The US Department of Labor obtained a consent judgment requiring a Pennsylvania home healthcare agency and its operator — which intentionally misclassified workers as independent contractors and misapplied an overtime rule to avoid paying full wages — to pay 75 caregiver employees a total of $293,990 in back wages and liquidated damages. The action began with a June 2021 complaint filed by the Department’s Office of the Solicitor, and followed an investigation by the Department’s Wage and Hour Division.
The Division found that the agency and its owner did not pay the overtime premium for hours worked over 40 in a workweek by willfully misclassifying workers and identifying the workers as live-in caregivers to avoid paying overtime, which is a violation of the Fair Labor Standards Act. Investigators also determined that the employers failed to keep and preserve payroll records for employees for at least two years, including accurate records of employees’ total weekly overtime premium pay, as the law requires.
The investigation determined that the agency owed the affected employees — who worked between 40 and 90 hours per week — a total of $146,995 in back wages and an equal amount in liquidated damages. The division also assessed a $66,956 civil money penalty for the willful nature of the violations.
The Department filed the complaint in June 2021 to recover the back wages and liquidated damages. It subsequently issued discovery requests to the agency and its owner. After neither fully responded, the court issued an order requiring their response. When the employers still failed to comply, the Department moved for sanctions. To avoid further litigation, they agreed to enter a consent judgment. In addition to recovered back wages and liquidated damages from the consent judgment, the employers also agreed to a permanent injunction against future FLSA violations.
Issue:
A worker is entitled to minimum wage and overtime pay protections under the Fair Labor Standards Act (FLSA) when there is an employment relationship between the worker and an employer and there is coverage under the FLSA. The FLSA requires that, among other things, covered employers pay their nonexempt employees at least the federal minimum wage for every hour worked and overtime pay for every hour worked over 40 in a workweek, and it mandates that employers keep certain records regarding their employees. It is essential that individuals who determine workers’ classifications are knowledgeable about the differences between employees and independent contractors. Misclassification of an employee’s status can lead to violations of the FLSA which can result in fines and other penalties.
Discussion Points:
- Review your policies and procedures on fair wages, overtime pay eligibility, and recordkeeping. Determine if your policies clearly state the differences between an independent contractor and an employee. Update your policies as needed.
- Provide training for staff who have responsibility for ensuring accuracy of overtime pay and recordkeeping, and ensure they demonstrate competence with the requirements of your policy and procedures and the FLSA, including the difference between an employee and an independent contractor. Document that these trainings occurred, and file each signed document in the employee’s education file.
- Periodically audit to ensure that overtime pay eligibility and recordkeeping are accurate and being reported and paid correctly.
