A US Department of Labor’s (USDOL) Wage and Hour Division’s investigation discovered that a Georgia based business, Pegasso Construction & Floor Covering LLC, misclassified all of its employees as independent contractors. This ill advised practice resulted in violations of the Fair Labor Standards Act (FLSA), the Davis-Bacon and Related Acts (DBRA) and the Contract Work Hours and Safety Standards Act (CWHSSA).
The company paid several of these employees on a weekly salary basis with no regard for the number of hours worked. In some instances the employees’ salary, when divided by the number of hours worked, was not sufficient to meet the current federal minimum wage of $7.25 per hour. In addition, the contractor failed to pay required overtime when employees worked beyond forty hours in a workweek. As a result of these FLSA minimum wage and overtime violations, Pegasso owes 151 employees back wages of $135,819. The firm also violated the DBRA and CWHSSA, which apply to federally financed work performed at Fort Gordon (Augusta, GA), by not accurately completing the required certified payrolls and by failing to pay overtime to one employee.
Pegasso has agreed to future compliance with DBRA, CWHSSA and the FLSA and to pay the back wages. The company has also put all employees on its payroll and will properly classify them as employees.
Much has been said and written about misclassifying employees as independent contractors. This issue has been a lightning rod for the USDOL and the IRS for years and in the past few years has garnered considerable attention by NC regulatory agencies and the North Carolina General Assembly. In fact, there were five “employee misclassification” bills introduced in the 2015 session of the North Carolina General Assembly (NCGS), one of which is H 482. This bill appears to be on the move with a strong possibility that it will passed by the NCGS this session.
To read this bill, go to http://www.ncleg.net/gascripts/BillLookUp/BillLookUp.pl?Session=2015&BillID=h482&submitButton=Go.
If you have any questions about misclassifying employees as independent contractors, call CAI’s Advice and Resolution Team at 919-878-9222 or 336-668-7746.
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