Articles Posted in Employee Job Title Misclassification

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Misclassifying employees as exempt from overtime requirements is bad enough on its own, but the damage done can be compounded when the inaccurate status prevents employees from bringing their grievances against their employer to a court of law.

That’s what happens when employees are forced to sign arbitration agreements, which have become increasingly common throughout all American industries. Having started out as a way for businesses to resolve disputes between each other, companies have increasingly been expanding their interpretation of the Federal Arbitration Act to include relationships between businesses and individuals, such as their employees. Most employment contracts now contain arbitration clauses that require workers to use arbitration to settle all disputes with their employer.

There are several problems with this, with the biggest one probably being the fact that arbitration agreements prevent a lot of cases from ever getting a hearing. Because arbitration is not equipped to handle class actions or collective actions, individuals with small claims against their employer don’t have the opportunity to combine their claims in order to justify the costs of filing the complaint. Without this protection, many small claims go unresolved. Continue reading

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Because franchisees are representing a larger company in various regions across the country, it makes sense for the parent company to maintain a certain level of control over how the franchisees run their business. After all, it’s the reputation of their brand at stake.

But the amount of control a franchisor can legally exert over its franchisees is limited. Franchisees need to maintain enough control and autonomy in the running of the business to be legally considered independent contractors.

The federal Fair Labor Standards Act (FLSA) is very specific about the requirements workers need to meet in order to be considered independent contractors. They include qualities like being able to make their own hours, control the environment they work in, what they wear while working, how the work is conducted, how they get paid and their rates. If any one of these conditions is not met, then the workers need to be classified as employees and paid accordingly, including benefits. Continue reading

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In addition to the federal Fair Labor Standards Act (FLSA), which provides definitions of things like overtime and the federal minimum wage, each state and city has its own labor laws to govern employers within their limits. There is also the federal Service Contract Act, which defines minimum wage limits for certain types of employees working on government contracts worth $2,500 or more.

Misclassifying employees in order to avoid paying them overtime is common enough among large employers looking to save a few bucks, but one contractor has been accused of allegedly deliberately misclassifying employees in order to avoid paying them a higher hourly wage.

In summer of 2011, the U.S. Department of Homeland Security granted to New Jersey’s Essex County a five-year contract for $130 million to run an immigrant detention center at Delaney Hall Center in Newark, New Jersey. The county subcontracted parts of the job to Education and Health Centers of America Inc., which also subcontracted portions of the job to Community Education Centers Inc. (CEC).

The Wage and Hour Division of the Department of Labor investigated the employment practices at the detention facility and determined that both CEC and Essex County had allegedly illegally misclassified 122 operations counselors who allegedly should have been classified as detention officers. The minimum wage for detention officers is $30.97 per hour, while the minimum for operations counselors is only $11.29 per hour. To make matters worse, the lower minimum wage the workers were paid was allegedly due to a collective bargaining agreement that had been invalidated by the National Labor Relations Board at the end of 2013. Continue reading

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Even trainees are entitled to minimum wage and overtime under the federal Fair Labor Standards Act (FLSA), in addition to various state laws. Under the FLSA, all hourly employees are entitled to earn at least the federal minimum wage of $7.25 per hour for all hours they spend working. For all time spent working after eight hours a day or forty hours a week, employees are entitled to one and one half times their normal hourly rate.

According to a recent wage and hour class action lawsuit, Morgan Stanley violated the federal FLSA and various state laws by failing to pay its Financial Advisor Associates (FAAs) the proper overtime compensation when they worked more than forty hours a week. Jason Z., who filed the class action lawsuit, worked for the company as an FAA in 2012. He alleges he regularly worked more than forty hours a week during his six-month training period and was not properly compensated for that time. Continue reading

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The purpose of the federal Fair Labor Standards Act (FLSA) is to guarantee fair wages for all employees working within the United States. Part of that is ensuring that all workings are paid no less than the federal minimum wage for all time spent working. The Act also requires that all employees are paid one and one-half times their normal hourly rate for all time spent working in excess of eight hours a day or forty hours a week. The federal statute does provide exceptions to this rule, but it is very specific about the kinds of employees that can qualify for the exemption.

To begin with, the employee must be paid an annual salary of at least $23,600 and must be considered an administrative, executive, or professional employee. Rather than allowing employers to arbitrarily label their workers under one of these categories, the FLSA has specific job requirements which an employee must perform to qualify as exempt from overtime compensation.

In order to qualify for the administrative category, an employee must perform primarily office work and provide administrative assistance directly to an executive. For the executive category, an employee must spend the majority of her time managing other employees. Managers are often classified as exempt from overtime compensation under the executive category, even if they do not meet all of the above requirements. The professional category consists of employees who must have a particular set of skills or level of education in order to perform their job, such as doctors, lawyers, actors, musicians, and artists.

According to a recent class action wage and hour lawsuit against Petco, the store allegedly required assistant managers to perform the same duties as hourly workers, but did not provide them with the requisite overtime compensation. The FLSA contains a statute of limitations, which requires a lawsuit to be filed within two years of the violation. Petco filed a motion to dismiss the overtime lawsuit, based on the fact that the plaintiffs had exceeded the statute of limitations. Continue reading

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Even after a law is passed, it is possible for citizens to challenge that law as unconstitutional. However, anyone who does so should make sure that they have good reasons for making such a claim and can back up their argument.

The Employee Classification Act was challenged as being unconstitutional in a recent lawsuit. The plaintiffs, Rhonda and Jack Bartlow, are general partners in Jack’s Roofing in Illinois. The other named plaintiffs, Ryan Towle and Charles Eric Modglin work for Jack’s Roofing. In 2008, the Department of Labor informed Jack’s Roofing that it would be conducting an investigation into reports it had received that the company was misclassifying its employees as independent contractors in violation of the Employee Classification Act. In connection with the investigation, the Department requested related contracts, work records, payroll, and payment records, which Jack’s Roofing provided. In February 2010, the Department sent Jack’s Roofing a notice of its “preliminary determination” which found that Jack’s Roofing had allegedly misclassified ten people, including Towle and Modgin, for between 8 and 160 each in 2008. The Department also provided a calculation of a “potential penalty” of $1,683. The Department requested that Jack’s Roofing respond within 30 days of the notice before it’s “final determination”.
Before those 30 days had passed, the Department sent Jack’s Roofing a notice of a second investigation and requested additional information.

The plaintiffs responded by filing a lawsuit against the Department. The lawsuit alleged that the way that the Department handled the investigation caused uncertainty on “how to continue their business in compliance with the Act” and requested a temporary restraining order and preliminary injunction against the Department. The lawsuit also claimed that the act is unconstitutional because it violates:

1. The special legislation clause of the Illinois Constitution because it subjects the construction industry to more stringent standards that other industries;
2. The due process clauses of the United States and Illinois Constitutions by failing to provide an opportunity to be heard and by being too vague;
3. The prohibition against bills of attainder in the United States Constitution because it is a legislative act which inflicts punishment without a judicial trial; and
4. The equal protection clauses of the United States and Illinois Constitutions because no other industry is subjected to the same standards when hiring independent contractors.

The Circuit Court and Appellate Court both ruled in favor of the Department, but granted the plaintiffs a stay pending appeal. The plaintiffs appealed the decision and the case went to the appellate court, which upheld the ruling of the lower court. The case then went before the Illinois Supreme Court.

Since the Department conducted its investigation of Jack’s Roofing, the Employee Classification Act has been amended to require written notice of the Department’s findings, provide a formal hearing under the Illinois Administrative Procedure Act, and subject a final decision to judicial review. Since this amendment solves one of the problems raised by the plaintiffs in their complaint, the Supreme Court determined that it renders the point moot.

The Court disagreed with the plaintiff’s assertion that the act was too vague, ruling instead that it was clear enough to allow a person of “reasonable intelligence” to be able to interpret it.

The other claims of unconstitutionality made by the plaintiffs were too vague and, as they plaintiffs did not bother to provide any kind of analysis to argue these points, the Court did not deem them to be worth reviewing. The Court upheld the rulings of the lower courts in favor of the Department of Labor.

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The option for forming class actions to sue a company exists to make reaping benefits easier for plaintiffs as well as to ensure that companies do not get away with illegal behavior simply because the individual claims are too small to warrant a court battle. However, the punitive aspect of the class actions is not always enough to deter companies from continuing and/or repeating their illegal practices.

Such is allegedly the case with Maxim Healthcare Services Inc., a corporation based in Maryland which provides in-home personal care, management and treatment of various conditions. Maxim Healthcare has hundreds of locations nationwide and, in 2012, an overtime class action lawsuit was filed against the company in Ohio by Jasmine Lawrence, a former Home Health Aide who was employed by the company until October 2012.

Lawrence’s overtime class actin lawsuit alleged that Maxim Healthcare had violated the Ohio Minimum Fair Wage Standards Act (OMFWSA) by failing to pay her and other employees the proper compensation for overtime. According to the OMFWSA, as well as the federal Fair Labor Standards Act, all employers in the United States are required to pay their hourly non-exempt employees no less than one and one-half times their normal hourly rate for each hour that they work in excess of 40 hours a week or eight hours per day. According to Lawrence’s lawsuit, she regularly worked more than 70 hours per week for Maxim Healthcare. Far from qualifying for overtime exempt status, Lawrence alleges that the majority of her duties consisted of general housekeeping duties.

Repeat offenders are common when it comes to violation of employment law and Maxim Healthcare allegedly appears to fit the bill. Recently, the company has faced a second overtime class action lawsuit filed by a healthcare recruiter who worked for Maxim Healthcare. Although the employee was paid a salary, the duties performed were allegedly not sufficient to meet the requirements for overtime exemption under the federal Fair Labor Standards Act. Despite failing to qualify for overtime exemption, the employee allegedly worked an excess of 40 hours per week on a regular basis. The overtime class action lawsuit is seeking to represent all current and former salaried workers of Maxim Healthcare, including other healthcare recruiters, homecare recruiters, staffing recruiters, and senior recruiters who were employed by Maxim Healthcare at any time during the past three years.

Despite the fact that at least one of these plaintiffs was paid a salary by Maxim Healthcare, the Fair Labor Standards Ace has specific requirements for the types of duties an employee must perform in order to qualify for overtime exempt status. The first category is administrative, in which the employee must provide administrative support directly to an executive in order to qualify for the overtime exemption. For the second category, executive, an employee’s main responsibilities must consist of managing other employees. The third and final category is professional and mandates that an employee’s main responsibilities require a particular set of skills or education. None of the employees listed in the above overtime class action lawsuits appear to have fit the requirements for any of these categories.

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Many employers have gotten themselves into legal trouble by misclassifying their employees as exempt from overtime when, in fact, their employees do not meet the federally mandated requirements for overtime exemption as defined by the Fair Labor Standards act. An employer probably would not help the situation by paying overtime to some employees while refusing to pay other employees performing similar job functions.
Such is allegedly the case in a recent case our Chicago overtime lawyers have reviewed. In Tammy D. Lewis et al v. Maximus Inc. Lewis began working for Maximus Inc. on June 5, 2006 and was eventually promoted to the position of workforce analyst (otherwise referred to as workforce management analyst). After her promotion, she was allegedly misclassified as exempt from overtime.

According to the Fair Labor Standards Act, in order to qualify for overtime, an employee must be paid an annual salary and fit into one of three categories. Those categories are administrative, executive, and professional. Rather than simply allowing employers to label their workers as they please to avoid overtime payments, the Fair Labor Standards Act has specific guidelines for the kinds of responsibilities which employees must have in order to qualify for overtime exemption. The administrative category, for example, requires an employee to directly support an executive. For the executive category, an employee must manage other employees who report directly to her. In order to fulfill the requirements for the professional category, employees must use a certain set of skills or training in order to perform their jobs. No matter how an employee is labeled, if the job that they perform does not fulfill the requirements of one of these categories, they cannot legally be exempted from overtime.

Lewis, in her position as a workforce management analyst, alleges that she did not manage other employees, nor was she involved in any decisions regarding hiring, firing, or establishing pay rates. In February 2013, according to Lewis’s overtime attorney, a supervisor asked Lewis to calculate her hours on a weekly basis over the past three years. Lewis alleges that she regularly worked in excess of 40 hours per week for the three years that she has worked as a workforce management analyst for Maximus Inc. She estimates that she worked more than 6,000 hours of overtime during those three years. Despite all that overtime, Lewis was allegedly never paid more than her annual salary of $35,000.

According to the lawsuit, Maximus Inc. allegedly paid other employees with similar job duties the proper overtime compensation, but they balked at the sheer number of overtime hours clocked by Lewis and refused to pay her for it. Lewis believes Maximus Inc. owes her at least $120,000 in overtime wages.

Lewis is now filing a class action lawsuit against Maximus Inc. on behalf of all employees of the company who are similarly situated, including employees with either the job title or duties of workforce analyst. The lawsuit was filed in the U.S. District Court in the Eastern District of Texas. It is seeking an award of damages for unpaid overtime, liquidated damages, attorneys’ fees, court costs, and interest.

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This blog frequently discusses the requirements for overtime exemption under the Fair Labor Standards Act. Most commonly discussed by our Chicago overtime lawyers is the proper classification of a worker as either an administrative, executive, or professional employee. Each of these classifications has specific requirements according to the Fair Labor Standards Act. Employers cannot simply put their employees into one of these categories without taking into consideration what the employees’ jobs entail.

Under the Fair Labor Standards Act, an employee must provide direct assistance to an executive in order to qualify for the administrative exemption. To qualify as an executive, an employee must manage other employees who report directly to her. For the professional category, an employee must utilize a particular set of skills or education in order to perform their job.

Not covered under the Fair Labor Standards Act are home healthcare workers. However, that may soon change. In December 2011, the Obama administrative proposed regulations to the Fair Labor Standards Act, which would provide nearly two million homecare workers nationwide with minimum wage and overtime protections. It is expected that they will reach a decision within the next few months.

Homecare workers in some states already have these protections under state labor law. California is one of 16 states to protect their home healthcare workers. In California alone, some 360,000 mostly unionized homecare workers are employed by In-Home Support Services, a state program, which subsidizes homecare services for about 450,000 elderly, blind, and disabled residents. However, many people work as “personal attendants” or are employed directly by private households and they are not paid overtime.

Having these protections mandated by the Federal Fair Labor Standards Act will mean some changes to the current overtime rules. Many people, including Jerry Brown, the governor of California, oppose this proposal, estimating that it will cost $150 million per year.

Some people have speculated that opponents of the new measure, such as Governor Brown, will likely react to the new ruling, if passed, by restricting the number of hours that home healthcare workers can work. Most of the healthcare industry is behind Governor Brown in opposing the new regulation. They claim that such restrictions would limit the number of hours that home healthcare workers would be allowed to work, thereby forcing many of the elderly into nursing homes. It appears to be a battle between those fighting for worker rights and those fighting for what is in the best interest of the elderly and disabled.
The Coalition for Sensible Safeguards, which has been pushing the reformation to the Fair Labor Standards Act, disagrees.

The Coalition, as well as other proponents of the new measure, argue that home healthcare workers are entitled to the same rights and protections as every other employee in the country.

Higher minimum wage and overtime pay, they argue, will lead to a lower turnover rate which, in turn, will benefit the patients.

The primary reason that Congress is proposing the rule change is to encourage friends and neighbors to help the elderly in their neighborhoods and communities.

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Employers sometimes try to get out of paying employees overtime by paying them only on commission. However, this does not legalize paying the employees less than minimum wage or failing to pay overtime.

A California service provider, Premier Insurance Services, has allegedly done just that with about 90 employees working in the company’s 13 California locations. The sales agents were allegedly paid solely on commission with no “draw” or base pay. This allegedly led to many of the employees earning less than minimum wage in addition to working overtime without the proper overtime compensation.

According to the Federal Labor Standards Act (FLSA), employees can only be classified as exempt from overtime pay if their job description fits certain requirements. The employees must work in a professional, administrative, or executive capacity in order to qualify for overtime exempt status. Employers will sometimes misclassify employees in order to avoid paying them the proper overtime compensation but this is illegal and salespeople do not fit into any of the exempt categories provided by the FLSA. The employees at Premier Insurance Services therefore should have been paid at least minimum wage for each hour that they worked and no less than 1 and 1/2 times their normal hourly rate for each hour that they worked in excess of eight hours a day and forty hours a week.

Premier Insurance Services has settled the case for almost $120,000. Of that amount, about $33,000 represents various civil penalties for the illegal employment practices. The company was also mandated by the US Department of Labor to sign an agreement, which required the firm to implement a proper timekeeping system to facilitate the recording of the time employees spend working.

It seems these alleged illegal practices may originate from the top of the ladder. Speedlane Insurance Services of Upland was found in a 2012 overtime lawsuit to have committed similar violations of overtime and wage and hour pay. Speedlane was mandated by the US Department of Labor to pay about $200,000 in back wages to 96 employees. The statement by the Department of Labor revealed that Speedlane was owned and operated by a close relative of Hakim Kabir, who was identified as the owner of Premier Insurance Services.

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