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Rejecting the arguments of two Massachusetts firms that
each of their 619 low-skilled workers was an independent contractor, a judge
has ordered the firms to pay a record $150,000 fine to the U.S. Labor
Department for willful violations of the federal wage and hour law.
The case against Baystate Alternative Staffing, Inc.,
Fitchburg, and Able Temps Referrals, Inc., Worcester, is the largest case of
its kind to be tried under the Fair Labor Standards Act (FLSA). In addition to
the penalty, the firms face a lawsuit by the department seeking $280,000 in
back wages and damages for the same 619 employees.
The department found that the firms were trying to avoid
paying overtime by claiming the workers were independent contractors. But the
administrative law judge agreed with the department's assessment that since the
companies recruited, hired, placed, transported and controlled the 619 day
laborers, the workers were not independent contractors and the firms were
responsible for paying them time-and-a-half for hours worked over 40 hours a
week.
"This case should discourage other temporary employment
firms from trying to evade the nation's wage and hour laws by classifying
low-skilled workers as independent contractors," said Labor Secretary Robert B.
Reich. "The department will not allow companies to traffic in exploited
workers."
The case stems from the department's investigation of the
companies' recruitment and placement of workers as temporary day laborers.
"These workers were in no way independent contractors,"
said Maria Echaveste, administrator of the department's Wage and Hour Division.
"They are poor, vulnerable individuals who performed very simple repetitive
tasks under the control of these firms."
Baystate and Able Temps recruited these individuals for
temporary minimum wage jobs requiring no particular skills or training, mostly
in light manufacturing industries.
The investigation by the department's Wage & Hour
Division found that between Sept. 30, 1991 and July 3, 1994, the firms employed
4,199 day laborers to work for client companies. Of those workers, 619 were
found to have worked, collectively, thousands of hours of overtime, but to have
received only straight-time pay despite the law's requirement of
time-and-a-half for working more than 40 hours a week.
In an administrative complaint, the administrator of the
Wage & Hour Division issued the assessment requiring the firms and their
owners to pay $150,000 in penalties for willfully violating the FLSA's overtime
provisions. The companies appealed the assessment, claiming they didn't have to
pay the workers overtime because they were "independent contractors."
In a detailed decision and order, Administrative Law Judge
David W. Di Nardi found that, in fact, the companies, as well as founder
William Woods and company officers Ann F. Woods, Harold and Marlene Woods, were
the legal employers of the temporary dayworkers. He also found that, as
employers, they "had acted with reckless disregard for the requirements of the
Act (the FLSA), and the imposition of the calculated civil money penalty under
the willful standard is appropriate." In addition he found that they had
willfully attempted to prevent the department from obtaining payroll records
for the day workers from 1990 through January 1994, and had finally provided
the records only when faced with a contempt of court action.
The employers may appeal the judge's decision to an
administrative review board, the U.S. District Court, and ultimately to the
U.S. Supreme Court.
Passed in 1938, the FLSA--also known as the federal wage
and hour law--today covers more than 80 million workers. The law, enforced by
the department's Wage and Hour Division, sets the federal minimum wage at $4.25
per hour and generally requires overtime for hours worked over 40 in any
workweek. It also prohibits child labor abuse and requires employers to keep
adequate time and payroll records.
Reich has directed the Wage and Hour Division and all other
department enforcement agencies, to adopt a strategy of tough, responsible, and
consistent enforcement. The department's overall strategy includes: (1)
targeting the worst actors and the worst acts; (2) protecting vulnerable
populations; (3) deterring violations with significant penalties; and (4)
getting results swiftly and efficiently.
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