New England Company & Affiliate Pay $2.6 Million in Back Wages
Over the past few years we have discussed the importance of proper classification of workers and the ever-increasing number of DOL audits and wage and hour lawsuits that are stemming from improper classification of the workforce. Yesterday, the Department of Labor announced that it reached a consent judgment with Force Corp. and its contractor AB Construction Group Inc. in which the companies will pay 478 workers $2.6 million in back wages, penalties, and damages as a result of the misclassification of employees as independent contractors. The consent judgment includes payment of approximately $2.4 million in wages and liquidated damages as well as $262,900 in civil penalties. The approximately $2.4 million is the DOL’s largest FLSA wage recovery in Massachusetts since 2009.
In this situation, AB Construction provided labor on sites and a separate entity, Force Corp., controlled payroll activities. The DOL reported in a statement that of the 478 workers, nearly all of them were misclassified as independent contractors and a group of the individuals were still owed wages from a time in which they had previously been characterized as an employee.
Under the federal standard, the DOL (and courts) will look at a number of factors to determine whether an individual is properly characterized as an independent contractor including:
- Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how the individual is paid, whether expenses are reimbursed, who provides tools/supplies)
- Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
Additionally, it is important to review state-specific requirements in determining whether classification is proper. Maine’s standard is available here, Connecticut’s standard is available here, and Massachusetts’ standard is available here.