Worker misclassification costs Charlotte employer

Whether a worker is properly classified as an employee or an independent contractor is an important decision for any business. If a worker is an independent contractor, then numerous employment laws—such as federal discrimination laws, wage and hour statutes, workers’ compensation requirements, benefit laws, and unemployment coverage—don’t apply. However, misclassifying an employee as an independent contractor can be a costly mistake. This is especially true when the business has multiple workers doing the same job who are classified as contractors.

Facts

A Charlotte company recently found out that a mistake in classifying workers can indeed be costly. IPD Company Inc. installs commercial and industrial rack systems in the U.S. and Canada. It was recently subject to an investigation by the United States Department of Labor’s (DOL) Wage and Hour Division (WHD), which is charged with enforcing the Fair Labor Standards Act (FLSA) including its overtime requirements based on its classification of workers doing installments as independent contractors.

The DOL found the IPD had misclassified the installers, and they should have been treated as employees and paid overtime when they worked over 40 hours in a workweek. As a result of this misclassification, the DOL recovered back wages of $185,963 for 181 workers.

In a press release publicizing the recovery, the WHD District Director Richard Blaylock in Raleigh, North Carolina, warned that: