The Wage and Hour Division in Louisiana announced a recent settlement with Brownlow Plastering LLC in Hammond, LA regarding violations of the overtime and recordkeeping provisions of the Fair Labor Standards Act (FLSA).  The Company misclassified its workers as independent contractors (instead of employees) and failed to pay overtime.  The company agreed to pay $365,291 in overtime wages to 147 employees, and also sign an enhanced compliance agreement.

The investigation revealed that the labor broker used by the contractor was an employee working directly for Brownlow Plastering. Workers hired by the “broker” to work for Brownlow were, in fact, direct employees. The labor broker only worked and provided services for Brownlow (as did the other workers). None of the workers were in business for themselves, Brownlow bid all the work and supplied all the materials.  Brownlow paid workers fixed hourly rates determined by the company.  They were not independent contractors just because they were recruited through a labor “broker.”

According to the DOL, the FLSA defines “employ” as including to “suffer or permit to work”, representing the broadest definition of employment under the law because it covers work that the employer directs or allows to take place.  A number of “economic realities” factors are helpful guides in resolving whether a worker is truly in business for himself or herself, or like most, is economically dependent on an employer who can require (or allow) employees to work and who can prevent employees from working.

Factors to consider when determining an employment relationship:

• Extent to which the work performed is an integral part of the employer’s business.
• Whether the worker’s managerial skills affect his or her opportunity for profit and loss.
• The relative investments in facilities and equipment by the worker and the employer.
• The worker’s skill and initiative.
• The permanency of the worker’s relationship with the employer; and
• Nature and degree of control by the employer.

Signing an independent contractor agreement that does not reflect the realities of the relationship is not the controlling factor  Contractors using misclassified workers are also in violation of state workers’ compensation laws and unemployment taxes, as well as federal FICA obligations.

Consultstu LLC provides fractional HR services to small/mid businesses to lower operational costs, improve business processes and comply with workplace regulations.  We deliver customized HR solutions that provide protection from expensive mistakes and strategies to improve workplace results. Call us at 727-350-0370 or visit http://www.consultstu.com