Heavy penalties to company that misclassified employees as independent contractors


U.S. Department of Labor’s Wage and Hour Division (WHD) conducted an investigation of misclassification in Burleson, Texas. It found that an employer had contracted with several construction and temporary drywall labor providers – RRT Construction, Carreno Interiors, J & R Drywall Services Inc., and JAC Contractor Inc. – and had improperly classified its companies’ employees as independent contractors.

Misclassification practices result in overtime violations when those employees work more than 40 hours in a workweek but are paid only their straight time hourly rate without overtime. WHD determined that Rice Drywall Inc. and the subcontractors jointly employed those workers. The employer also failed to accurately record and maintain records of the hours these employees worked, also an FLSA violation. The employer has paid $354,763 in back wages to all 558 misclassified employees.

“Our investigations frequently find violations that stem from employers improperly classifying employees as independent contractors and then failing to pay them overtime,” said Wage and Hour Division District Director Jesus A. Valdez in Dallas, Texas. “Employers should use the results of this investigation as an opportunity to review their pay practices and should contact the Wage and Hour Division if they need clarification on the employment relationship or have any other questions about how to comply with the law.”

Employers who discover overtime or minimum wage violations may self-report and resolve those violations without litigation through the PAID program. For more information about the FLSA and other laws enforced by the Division, contact the toll-free helpline at 866-4US-WAGE (487-9243).

Avoid possible violations by joining a Professional Employer Organization (PEO) such as LCR Resource, Inc. PEO’s can provide expertise in most regulatory compliance cases from Human Resource to Payroll and Employee Benefit Administration. Give us a call to find out more (915) 701-2325.

Source: U.S. Department of Labor / Wage and Hour Division

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