It is unfortunately common for employers to misclassify their employees as independent contractors. Not only does this violate the employees’ rights to overtime and other legal protections, but this abuse also corrupts the true independent contracting system. As one Panama City Beach, Florida hotel staffing agency recently learned, however, these actions can have severe consequences – paying $503,053 in back wages and liquidated damages to 227 workers.
The Problem with Misclassification
There are legitimate uses for independent contractors that allow for hiring them and not treating them as employees. For instance, a business may decide to have professional photographs taken of its workers. The company hires a professional photographer who runs their own business and provides their own equipment to deliver the specific project. The photographer is properly treated and paid as an independent contractor.
Dishonest businesses misuse this system to avoid paying their employees the wages to which they are entitled. Misclassifying an employee as an independent contractor is illegal. In determining whether a worker is an employee or a contractor, courts will look at such factors as:
- Whether, and to what degree, the employer controls the work that is done
- Whether, and to what degree, certain aspects of the worker’s job are controlled by the employer (e.g., who provides tools and supplies)
- The relationship between the employer and the worker, as defined by any contract, benefits, etc.
Independent contractors are usually only entitled to the rate of pay specified in the agreement with the company that contracts with them and are not legally required to receive overtime pay. This creates an incentive to misclassify employees as contractors, allowing the employer to skirt the overtime pay laws.
How Touch of Grace Services Got in Trouble
The Panama City Beach hotel staffing company known as Touch of Grace Services LLC attempted to do just that. By misclassifying 227 employees as contractors, the business paid these workers straight-time rates for all hours worked – including above 40 in a work week. The agency, therefore, failed to pay time and a half for the hours over 40 as required by the Fair Labor Standards Act.
As a result, Touch of Grace Services ended up paying over $503,000 in back wages and liquidated damages. Liquidated damages are an amount that is equal to the pay that an employee was denied. In effect, an employee can recover double the pay he or she should have received had the law been followed. These additional damages are meant to compensate workers for the loss they suffer when their pay is unlawfully denied and delayed.
The law is clear – employers are obligated to understand what the law requires concerning overtime, wages, and other worker rights. Misclassifying an employee as an independent contractor is an avoidable problem, but as the matter in Panama City Beach proved, it can also be costly.
We Can Help If Your Overtime Rights Are Being Violated
There are undoubtedly many similar cases of overtime violations, misclassification, and other labor and wage law violations throughout the country. The Lore Law Firm helps protect workers by taking legal action on their behalf against employers who infringe on their rights. Reach out today by filling out our confidential intake form.