$754,578 FLSA Settlement Shows Employer Risks From Worker Misclassification, Underpayment

Cynthia Stamer
April 7, 2011 — 3,050 views  
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Beck Disaster Recovery Inc. (Beck) will pay $754,578 in overtime back wages to 89 current and former temporary field supervisors to settle U.S. Department of Labor Wage & Hour Division (DOL) charges that that the company violated the Fair Labor Standards Act (FLSA) by improperly classifying workers as exempt from the Fair Labor Standards Act and failed to pay the workers for all compensable hours worked.  Another of the mounting series of DOL overtime and wage and hour enforcement actions arising from employer misclassification of workers, the Beck settlement and other recently reported DOL enforcement actions demonstrate the significant risks that employers can incur if caught mischaracterizing or underpaying non-exempt employees. See e.g. $1 Million + FLSA Overtime Settlement Shows Employers Should Tighten On-Call, Other Wage & Hour Practices.   FLSA & Beck Settlement The FLSA generally requires that employers pay covered employees at least the federal minimum wage of $7.25 per hour for all hours worked, plus time and one-half their regular rates of pay, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week.  Under existing FLSA regulations, covered employees generally include all common law employees other than those employees that the employer proves qualify as exempt.  Employers also generally maintain accurate time and payroll records.  Improper classification of workers as exempt from FLSA coverage, inadequate recordkeeping, or mischaracterization of compensable hours of work as non-compensable exposes an employer to significant minimum wage, overtime and recordkeeping violations.  Misclassification often occurs because an employer improperly treats a worker that it recognizes to be its employee as an “exempt” employee and pays the employee on a salaried or other basis inconsistent with the FLSA, because the employer treats a worker as not its employee when that worker qualifies as its employee under applicable common law tests of the existence of an employment relationship, or a combination of both of these circumstances.  The Beck settlement announced by DOL on March 10, 2011 resolves charges that its misclassification of certain regular and temporary workers as exempt employees lead Beck to violate the FLSA in several respects. Beck provides emergency preparedness and natural disaster response services to public and private sector organizations nationwide. While its corporate offices are in Florida, and the company also maintains offices in California, Indiana, Louisiana, Massachusetts., New York, Texas, and the District of Columbia. Employees travel to natural disaster sites nationwide as needed.  In addition to denying several misclassified employees overtime compensation earned for hours over 40 in a week, the DOL charged that Beck also failed to provide paid leave as required to certain of these misclassified employees.  Under the FLSA, employees claimed as exempt must receive a fixed salary that may not be reduced based on the quality or quantity of the work performed. To resolve the DOL charges, Beck has agreed under the settlement to pay the full amount of back wages, properly classify its temporary employees as nonexempt from the FLSA and maintain future compliance with the law. DOL Enforcement Demonstrates Risks For Business The Beck settlement and other recently reported enforcement actions send a strong signal to employers of the advisability of auditing the defensibility of their classification of workers as exempt, contractors or non-employees, and taking other steps to strengthen the defensibility of their overtime, recordkeeping, and other wage and hour practices.   In recent months, DOL enforcement actions against misclassification of workers as exempt employees or treatment of contract or leased employees as non-employees have resulted in several back pay awards by several employers of more than $1 million and many others of several hundreds of thousands of dollars. $1 Million + FLSA Overtime Settlement Shows Employers Should Tighten On-Call, Other Wage & Hour Practices.   As the same conduct often also violates state wage and hour laws, offending employers also may face back pay and other awards from actions brought by state officials and employee lawsuits. Employers and others providing workforce staffing should review and tighten existing worker classification, timekeeping and classification, recordkeeping and other practices and take other steps to strengthen the defensibility of their practices. Learn more about the DOL’s FLSA enforcement actions and tips for managing FLSA and other wage and hour risks here. For Help With Wage & Hour or Other Needs If you need assistance in auditing or assessing, updating or defending your wage and hour or with other labor and employment, employee benefit, compensation or internal controls practices, please contact the author of this update, attorney Cynthia Marcotte Stamer here or at (469)767-8872. Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 23 years of work helping employers; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; and others design, administer and defend innovative workforce, compensation, employee benefit  and management policies and practices. Her experience includes extensive work helping employers implement, audit, manage and defend wage and hour and other workforce and internal controls policies, procedures and actions.  The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer works, publishes and speaks extensively on wage and hour, worker classification and other human resources and workforce, employee benefits, compensation, internal controls and related matters.  She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. About Solutions Law Press Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. 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Cynthia Stamer


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.