November 02, 2021

Misclassification Strikes Again!

The U.S. Department of Labor (DOL) announced that the 9th U.S. Circuit Court of Appeals affirmed the Department’s investigation that found the primary employer, two sister companies, and two owners intentionally and illegally misclassified 1,328 employees as independent contractors. The employees worked in the employer’s call center as telemarketers.

In addition to misclassifying them, the employer required the employees to sign away their federal rights. And, when it came to wage payments, those only happened when the workers made sales. In turn, the two owners were found personally liable and had to pay $728,994 in back wages and an additional $728,994 in liquidated damages to the affected employees.

Lessons Learned:

  • There are federal and state rules that must be followed when you classify a worker as an independent contractor instead of an employee.  Ensure you do so diligently and properly. The DOL has an entire webpage dedicated to worker misclassification.
  • If you pay an employee on a commission-only basis, ensure it still provides the employee with at least minimum wage (the higher or federal or state) for all hours worked in the “representative period” covered by the commission. Minimum wage and overtime rules for commissioned employees vary depending upon your industry.
  • Review your employment agreements or have your legal counsel do so.  Generally, employees cannot waive their FLSA rights. So, if you have a related provision in any agreement, you may want to reconsider it.