The U.S. Department of Labor announced on January 17, 2025, that it recovered a total of $446,334 in back wages and liquidated damages from two home health care providers in northwest Louisiana - Inner Quality Services LLC, based in Stonewall and Sincere Client Care Services LLC, based in Shreveport.
These companies had misclassified 88 workers as independent contractors, which led to violations of the Fair Labor Standards Act (FLSA), particularly regarding overtime pay.
Specifically, 24 employees at Inner Quality Services and 64 at Sincere Client Care Services were paid straight-time wages for all hours worked, including those exceeding 40 hours per week, instead of receiving the legally-required overtime compensation.
The Wage and Hour Division recovered $70,106 in back wages and an equal amount in liquidated damages from Inner Quality Services, and $153,061 in back wages and an equal amount in liquidated damages from Sincere Client Care Services.
The Department emphasized that misclassification not only deprives workers of overtime pay but also strips them of other critical workplace protections and benefits.
The Department also encouraged workers to use its resources, including a multilingual helpline and a timesheet app, to verify their pay and hours worked.
Source: https://www.dol.gov/newsroom/releases/whd/whd20250117-0
Commentary
In the above matter, the DOL found two organizations misclassified workers as independent contractors, rather than as employees, in order to avoid paying overtime.
Independent contractors are not entitled to overtime pay under the Fair Labor Standards Act (FLSA) because they are considered self-employed individuals who operate their own businesses.
Moreover, they are not covered by the same wage and hour protections that apply to employees, such as minimum wage, overtime, unemployment insurance, and workers' compensation.
This distinction is based on the principle that independent contractors have control over how they perform their work, including setting their own hours and rates, and that they are not economically dependent on a single employer.
Healthcare organizations may misclassify workers as independent contractors (intentionally or negligently) to avoid the legal and financial obligations that come with employee status. By doing so, they can sidestep paying overtime, payroll taxes, benefits, and complying with other labor protections. This practice can significantly reduce labor costs but exposes such organizations to legal risks and penalties if the classification is found to be incorrect.
Legally, there is a presumption that workers are employees unless proven otherwise. Courts and regulatory agencies like the Department of Labor and the IRS use various tests - such as the economic realities test or the common law control test - to determine the correct classification. These tests assess factors like the degree of control the employer has over the worker, the worker's opportunity for profit or loss, and the permanency of the relationship.
The final takeaway is that given the complexity and potential consequences of misclassification, obtaining a legal opinion before classifying a worker as an independent contractor is considered a best practice. Legal counsel can help ensure that the classification aligns with federal and state laws, reducing the risk of audits, lawsuits, and financial penalties.
