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A recent article in the Times Union discussed a class action settlement for a fuel cell producer, in which the company paid $600,000 to settle the lawsuit over employee misclassification.
The suit was brought by former employees who were misclassified as “exempt” and were not given overtime pay, despite allegedly working 55 to 65 hours per week. The Fair Labor Standards Act (FLSA) and New York’s Wage and Exemption Law require non-exempt employees to be paid overtime after 40 hours in a workweek.
According to the article, nineteen workers will receive settlements totaling $15,251.75, or a total of $289,786. The lead plaintiff in the case gets an additional $10,000 payment. Another $205,000 will go toward attorney fees and costs, and $24,000 will be used to pay the mediation firm. The settlement states that about $70,000 in unclaimed funds will revert to the company.
As exemplified in this case, improperly classifying employees under the FLSA and NYS law denies employees access to critical benefits and protections they are entitled to under those laws, such as overtime and minimum wage.
The consequences of misclassifying workers range from monetary penalties to jail time and can add up quickly. Penalties can become even more severe if the Department of Labor determines the misclassification was intentional. Misclassification penalties are evaluated using several factors, including the number of times a company avoided employee classification and/or pay requirements.
Employee Classification Analysis
One way to stay in compliance with classification regulations is to conduct an employee classification analysis. This is a comprehensive review that ensures all workers are properly categorized under federal, state, and local labor laws. This audit focuses primarily on two key areas: exempt vs. non-exempt employee status (for purposes of overtime and minimum wage under the FLSA) and employee vs. independent contractor status.
An employee classification analysis typically examines:
- Work schedules and timekeeping
- Compensation practices
- Pay structures (e.g., hourly versus salaried)
- Job duties and responsibilities to ensure they align with the correct exemption status
- Actual work performed compared to job titles or written job descriptions
- State-specific classification rules and thresholds
By conducting an employee classification analysis, employers can reduce legal and financial risk, correct errors proactively before an investigation or lawsuit, and improve trust and transparency with employees.
GTM can conduct an employee classification analysis at your organization that enhances legal compliance, protects your business, and ensures fair treatment of your workforce.
Request more information or fill out the brief form below.
