nature of their violations.

"Deliberately denying employees their earned income is illegal, and it makes it harder for workers to care for themselves and their families," said Sonia C. Rybak, the Wage and Hour Division's assistant district director in the White Plains Area Office. "We will use every enforcement tool at our disposal to ensure a fair and level playing field for employers and fair pay for employee work."

"This case shows our commitment to take all necessary legal steps, including using restraining orders, to protect workers and their rights," said Jeffrey S. Rogoff, the department's regional solicitor of labor in New York. "The judgment here does more than secure back wages. It commits BabyVision and the Shahs to a comprehensive compliance plan that includes corrective action and worker education to keep these violations from happening again."

The compliance plan requires the defendants to use a time clock or another automated timekeeping device to record all hours worked by their employees accurately; prohibits employees from working off-the-clock; record employees' work hours and break time correctly; prominently post an employees' rights notice and poster in Spanish and English; and provide all current workers and new hires with a copy of the consent judgment in Spanish and English.

BabyVision designs and distributes baby apparel and accessories to retail stores and on the Internet under brands such as Luvable Friends, Hudson Baby, Yoga Sprout and Nurtria. It operates a warehouse and offices at 30 Firemens Way in Poughkeepsie. The underpaid employees prepared customer orders, loaded and stocked items in the warehouse and maintained the company's website.

Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

Danica Group LLC underpaid workers, misclassified some as independent contractors

The U.S. Department of Labor has obtained a settlement by consent judgment that provides for the recovery of $1.42 million in back wages and liquidated damages for more than 300 current and former employees of four Long Island City plumbing and heating contractors. The related businesses are Danica Group LLC; Copper Plumbing & Heating LLC; Copper II Plumbing & Heating LLC; Copper III Plumbing & Heating LLC, and the owners are Thomas Andreadakis, Leonidas Andreadakis and Helen Andreadakis.

Investigations by the department's Wage and Hour Division found that the contractors violated the overtime and recordkeeping requirements of the Fair Labor Standards Act. Specifically, they paid employees straight time wages rather than time and one-half when employees worked beyond 40 hours in a workweek, and issued separate paychecks for the overtime hours from a petty cash account.

Additionally, they misclassified at least 25 employees as independent contractors, paying them a weekly salary that did not compensate the employees at time and one-half when employees worked beyond 40 hours in a workweek. The defendants also frequently paid many employees late, sometimes requiring workers to wait several weeks to be paid. Finally, they maintained incomplete and inaccurate payroll records.

"Hundreds of workers were denied their lawful pay when they were not paid promptly and correctly or were misclassified as independent contractors," said Dr. David Weil, administrator for the Wage and Hour Division. "The misclassification of employees as independent contractors deprives workers of wages and benefits they are entitled to under the law, thereby 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."

Under the terms of a consent judgment entered with the U.S. District Court for the Eastern District of New York, the defendants will pay the workers $710,000 in back wages covering the time period between September 2010 and April 2014, and an equal amount in liquidated damages. The judgment also includes enhanced compliance provisions that will commit the defendants to taking effective steps to improve their payroll recordkeeping, ensure that employees are paid on time each week, reclassify as employees those who were previously misclassified as independent contractors and properly pay them.

"Underpaying and misclassifying employees as independent contractors are illegal and unacceptable actions. The Labor Department will pursue all available legal measures to ensure that workers are properly classified and compensated for their work," said Jeffrey Rogoff, regional Solicitor of Labor in New York. "If the defendants fail to adhere to the terms of the judgment, they could be subject to contempt sanctions by the Court."

The case was investigated by the Wage and Hour Division's New York City District Office and litigated by the Department's regional Office of the Solicitor in New York City.

Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

Judgments end misclassification scheme, order workers paid and treated as employees

Investigation in Utah and Arizona secures wages and benefits for more than 1,000 construction workers who were wrongly classified

A nearly five-year federal investigation of illegal business practices by 16 defendants in Utah and Arizona has yielded $700,000 in back wages, damages, penalties and other guarantees for more than 1,000 construction industry workers in the Southwest, the U.S. Department of Labor announced.

Consent judgments put an end to an effort by the defendants — operating collectively as CSG Workforce Partners, Universal Contracting, LLC and Arizona Tract/Arizona CLA — to claim that their workers were not employees. The defendants required the construction workers to become "member/owners" of limited liability companies, stripping them of federal and state protections that come with employee status. These construction workers were building houses in Utah and Arizona as employees one day and then the next day were performing the same work on the same job sites for the same companies but without the protection of federal and state wage and safety laws. The companies, in turn, avoided paying hundreds of thousands of dollars in payroll taxes.

"Hiding behind deceptive legal partnerships to reduce wages owed to employees is wrong. We will not tolerate denying overtime and other employment rights to workers," said U.S. Secretary of Labor Thomas E. Perez. "We will combat schemes like these with every enforcement tool we have, including partnering with other federal and state agencies to ensure that workers are not misclassified as owners or members of LLCs or otherwise. Deceptions like these deny workers hard-earned wages, hurt families who depend most on those wages, and leave workers without important protections if they're injured on the job or laid off."

A misclassified employee — with independent contractor or other non-employee status — lacks minimum wage, overtime, workers compensation, unemployment insurance, and other workplace protections. Employers often misclassify workers to reduce labor costs and avoid employment taxes. By not complying with the law, these employers have an unfair advantage over competitors who pay fair wages, taxes due, and ensure wage and other protections for their employees. These illegal practices lower standards for all workers, especially in highly competitive markets and industries where employers try to reduce overhead, often at the expense of their workers.

"Employers who misclassify workers do not pay their fair share of payroll taxes, which cheats critical state and federal programs," Perez added. "The misclassification of workers shortchanges every single taxpayer by forcing them to pick up the slack for those who break the law."

The consent judgments are the result of a combined effort of the U.S. Department of Labor, U.S. Department of Justice and the state of Utah. The investigation began in southern Utah and then moved to Arizona after the passage of state legislation in Utah that required LLCs to provide workers' compensation and unemployment insurance to their "members." To avoid legal jeopardy in Utah, the defendants moved their operations south to Arizona.

Utah officials assisted the department by sharing information through the state's Worker Classification Coordinated Enforcement Council, an entity created by the state legislature to combat misclassification. Working together in the investigation and litigation, the U.S. Attorney's Office for the District of Utah and the U.S. Department of Labor presented findings to federal courts in Utah and Arizona. The courts, in turn, approved consent judgments on April 21 against the above-named companies and their respective owners.

The consent judgments require the defendants to:

• Pay $600,000 in back wages and liquidated damages to employees in Utah and Arizona and an additional $100,000 in civil penalties;
• Stop using limited liability companies to avoid Fair Labor Standards Act compliance;
• Treat themselves as "employers" and their current and future workers as "employees" under the FLSA;
• Comply with the FLSA's minimum wage, overtime, recordkeeping, and anti-retaliation provisions;
• Pay all applicable federal, state and local taxes; and
• Work with the department to identify those workers who were harmed by their misclassification scheme and determine proper individual payment of back wages.

"Legitimate independent contractors are valuable contributors to our economy, but those who deliberately misclassify actual employees as independent contractors — or partners — are a serious problem in many industries, especially in construction," said Wage and Hour Division Administrator David Weil. "We will continue to work together with other enforcement authorities to ensure a fair and level playing field for businesses, and fair and full pay for workers."

"We are pleased that this multi-agency effort has helped so many workers find justice, and produced a change in business practices in the regional construction industry," said M. Patricia Smith, U.S. Solicitor of Labor. "This kind of cooperation among state and federal law enforcement authorities will serve as a model for preventing misclassification and similar practices that deny workers' their wages and protections, and undermine law-abiding employers. The resolution of this case should send a strong message to any other employers, in any industry, contemplating such a scheme."
Workers who believe they might be owed back wages by the defendants can contact the Wage and Hour Division's Salt Lake City District Office at 801-524-5706, or Arizona District Office at 602-514-7100.

In a separate but related case, the department obtained a consent judgment against a major client of the Arizona defendants in this case. The judgement in the U.S. District Court for the District of Arizona against Paul Johnson Drywall, LLC, required the company to stop using the Arizona defendants' unlawful LLC business model and to pay $600,000 in back wages, liquidated damages and civil money penalties.

The Wage and Hour Division has aggressively expanded its efforts to combat employee misclassification in sectors where workers are especially vulnerable and violations are rampant. The department currently has 20 Memoranda of Understanding with states, including the Utah Labor Commission, through which it collaborates with states agencies to combat misclassification. More information is available on the department's misclassification Web page at http://www.dol.gov/misclassification.

Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

Lockheed Martin settles wage dispute with US Coast Guard

18 wrongly classified workers receive $201K for wages owed

The U.S. Department of Labor has announced an agreement with Lockheed Martin Corp. to settle allegations that the company violated prevailing wage laws while under contract with the U.S. Coast Guard in Petaluma. Eighteen workers have been paid $201,000 in back wages by Lockheed as a result.

A Wage and Hour Division investigation determined that Lockheed violated the prevailing wage requirements of the Service Contract Act by improperly classifying technical instructors/course developers in job categories that did not reflect the duties they performed. As a result of the improper classification, the company paid incorrect prevailing wages.

“Government contracts specify in detailed language how pay and benefits are to be determined. Employers must follow these rules, so that workers are paid correctly,” said Susana Blanco, district director for the Wage and Hour Division in San Francisco. “Government contractors, large and small, should be aware of their obligations under the law.”

The SCA applies to every contract entered into by the U.S. that has as its principal purpose services furnished by contractors. The law requires that contractors and subcontractors performing services on covered federal contracts in excess of $2,500 must pay their service workers no less than the wages and fringe benefits prevailing in the locality. Additional information on labor provisions and enforcement of government contracts is available at http://www.dol.gov/whd/govcontracts/.

Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

U.S. DOL signs agreement with Florida Department of Revenue to reduce misclassification of employees

Officials from the U.S. Department of Labor and the Florida Department of Revenue today signed a memorandum of understanding with the goal of protecting the rights of employees by preventing their misclassification as independent contractors or other nonemployee statuses. Under the agreement, both agencies will share information and coordinate law enforcement. The MOU represents a new effort on the part of the agencies to work together to protect the rights of employees and level the playing field for responsible employers by reducing the practice of misclassification. The Florida Department of Revenue is the latest state agency to partner with the Labor Department.

In Fiscal Year 2013, WHD investigations resulted in more than $83,051,159 in back wages for more than 108,050 workers in industries, such as janitorial, food, construction, day care, hospitality and garment. WHD regularly finds large concentrations of misclassified workers in low-wage industries.

"Misclassification deprives workers of rightfully-earned wages and undercuts law-abiding businesses," said Dr. David Weil, administrator of the Wage and Hour Division. "This memorandum of understanding sends a clear message that we are standing together with the state of Florida to protect workers and responsible employers and ensure everyone has the opportunity to succeed."

"Working with the states is an important tool in ending misclassification," said Wayne Kotowski, the Wage and Hour Division's regional administrator for the southeast. "These collaborations allow us to better coordinate compliance with both federal and state laws alike."

"By partnering with the U.S. Department of Labor we are actively working to level the playing field for Florida's businesses to stop the misclassification of workers. Businesses that misreport workers obtain an unfair advantage over other law-abiding businesses," said Florida Department of Revenue Executive Director, Marshall Stranburg. 
 
Business models that attempt to change or obscure the employment relationship through the use of independent contractors are not inherently illegal, but they may not be used to evade compliance with federal labor law. Although legitimate independent contractors are an important part of our economy, the misclassification of employees presents a serious problem. Independent contractors are often denied access to critical benefits and protections, such as family and medical leave, overtime compensation, minimum wage pay and unemployment insurance, to which they are entitled. In addition, misclassification can create economic pressure for law-abiding business owners, who often find it difficult to compete with those who are skirting the law.

Memoranda of understanding with state government agencies arose as part of the department's Misclassification Initiative, with the goal of preventing, detecting and remedying employee misclassification. Alabama, California, Colorado, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New York, Utah and Washington state agencies have signed similar agreements. More information is available on the Department of Labor's misclassification website at http://www.dol.gov/misclassification/.

Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

General Interior Systems Inc. to pay back wages to employees misclassified as independent contractors

US Labor Department seeking employees to ensure payment

An investigation by the U.S. Department of Labor’s Wage and Hour Division found that Liverpool employer General Interior Systems Inc., and its president, Jeffrey T. Mento, violated the federal Fair Labor Standards Act by misclassifying more than 300 employees working as drywall installers as independent contractors and failed to pay them overtime. The department obtained a judgment in the U.S. District Court for the Northern District of New York that required payment of $380,000 in back wages to the affected employees.

“The issue here—misclassifying employees as independent contractors to avoid paying required wages and benefits—is a critical one. Misclassification impacts not only employees and their families, but entire industries,” said Mark Watson, regional administrator for the Wage and Hour Division in the Northeast. “This case sends a clear message that the Wage and Hour Division will use every tool available to protect workers and to ensure a level playing field so that law-abiding employers are not put at a competitive disadvantage.”

The employees, who worked throughout central New York and the Northeast, put in as many as 60 to 70 hours per week with regularity and were paid straight time for hours worked beyond 40 in a workweek. The defendants are paying the back wages covering a three-year period. The Wage and Hour Division will distribute the wages to the workers. The division is now seeking to locate these employees, including those who have moved and left no forwarding address, to ensure that they receive their back wages.

“We want to make sure that these employees receive the wages to which they are entitled,” said Jay Rosenblum, the Wage and Hour Division’s district director in Albany. “We ask them to contact the Wage and Hour Division, at either our Albany or Syracuse offices or, if they have moved, the division office closest to where they live now.”

Misclassified employees are often denied access to critical benefits and protections, such as overtime, minimum wage, family and medical leave and unemployment insurance. Misclassification also undercuts law-abiding businesses who pay workers properly. Responsible employers often find it difficult to compete with those who skirt the law and avoid their financial responsibilities.

Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

General Interior Systems Inc. misclassified workers as independent contractors

US Labor Department seeking employees to ensure payment

An investigation by the U.S. Department of Labor’s Wage and Hour Division found that Liverpool employer General Interior Systems Inc., and its president, Jeffrey T. Mento, violated the federal Fair Labor Standards Act by misclassifying more than 300 employees working as drywall installers as independent contractors and failed to pay them overtime. The department obtained a judgment in the U.S. District Court for the Northern District of New York that required payment of $380,000 in back wages to the affected employees.

“The issue here—misclassifying employees as independent contractors to avoid paying required wages and benefits—is a critical one. Misclassification impacts not only employees and their families, but entire industries,” said Mark Watson, regional administrator for the Wage and Hour Division in the Northeast. “This case sends a clear message that the Wage and Hour Division will use every tool available to protect workers and to ensure a level playing field so that law-abiding employers are not put at a competitive disadvantage.”

The employees, who worked throughout central New York and the Northeast, put in as many as 60 to 70 hours per week with regularity and were paid straight time for hours worked beyond 40 in a workweek. The defendants are paying the back wages covering a three-year period. The Wage and Hour Division will distribute the wages to the workers. The division is now seeking to locate these employees, including those who have moved and left no forwarding address, to ensure that they receive their back wages.

“We want to make sure that these employees receive the wages to which they are entitled,” said Jay Rosenblum, the Wage and Hour Division’s district director in Albany. “We ask them to contact the Wage and Hour Division, at either our Albany or Syracuse offices or, if they have moved, the division office closest to where they live now.”

Misclassified employees are often denied access to critical benefits and protections, such as overtime, minimum wage, family and medical leave and unemployment insurance. Misclassification also undercuts law-abiding businesses who pay workers properly. Responsible employers often find it difficult to compete with those who skirt the law and avoid their financial responsibilities.

Under the FLSA, employers must distinguish employees from bona fide independent contractors. Whether a worker is an employee under the FLSA is a legal question determined by the actual employment relationship, not by title. An employee, as distinguished from a person who is engaged in a business of his own, is one who, as a matter of economic reality, follows the usual path of an employee and is dependent on the business that he serves. For more information, visit http://www.dol.gov/whd/regs/compliance/whdfs13.htm.

Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

US DOL signs agreement with Alabama DOL to reduce misclassification of employees

Officials of the U.S. Department of Labor’s Wage and Hour Division and the Alabama Department of Labor signed a memorandum of understanding to protect the rights of employees by preventing their misclassification as something other than employees, such as independent contractors. The memorandum of understanding represents a new effort on the part of the agencies to work together to protect the rights of employees and level the playing field for responsible employers by reducing the practice of misclassification. The Alabama Department of Labor is the latest state agency to partner with the U.S. Labor Department.

In Fiscal Year 2013, WHD investigations resulted in more than $83,051,159 in back wages for more than 108,050 workers in industries, such as janitorial, food, construction, day care, hospitality and garment. WHD regularly finds large concentrations of misclassified workers in low-wage industries. “Misclassification deprives workers of rightfully-earned wages and undercuts law-abiding businesses,” said Dr. David Weil, administrator of the Wage and Hour Division. “This memorandum of understanding sends a clear message that we are standing together with the state of Alabama to protect workers and responsible employers and ensure everyone has the opportunity to succeed.”

“Working with the states is an important tool in ending misclassification,” said Wayne Kotowski, the Wage and Hour Division’s regional administrator for the southeast. “These collaborations allow us to better coordinate compliance with both federal and state laws alike.”

“We are pleased to be able to partner with the U.S. Department of Labor in order to better serve all employers and employees in Alabama,” said Alabama Department of Labor Commissioner Fitzgerald Washington. “This sharing of information between agencies can lead to better benefits for and a better understanding of the law by employees, as well as serving to level the playing field for employers who are legitimately reporting their employees’ classifications.”

Business models that attempt to change or obscure the employment relationship through the use of independent contractors are not inherently illegal, but they may not be used to evade compliance with federal labor law. Although legitimate independent contractors are an important part of our economy, the misclassification of employees presents a serious problem. Independent contractors are often denied access to critical benefits and protections, such as family and medical leave, overtime compensation, minimum wage pay and unemployment insurance, to which they are entitled. In addition, misclassification can create economic pressure for law-abiding business owners, who often find it difficult to compete with those who are skirting the law.

Memoranda of understanding with state government agencies arose as part of the department’s Misclassification Initiative, with the goal of preventing, detecting and remedying employee misclassification. California, Colorado, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New York, Utah and Washington state agencies have signed similar agreements. More information is available on the Department of Labor’s misclassification website at http://www.dol.gov/misclassification/.

Source: US DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

Super Maid ordered to pay back wages, damages misclassified employees

Romeoville, Illinois, company misclassified maids as independent contractors

U.S. District Judge John J. Tharp of the Northern District of Illinois has ordered Paul Krawczyk, owner and operator of Romeoville-based Super Maid LLC, to pay 55 workers a total of $184,505 in back wages and liquidated damages. The order resolves a lawsuit filed by the U.S. Department of Labor alleging violations of the Fair Labor Standards Act and enjoins Krawczyk and Super Maid from violating the FLSA in the future.

An investigation by the Wage and Hour Division found that employees of Super Maid, which provides cleaning services throughout Chicago and northwest Indiana, were misclassified as independent contractors rather than employees entitled to minimum wage, overtime and other protections of the FLSA.

“Super Maid and its owner demonstrated a reluctance to cooperate with investigators by failing to produce reliable records and to comply with wage laws,” said Karen Chaikin, regional administrator for the Wage and Hour Division in the Midwest. “It is unfortunate that there are employers who believe they can exploit vulnerable workers through intimidation and harassment. This judgment sends a clear message that denying employees their rightfully earned wages will not be tolerated.”

Krawczyk’s claims that the maids were independent contractors were proven false by actions the company took, including requiring maids to sign noncompete agreements and not allowing them to clean homes other than those assigned by Super Maid. The company provided training, vehicles and cleaning equipment and set all work hours and assignments. Super Maid intimidated and threatened workers with disciplinary actions and loss of pay for exceeding time limits for cleaning. The company threatened to sue maids who violated the noncompete agreement.

The investigation determined maids were paid a flat rate per house cleaned, regardless of the amount of time it took, and were not compensated for all hours worked, including travel time between cleaning assignments. These practices resulted in maids earning less than the federal minimum wage of $7.25 per hour. Employees did not receive additional compensation for overtime hours, and the company failed to maintain accurate payroll records.

The investigation determined that 55 workers were due $92,252.50 in unpaid overtime and minimum wages. The court has ordered an equal amount payable to the maids in liquidated damages. The department’s regional solicitor in Chicago litigated the case.

Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

Employees misclassified as independent contractors

Paul Johnson Drywall Inc. agrees to pay $600,000 in back wages, damages and
penalties following US Labor Department investigation

As a result of a Wage and Hour investigation, Paul Johnson Drywall Inc. severed its relationship with Arizona Tract LLC., a construction labor contractor. Beginning April 2013, Paul Johnson Drywall entered into a contract with Arizona Tract for the provision of drywall labor. Arizona Tract classified former Paul Johnson Drywall workers as "member/owners" instead of employees, which stripped them of basic worker protections afforded to employees.

Today, the U.S. Department of Labor filed a consent judgment in the U.S. District Court for the District of Arizona by which Prescott-based Paul Johnson Drywall Inc., and its owner Robert Cole Johnson, agreed to take concrete steps to ensure that misclassification of its workforce does not occur again and to pay $556,000 in overtime back wages and liquidated damages to at least 445 current and former employees. The employer also agreed to pay $44,000 in civil monetary penalties.

"This case exemplifies our commitment to eradicating unfair competition and pay schemes that result in employees not getting their fair pay for honest, hard work," said Administrator of the Wage and Hour Division Dr. David Weil. "Employers in this industry and others should take notice that we will not tolerate the misclassification of employees as independent contractors, and we will use all legal remedies available to recover unpaid wages for these workers."

The judgment resolves an investigation by the department's Wage and Hour Division in Phoenix that began to look into construction contractors Arizona Tract solicited. Investigators found that the drywall contractor violated the Fair Labor Standards Act's overtime and record-keeping provisions.

"This resolution will bring a lot of positive change for hundreds of employees working in residential construction," said Janet Herold, the department's regional solicitor in San Francisco. "Paul Johnson Drywall is a leader in this industry in Arizona, and we are pleased that, as a result of our investigation, the company has taken such a public stand against the scourge of misclassification, which deprives vulnerable workers of their wages and the full rights and benefits of employee status and deprives taxpayers of the payroll taxes. Everyone but the misclassifying employer loses, and loses greatly, when misclassification occurs."

As part of the resolution in this case, Paul Johnson Drywall agreed that all workers will be properly classified as employees and paid FLSA's required wages. The investigation also established that the employer, prior to being solicited by Arizona Tract, failed to pay employees paid on a piece-rate basis – the proper overtime at time and one-half their regular rates of pay for all hours worked beyond 40 in a single workweek. In addition, investigators found that Paul Johnson Drywall failed to keep complete and accurate records, which is also required under the FLSA.

In addition to the payment of $600,000 in back wages, damages and penalties, Paul Johnson Drywall has agreed to take specific proactive steps to ensure that its workers are properly classified and paid as employees and to improve compliance in the construction industry. Paul Johnson Drywall will hire a third-party monitor to ensure compliance by the company and require any drywall subcontractors to conduct regular training of supervisors and employees regarding the requirements under the FLSA. Furthermore, if Paul Johnson Drywall hires a subcontractor, the consent judgment requires the company to ensure that the subcontractor is properly licensed and insured, and that the subcontractor complies with the FLSA.

"With increasing frequency, we are entering into agreements, like this one, with employers found in violation," said Ruben Rosalez, regional administrator for the Wage and Hour Division's west region. "In addition to paying back wages, damages, and penalties, ongoing efforts like those called for with Paul Johnson Drywall keep compliance prominently on the employer's radar. These agreements greatly enhance our efforts to maintain compliance and to protect workers' wages long after an investigation."

Paul Johnson Drywall also agreed to implement an educational campaign to promote awareness of the importance of compliance with the FLSA in the Arizona residential construction industry. In the months ahead, Paul Johnson Drywall will make presentations to local home builder associations addressing the importance of properly classifying and paying workers in the drywall industry as employees and identify the costs workers, taxpayers and law-abiding employers, due to the resulting unfair competition, endure from the unlawful misclassification of employees as independent contractors.

Under the FLSA, employers must distinguish employees from bona fide independent contractors. The inquiry to determine a worker's status as employee or independent contractor is whether the worker, as a matter of economic reality, is dependent on the employer or in business for himself. For more information, visit http://www.dol.gov/whd/regs/compliance/whdfs13.htm.
 
The FLSA requires that covered employees be paid at least the federal minimum wage of $7.25 per hour 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.

Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

Judge orders Darryl Howes Farms to stop misclassifying migrant workers

A federal judge has ordered Darryl Howes and his business, Darryl Howes Farms, located in Copemish, to stop misclassifying his migrant workers as independent contractors, to comply with the record-keeping provisions of the Fair Labor Standards Act and housing standards of the Migrant and Seasonal Agricultural Worker Protection Act, and to cease interfering with U.S. Department of Labor investigations.

When investigated, Darryl Howes Farms employed approximately 38 workers for the 2011 harvest. The migrant agricultural workers were incorrectly classified as independent contractors rather than employees entitled to minimum wage and other provisions of the FLSA and MSPA.

The opinion and accompanying order, issued by U.S. District Court Judge Gordon J. Quist, upholds the department’s findings of record-keeping and housing violations at Howes’ 60-acre cucumber farm and migrant housing camp during the 2011 harvest. The department filed a complaint in federal court in 2012 alleging minimum wage, record-keeping, and housing violations following investigations conducted by the Wage and Hour Division. The minimum wage violations remain in litigation now that the threshold issue of employment status has been determined.

“The nature of migrant agricultural work makes the migrant farm worker vulnerable to unfair and unsafe labor practices. The misclassification of these workers as independent contractors cheats them of their rightfully earned wages and gives the employer an unfair competitive edge in the marketplace,” said Karen Chaikin, regional administrator of the Wage and Hour Division in the Midwest. “These actions put agricultural employers on notice that the department is committed to protecting the many low-wage and vulnerable migrant workers, who are susceptible to exploitation and unfair treatment.”

The court also found that Howes controlled a housing camp, known as the “Green Camp,” and provided substandard housing to migrant workers, in violation of the MSPA’s housing standards. The violations include failure to provide adequate shelter; prevent insect or pest infestation; remove standing wastewater; repair broken screen doors and showers; and maintain toilets in a sanitary condition. The court has ordered Howes to ensure all MSPA housing he owns or controls complies with the MSPA. 
 
In addition to the labor violations, the court also found that Howes had interfered with the department’s investigation. The complaint mentioned four instances when interviews of agricultural workers had to be terminated because Howes or one of his employees attended the interviews with cameras and refused to leave. The order requires Howes to not interfere with future investigations.

Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

Janitorial service subcontractor misclassified workers as independent contractors

Empire Janitorial Sales and Services Inc. has paid $277,565 in overtime back wages to 233 current and former janitorial service workers employed by Acadian Payroll Services LLC after an investigation by the U.S. Department of Labor’s Wage and Hour Division found violations of the Fair Labor Standards Act’s overtime and record-keeping provisions.

The investigation, conducted by the division’s New Orleans District Office, found that employees were wrongfully classified as independent contractors and paid an hourly wage with no overtime wages of time and one-half their regular rate of pay for hours worked over 40 in a workweek. Additionally, Acadian Payroll Services did not establish a seven-day workweek and failed to maintain proper records of weekly hours worked by its employees. Empire Janitorial Sales and Services and Acadian Payroll Services shared joint employer responsibilities. Both companies agreed to future compliance with the FLSA; however, full payment of back wages was made by Metairie-based Empire Janitorial Sales and Services, which cooperated with the investigation.

“We are pleased that the employer agreed to reclassify janitorial staff as employees, establish a seven-day workweek and to compensate workers properly when they work overtime,” said Cynthia Watson, the Wage and Hour Division’s regional administrator for the Southwest. “Misclassified workers are often denied access to basic benefits and protections under the FLSA, such as the Family and Medical Leave Act, overtime, minimum wage and unemployment insurance, to which they are entitled.”

The department 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 improving compliance with federal labor laws.

Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

Hibachi Grill & Supreme Buffet sued to recover nearly $2 million in unpaid wages and damages

The U.S. Department of Labor has filed a lawsuit against Wang's Partner Inc., doing business as Hibachi Grill & Supreme Buffet in Jonesboro, and its owner, Shu Wang, to recover unpaid wages and damages under, Fair Labor Standards Act. The department is seeking $1,997,726 in back wages and liquidated damages for 84 employees. The lawsuit is based on an investigation by the department's Wage and Hour Division, which revealed numerous violations of the FLSA. The lawsuit has been filed by the department's Office of the Solicitor in the U.S. District Court for the Northern District of Georgia.

Investigators from the division's Atlanta district office found that the employer misclassified servers as independent contractors, failed to pay servers and kitchen staff at least the federal minimum wage of $7.25 per hour and failed to pay overtime compensation at time and one-half employees' regular rates for hours worked beyond 40 in a work week. Additionally, the employer did not maintain accurate records of hours worked and wages paid.

"The U.S. Department of Labor is committed to ensuring that all workers receive the wages to which they are legally entitled," said Secretary of Labor Thomas E. Perez. "We will not stand by while employers use business models that hurt workers, their families and law-abiding employers. This lawsuit illustrates that the department will use every enforcement tool necessary to resolve cases where employees are unlawfully treated as independent contractors, and vulnerable workers are not paid the minimum wage."

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. In general, "hours worked" includes all time an employee must be on duty, or on the employer's premises or at any other prescribed place of work, from the beginning of the first principal work activity to the end of the last principal activity of the workday. Additionally, the law requires that accurate records of employees' wages, hours and other conditions of employment be maintained.

The misclassification of workers as something other than employees, such as independent contractors, presents a serious problem for affected employees, employers and to the entire economy. Misclassified employees are often denied access to critical benefits and protections, such as family and medical leave, overtime, minimum wage and unemployment insurance. Employee misclassification also generates substantial losses to state and federal treasuries, and to the Social Security and Medicare funds, as well as to state unemployment insurance and workers compensation funds.

Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

Norwood Commercial Contractors agrees to pay back wages and damages to 96 workers

Company signs consent judgment to prevent future labor violations of the FLSA

Norwood Commercial Contractors Inc. has agreed to pay 96 workers $395,465 in back wages and liquidated damages following an investigation by the U.S. Department of Labor’s Wage and Hour Division. The investigation found that the commercial construction contractor misclassified 16 workers as independent contractors and denied them and the remaining employees proper compensation for all hours worked, in violation of the Fair Labor Standards Act’s overtime and record-keeping provisions.

“The misclassification of employees as independent contractors denies workers of wages and benefits they are entitled to under the law. It also leads to unfair competition because businesses that play by the rules operate at a disadvantage when compared with those that don’t,” said Thomas Gauza, the division’s district director in Chicago. “We often find misclassification in the construction industry. This investigation should send a clear message to other employers to evaluate their pay practices and to ensure that they are in compliance with federal labor laws.”

The investigation determined that employees—such as carpenters, electricians, masons, laborers, painters, and drywall hangers and finishers—were misclassified as independent contractors and were denied proper compensation, in violation of the FLSA. Many of these employees were not paid overtime premiums at time and one-half their regular rates of pay for hours worked beyond 40 in a workweek, and they were not paid for travel time to and from assignments when employees worked away from home. Additionally, the company took illegal deductions from employees’ pay in overtime workweeks and banked some overtime hours to be paid at straight time in future workweeks. The investigation also alleged that the employer reduced the number of hours worked when processing payroll, in violation of the FLSA’s record-keeping provisions.

Norwood Commercial Contractors and the company president, Douglas Hudson, have signed a consent judgment to resolve a lawsuit brought by the department before the U.S. District Court for the Northern District of Illinois, Eastern Division, in Chicago.

Under terms of the consent judgment, in addition to paying the back wages and damages found due, the company has also agreed to a variety of enhanced compliance provisions. The employer has agreed to designate a compliance officer to act as a liaison with the Wage and Hour Division, and to provide employees with specific Wage and Hour compliance information, including contact information for the division. The employer has also agreed to maintain accurate payroll records; to provide full access to payroll records during visits by the Wage and Hour Division; to give a minimum of two presentations on compliance with the FLSA to contractor’s associations; and to create online informational tools, including information on FSLA compliance, on the company’s website. The company will also create a compliance-related question-and-answer forum on its Facebook page.

The misclassification of employees as something other than employees, such as independent contractors, presents a serious problem for affected employees, employers and to the economy. Misclassified employees are often denied access to critical benefits and protections, such as family and medical leave, overtime, minimum wage and unemployment insurance, to which they are entitled.
Employee misclassification also generates substantial losses to the U.S. Treasury and the Social Security and Medicare funds, as well as to state unemployment insurance and workers’ compensation funds.

Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

US Labor Department signs agreements to reduce misclassification of employees

Officials of the U.S. Department of Labor's Wage and Hour Division, the New York State Labor Department and the New York State Attorney General Eric T. Schneiderman's Office today signed memoranda of understanding to protect the rights of employees by preventing their misclassification as independent contractors or other nonemployee statuses.
 
The memoranda of understanding represent a new effort on the part of the three agencies to work together to protect the rights of employees and level the playing field for responsible employers by reducing the practice of misclassification. The New York State Labor Department and New York State Attorney General's Office are the latest state agencies to partner with the Labor Department. In the last two years, the Wage Hour Division has secured over $18.2 million in back wages for more than 19,000 workers where the primary reason for minimum wage or overtime violations under the Fair Labor Standards Act was that workers were not treated or classified as employees. This represents a 97 percent increase in back wages following the implementation of these agreements.

"Working with the states is an important tool in ending misclassification," said M. Patricia Smith, U.S. Solicitor of Labor. "These collaborations allow us to better coordinate and ensure compliance with both federal and state laws alike."

"Misclassification deprives workers of rightfully-earned wages and undercuts law-abiding businesses," said Laura Fortman, the principal deputy administrator of the Wage and Hour Division. "These memoranda of understanding send a clear message that we are standing together with the State of New York to protect workers and responsible employers and ensure everyone has the opportunity to succeed."

"When employers misclassify employees as independent contractors for their own gain, they hurt their employees and they even hurt other businesses — the law-abiding employers who don't steal from their employees," said New York State Labor Commissioner Peter Rivera. "I'm proud of this partnership we're beginning here today to root out bad actors and bring them to justice."

"This partnership with the U.S. Department of Labor will help New York continue our work of aggressively enforcing the labor laws and ensuring a level playing field for employers who play by the rules. Sharing information and cooperating in investigations will help protect the rights of New York's workforce, and will lead to more effective enforcement and greater compliance by employers," said Terri Gerstein, Labor Bureau Chief for New York Attorney General Eric T. Schneiderman. The New York State Attorney General's office brings select cases to enforce the state's labor laws, including both civil and criminal cases. For more information, please visit the Labor Bureau's website at: http://www.ag.ny.gov/bureau/labor-bureau/.

Business models that attempt to change or obscure the employment relationship through the use of independent contractors are not inherently illegal, but they may not be used to evade compliance with federal labor law. Although legitimate independent contractors are an important part of our economy, the misclassification of employees presents a serious problem, as these employees often are denied access to critical benefits and protections–such as family and medical leave, overtime compensation, minimum wage pay and Unemployment Insurance–to which they are entitled. In addition, misclassification can create economic pressure for law-abiding business owners, who often find it difficult to compete with those who are skirting the law.

Memoranda of understanding with state government agencies arose as part of the department's Misclassification Initiative, with the goal of preventing, detecting and remedying employee misclassification. California, Colorado, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington have signed similar agreements. More information is available on the Department of Labor's misclassification website at http://www.dol.gov/misclassification/.

Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

Judge finds Ohio-based Cascom Inc. liable for nearly $1.5 million in back wages, damages to employees misclassified as independent contractors

US Department of Labor filed lawsuit to recover wages for 250 employees

 
The U.S. District Court for the Southern District of Ohio has found Cascom Inc. liable for back wages and liquidated damages totaling $1,474,266 owed to approximately 250 cable installers the Fairfield, Ohio, company misclassified as independent contractors in violation of the Fair Labor Standards Act.

The findings of fact were issued following a damages hearing in a lawsuit filed by the U.S. Department of Labor in 2009, after an investigation conducted by the Columbus District Office of the department's Wage and Hour Division. The court ruled in September 2011 that Cascom Inc. and its owner, Julia J. Gress, violated the FLSA by failing to compensate employees for hours worked in excess of 40 per work week because they were misclassified as independent contractors.

"The findings in this case bring justice to workers and their families by providing them with their rightfully earned wages," said Secretary of Labor Thomas E. Perez. "Cascom's business model also hurt law-abiding employers, who were undercut by this illegal practice. The Labor Department is committed to ensuring compliance to protect middle-class workers and to level the playing field for responsible employers."

The installers were found to be employees covered by the FLSA, rather than independent contractors. Cascom Inc. was found to be liable for $737,133 in back wages and an equal amount in liquidated damages, which can be collected both from the company and its owner. The company has ceased operations, so the department will seek to collect from the owner as well.

The misclassification of employees as something other than employees, such as independent contractors, presents a serious problem for affected employees, employers and the economy. Misclassified employees are often denied access to critical benefits and protections — such as family and medical leave, overtime, minimum wage and unemployment insurance — to which they are entitled. Employee misclassification also generates substantial losses to the Treasury and the Social Security and Medicare funds, as well as to state unemployment insurance and workers' compensation funds.

Under the FLSA, an employment relationship must be distinguished from a strictly contractual one. An employee — as distinguished from a person who is engaged in a business of his or her own — is one who, as a matter of economic reality, follows the usual path of an employee and is dependent on the business that he or she serves. For more information, visit http://www.dol.gov/whd/regs/compliance/whdfs13.htm.

Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.

US Labor Department, Louisiana Workforce Commission sign agreement to reduce misclassification of employees as independent contractors

From the Wage and Hour Division News Release -

U.S. Department of Labor's Wage and Hour Division, and Louisiana Workforce Commission signed a memorandum of understanding Feb. 23 regarding the improper classification of employees as independent contractors. This partnership is the 13th of its kind for the U.S. Department of Labor.

"This memorandum of understanding helps us send a message: We're standing united to end the practice of misclassifying employees," said Leppink. "This is an important step toward making sure that the American dream is still available for employees and responsible employers alike."

"Initiatives like this are critical in leveling the playing field for businesses that play by the rules," Eysink said. "They're also vital for ensuring that eligible, hardworking men and women get the coverage and benefits they earn if they are injured on the job or lose their jobs through no fault of their own."

Memorandums of understanding with state government agencies arose as part of the U.S. Department of Labor's Misclassification Initiative, which was launched under the auspices of Vice President Biden's Middle Class Task Force with the goal of preventing, detecting and remedying employee misclassification. California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington have signed similar agreements. More information is available on the U.S. Department of Labor's misclassification Web page at http://www.dol.gov/misclassification.

Read the full news release here

This information is intended to be educational and should not be considered legal advice on any specific matter.

IRS Voluntary Classification Settlement Program (VCSP)

The IRS's Voluntary Classification Settlement Program (VCSP) is a program recently developed by the IRS that provides an opportunity for employers to reclassify their workers as employees for employment tax purposes for future tax periods with partial relief from federal employment taxes.

Under the VCSP, an employer will pay 10 percent of the amount of employment taxes calculated under reduced rates for the compensation paid for the most recent tax year to the workers being reclassified under the VCSP. In addition, the employer will not be liable for any interest and penalties on the payment under the VCSP, and will not be audited for employment tax purposes for prior years with respect to the worker classification of the workers.

As stated in the program announcement; whether a worker is performing services as an employee or as an independent contractor depends upon the facts and circumstances and is generally determined under the common law test. In some factual situations, the determination of the proper worker classification status under the common law may not be clear. In order to facilitate voluntary resolution of worker classification issues and achieve the resulting benefits of increased tax compliance and certainty for taxpayers, workers and the government, the IRS has determined that it would be beneficial to provide taxpayers with a program that allows for voluntary reclassification of workers as employees outside of the examination context and without the need to go through normal administrative correction procedures applicable to employment taxes.

Click here to apply for the VCSP

Click here for FAQ's about the VCSP

THOMAS HOUSTON associates, inc. can assist you in areas of DOL compliance. We offer pro-active and proven compliance tools and methods.

For more information on compliance services offeredy by THOMAS HOUSTON associates, inc. please visit our website, call 1 (800) 330-9000 or click here to schedule a convenient time for a call from an Affirmative Action Consultant.

This information is intended to be educational and should not be considered legal advice on any specific matter.

Department of Labor (DOL) Misclassification Initiative

Employer to pay $250,000 in back wages and damages following DOL investigation

Company pays more than $256,000 in back wages following DOL investigation

DOL recovers more than $219,000 in back wages and liquidated damages for 44 misclassified Boston-area restaurant employees

These are just a few examples of 2011 findings in investigations conducted as part of the DOL's Misclassification Initiative to vigorously examine the classification of employees/independent contractors.

In September 2011, as part of this initiative, a Memorandum of Understanding (MOU) was signed between the DOL and the Internal Revenue Service (IRS). Under this agreement, the agencies will work together and share information to "reduce the incidence of misclassification of employees, to help reduce the tax gap, and to improve compliance with federal labor laws." Additionally, the Department's Wage and Hour Division has signed MOUs with eleven states and other DOL agencies, including the OFCCP. These MOUs will enable the Department to share information and to coordinate enforcement efforts.

Classification of Independent Contractors is far from "cut and dry". The Supreme Court has said that there is no definition that solves all problems relating to the employer-employee relationship under the Fair Labor Standards Act (FLSA). The Court has also said that determination of the relation cannot be based on isolated factors or upon a single characteristic, but depends upon the circumstances of the whole activity. The goal of the analysis is to determine the underlying economic reality of the situation and whether the individual is economically dependent on the supposed employer. In general, an employee, as distinguished from an independent contractor who is engaged in a business of his own, is one who "follows the usual path of an employee" and is dependent on the business that he serves.

Further guidance on making Independent Contractor determinations may be found at the following websites:

Department of Labor - eLaws - Independent Contractor

IRS - Independent Contractor (Self-Employed) or Employee?

Read more about the DOL's Misclassification Initiative

THOMAS HOUSTON associates, inc. can assist you in meeting the challenges that will arise as a result of the upcoming OFCCP's regulatory efforts. We offer pro-active and proven compliance tools and methods.

For more information on the affirmative action compliance services offered by THOMAS HOUSTON associates, inc. visit our website www.thomashouston.com, call (800) 330-9000 or click here to schedule a convenient time for a call from an Affirmative Action Consultant.

MOU - Employee Misclassification - Which States Have Signed?

The Federal Department of Labor and the Colorado Department of Labor and  Employment, signed a Memorandum of Understanding (MOU) on Dec. 5 regarding the improper classification of employees as independent contractors.  This partnership is the 11th of its kind for the U.S. Department of Labor.

Memorandums of understanding with state government agencies arose as part of the U.S. Department of Labor's Misclassification Initiative, which was launched under the auspices of Vice President Biden's Middle Class Task Force with the goal of preventing, detecting and remedying employee misclassification.  In 2010, the Wage and Hour Division collected nearly $4 million in back wages for minimum wage and overtime violations under the Fair Labor Standards Act that resulted from employees being misclassified as independent contractors or otherwise not treated as employees.

To see which states have signed and / or to read the MOUs visit http://www.dol.gov/whd/workers/misclassification/stateinfo-nojs.htm. 

Read the WHD News Release

THOMAS HOUSTON associates, inc. can assist you in meeting the challenges that will arise as a result of the upcoming regulatory efforts. We offer pro-active and proven compliance tools and methods.

For more information on the affirmative action compliance services offered by THOMAS HOUSTON associates, inc., visit our website, call (800) 330-9000 or click here to schedule a convenient time for a call from one of our Consultant.