Quest Diagnostics Inc. to Pay $688,000 in Overtime Back Wages After Misclassifying Systems Employees as Exempt Under FLSA

Cynthia Stamer
April 30, 2008 — 1,837 views  
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Medical diagnostic testing company Quest Diagnostics Inc. (“Quest”) has agreed to pay 238 employees across the country a total of $688,772 in overtime back wages due under the federal Fair Labor Standards Act (FLSA) after having misclassified certain computer systems workers, the U.S. Department of Labor Wage & Hour Division announced today.  The settlement stems from a misclassification of systems workers as “exempt” which commonly occurs not only among health industry employers, but also among other employers as well.

According to the Labor Department, the Quest overtime back wages payment resulted after a Wage & Hour Division investigation at Quest’s Cambridge, Massachusetts location revealed that employees working in the positions of client systems analyst and senior client systems analyst were misclassified as being exempt from the FLSA's overtime requirements. The investigation also revealed that this same misclassification existed at all of the company's facilities nationwide.  After being informed of the investigation's findings, company management agreed to pay the affected employees back wages and to fully comply in the future \with the requirements of the FLSA.

Misclassification of workers and inappropriate compensation time practices are common compliance concerns among employers generally and for health industry employers particularly.  As in other industries, health care and other employers often overestimate the scope and applicability of the exempt classification, misclassify workers as independent contractors who are actually common law employees, overestimate their ability to provide “comp time” in lieu of overtime, misapply “on-call” policies, or misunderstand other FLSA requirements.  Wage & Hour Division Fact Sheets suggest that many health industry employers incur overtime and minimum wage violations because they failure to properly count and pay for all hours that an employee works in accordance with the FLSA due to improper rounding of hours worked,  failure to properly credit time spent traveling, failure to credit time spent for required attendance at lectures, meetings, training programs and similar activities are viewed as working time, improperly deducting times for breaks, failing to properly credit on call time, and failing to pay for unauthorized hours worked. Enforcement of these requirements against health care employers also is rising since the Wage & Hour Division has included health industry employers among the industry groups targeted for special compliance monitoring under the FLSA and the highly-publicized implementation of updated FLSA regulations regarding the classification of workers a few years ago has peaked the interest of plaintiffs’ attorneys . 

These mistakes can be very costly.  Health industry and other employers that fail to properly pay employees under Federal and state wage and hour regulations face substantial risk. Violation of wage and hour mandates carries substantial civil – and in the case of willful violations, even criminal- liability exposure.  Civil awards commonly include back pay, punitive damages and attorneys’ fees.  As a consequence, health care and other employers should review and document the defensibility of their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws and take appropriate steps to minimize their potential liability under applicable wages and hour laws. 

Under the FLSA, a health industry or other employer generally must pay an employee in accordance with the minimum wage and overtime requirements of the FSLA unless the employer can prove that the employee qualifies as “exempt” as a white collar employee under the DOL’s FLSA regulations.  The FLSA mandates that the base hourly rate of pay of each “non-exempt” employee of not less than the current Federally-established minimum wage of $5.15 an hour for each of the up to initial 40 hours of work performed by the employee in any workweek.  Subject to certain limited exceptions, the FLSA’s overtime rules generally also mandate that “non-exempt” employees be paid overtime pay at a rate of not less than one and one-half times the regular rate of pay for hours in excess of 40 hours of work performed in a given work week.  The regulations also provide guidance for determining when leased, contract or other non-traditionally employed workers will be treated as employees, for determining when an employer must treat “on-call” time, travel time, meal and break times, and certain other  time periods as compensable hours worked by a non-exempt employee, when “comp time” in lieu of the payment of wages is permitted, various alternative methods for calculating overtime under certain special circumstances, and various other rules applicable to various special circumstances. 

Health care providers and other health industry employers, like other employers, generally are required to comply with the applicable requirements of these Federal regulations.  In addition a health industry or other employer also generally must comply with various state-imposed minimum wage, overtime, compensable time, paid break, and other rules governing the calculation and payment of wages to employees employed within the particular state in which the employee renders the services.   

Under the FSLA and applicable state wage and hour laws, employers generally bear the burden of proving that they have properly paid their employees in accordance with the FLSA. Additionally, the FLSA and most applicable state wage and hour laws mandate that employers maintain records of the hours worked by employees by non-exempt employees, documentation of the employer’s proper payment of its non-exempt employees in accordance with the minimum wage and overtime mandates of the FLSA, and certain other records.  Since the burden of proof of compliance generally rests upon the employer, health industry employers should take steps to ensure their ability to demonstrate that they have properly paid non-exempt employees in accordance with applicable FLSA and state wage and hour mandates and that employees not paid in accordance with these mandates qualify as exempt from coverage under the FLSA. 

To minimize exposure under the FLSA, health care employers should review and document the defensibility of their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws and take appropriate steps to minimize their potential liability under applicable wages and hour laws.  Steps advisable as part of this process include, but are not necessarily limited to:

§          Conducting and audit of each position current classified as exempt to assess its continued sustainability and to develop documentation justifying that characterization;

§          Review of existing practices for tracking compensable hours and paying non-exempt employees for compliance with applicable regulations and to identify opportunities to minimize costs and liabilities arising out of the regulatory mandates;

§          If the audit raises questions about the appropriateness of the classification of an employee as exempt, self-initiation of appropriate corrective action after consultation with qualified legal counsel;

§          Review of existing documentation and recordkeeping practices for hourly employees;

§          Exploration of available options and alternatives for calculating required wage payments to non-exempt employees; and

§          Reengineering of work rules and other practices to minimize costs and liabilities as appropriate in light of the regulations.

Because of the potentially significant liability exposure, health industry employers generally will want to consult with qualified legal counsel prior to the commencement of their assessment and to conduct the assessment within the scope of attorney-client privilege to minimize risks that might arise out of communications made in the course of conducting this sensitive investigation. 

For assistance with assessing or defending your current worker classification, wage and hour or other health care and human resources policies and controls, please contact Cynthia Marcotte Stamer at [email protected], 972-419-7188.

 

Cynthia Stamer

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Cynthia Marcotte Stamer, is nationally and internationally recognized for her work assisting businesses, governments, and other entities to develop creative strategies for dealing with employee benefit and related human resources, insurance, health care and finance concerns. Ms. Stamer helps businesses design, administer and defend cost-effective employee benefit other human resources programs, policies and procedures to meet their budgetary and other business objectives.