Independent Contractor Misclassification Results in $1.5M in Back Wages Against Company’s Owner, Personally
Have you ever called a cable company and another company’s van showed up in your driveway? Do you know whether workers in those “other vans” are employees of the cable company or independent contractors hired by the cable company to install cable in your home?
According to the United States Department of Labor Wage and Hour Division, those workers were employees and owed significant back pay. Specifically, Cascom, Inc. from Fairfield, Ohio was liable for back wages and liquidated damages of nearly $1,500,000 to 250 cable installers that were misclassified as independent contractors.
Trying to avoid liability for the misclassification, Cascom shut down during the DOL investigation. Now, the DOL is seeking to collect the $1.5 million from Cascom’s owner, personally. I’d hate to try to explain that one to the wife.
According to the DOL’s press release about this case:
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.
The FLSA requires that covered, nonexempt 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 are required to maintain accurate time and payroll records.
I couldn’t have said it better myself.
Let this be a reminder to all companies that the federal government is rampantly investigating independent contractor status. Companies that use independent contractors should have their status reviewed by counsel to ensure they are not inadvertently inappropriately paying workers.
Matt Austin is a Columbus, Ohio lawyer who owns Austin Legal, LLC, a boutique law firm with offices in central and northeast Ohio that limits its representation to employers dealing with labor, employment, and OSHA matters. Austin Legal’s Concierge Legal Services program is relied upon by companies to remain compliant and competitive. If you have employees, you need Concierge Legal Services. You can call Matt at (614) 285-5342 or email him at Austin@LaborEmploymentOSHA.com.