Employers frequently misclassify individuals as independent contractors when they are really employees, or fail to pay employees 1½ times their regular rate of pay for working overtime hours. While sometimes done intentionally, often these are innocent mistakes made by an employer that simply does not understand the law. One Minnesota employer recently learned the hard way that it is better to properly classify workers at the outset rather than face the wrath of the Department of Labor!
In April 2012, a consent judgment* was entered against Hawkins Tree and Landscaping Inc., a Shakopee company, and its owners ordering the company to pay $478,000 in back pay and damages to 57 current and former employees for violations of the Fair Labor Standards Act (“FLSA”). The company’s owners also agreed to pay $22,000 in civil penalties. In addition, the company is required to retain a CPA firm to conduct bi-annual audits of its pay practices, and must provide all employees with information on the FLSA in English or Spanish. Click here to see the DOL’s News Release.
The consent judgment resolved a lawsuit the Department of Labor filed in 2010. The DOL’s investigation revealed several violations of the FLSA, which the company conceded, including failing to pay workers 1½ times their regular pay rate for hours worked over 40 in a workweek, failing to provide adequate records of hours worked, and misclassifying workers as independent contractors.
Don’t make the same mistake as did this Minnesota employer. The FLSA is complicated, and when you add state law requirements to the mix, compliance can be tricky. Properly classifying individuals, and keeping accurate pay records, is not only a good business practice, it is a necessity. A self-audit can reveal potential problem areas for an employer to resolve – before the DOL comes knocking on the door. It is far better to incur the expense to conduct a self-audit than to later be embroiled in litigation with the DOL.
*A consent judgment is a judgment entered by a court based on a settlement agreed to by the parties.