$754,578 FLSA Settlement Shows Risks of Misclassifying, Underpaying Employees

Updated: March 11, 2011

FLSA & Beck Settlement

The FLSA generally requires that employers pay covered employees at least the federal minimum wage of $7.25 per hour for all hours worked, plus time and one-half their regular rates of pay, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Under existing FLSA regulations, covered employees generally include all common law employees other than those employees that the employer proves qualify as exempt. Employers also generally maintain accurate time and payroll records. Improper classification of workers as exempt from FLSA coverage, inadequate recordkeeping, or mischaracterization of compensable hours of work as non-compensable exposes an employer to significant minimum wage, overtime and recordkeeping violations. Misclassification often occurs because an employer improperly treats a worker that it recognizes to be its employee as an "exempt" employee and pays the employee on a salaried or other basis inconsistent with the FLSA, because the employer treats a worker as not its employee when that worker qualifies as its employee under applicable common law tests of the existence of an employment relationship, or a combination of both of these circumstances.

The Beck settlement announced by DOL on March 10, 2011 resolves charges that its misclassification of certain regular and temporary workers as exempt employees lead Beck to violate the FLSA in several respects. Beck provides emergency preparedness and natural disaster response services to public and private sector organizations nationwide. While its corporate offices are in Florida, and the company also maintains offices in California, Indiana, Louisiana, Massachusetts., New York, Texas, and the District of Columbia. Employees travel to natural disaster sites nationwide as needed. In addition to denying several misclassified employees overtime compensation earned for hours over 40 in a week, the DOL charged that Beck also failed to provide paid leave as required to certain of these misclassified employees. Under the FLSA, employees claimed as exempt must receive a fixed salary that may not be reduced based on the quality or quantity of the work performed.

To resolve the DOL charges, Beck has agreed under the settlement to pay the full amount of back wages, properly classify its temporary employees as nonexempt from the FLSA and maintain future compliance with the law.

DOL Enforcement Demonstrates Risks For Business

The Beck settlement and other recently reported enforcement actions send a strong signal to employers of the advisability of auditing the defensibility of their classification of workers as exempt, contractors or non-employees, and taking other steps to strengthen the defensibility of their overtime, recordkeeping, and other wage and hour practices. In recent months, DOL enforcement actions against misclassification of workers as exempt employees or treatment of contract or leased employees as non-employees have resulted in several back pay awards by several employers of more than $1 million and many others of several hundreds of thousands of dollars. $1 Million + FLSA Overtime Settlement Shows Employers Should Tighten On-Call, Other Wage & Hour Practices. As the same conduct often also violates state wage and hour laws, offending employers also may face back pay and other awards from actions brought by state officials and employee lawsuits. Employers and others providing workforce staffing should review and tighten existing worker classification, timekeeping and classification, recordkeeping and other practices and take other steps to strengthen the defensibility of their practices.

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