Two US Gulf Coast staffing agencies have agreed to paid 353 workers nearly $516,000 in back wages after US Department of Labor Wage and Hour Division investigators found the firms classified employees incorrectly as independent contractors and mislabeled wages as per-diem reimbursement for expenses never incurred.
Federal investigators found that RBT Welders LLC and Contractor Labor Services LLC (CLS) owed back wages to welders and pipe fitters who worked on maritime vessels and oil and gas industry projects in Louisiana and Texas, the DOL agency said on Sept. 7. RBT paid $398,379 to 246 workers and CLS agreed to pay $118,128 to 107 workers for overtime violations under the 1938 Fair Labor Standards Act (FLSA), it indicated.
The investigations were part of an ongoing, multiyear initiative to curb a pervasive staffing agency practice of attributing part of an employee’s wages wrongfully as per-diem payments, often to avoid or reduce overtime, payroll taxes, and other costs. Division investigators are monitoring staffing agencies and other employers throughout the 1,600-mile Gulf Coast region for signs of this practice, the division said.
It said Wage and Hour Division investigators found that both firms:
• Attributed a portion of workers’ wages wrongfully as per-diem payments, rather than wages for hours worked, even though they did not incur lodging, meals, and travel expenses as part of their employment. The practice based employees’ overtime hourly rate on an artificially lower rate, which excluded this mislabeled “per diem.”
• Attempted to reduce their share of federal and state taxes, workers’ compensation, unemployment insurance and Social Security by designating wages as per diem pay, which is not subject to these costs.
Investigators also determined that CLS misclassified employees as independent contractor, the division said. This violated the FLSA when the employer paid the misclassified employees an additional $2/hr for overtime instead of the legally required time and one-half.
Like the per-diem scheme, employers who misclassify attempt to shield themselves from business costs associated with overtime obligations, unemployment insurance, worker’s compensation premiums, unemployment insurance and Social Security payments required for employees, the division said.
Both staffing agencies signed agreements with the department to resolve concerns that surfaced in the investigations, the division said. The investigation also found that the staffing agencies and the client companies that used the services of the welders, pipe fitters, and other craft workers employed them jointly. Had the staffing agencies failed to resolve the violations disclosed by these investigations, the department could have held the client or host companies responsible, the division said.
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