The owner of a Michigan lawn and snow-plowing service was slapped with a hefty fine after federal investigators discovered he misclassified workers and repeatedly cheated them out of overtime.
Business owner Darrell Hinken of H&H Lawn Service and Snowplowing, was ordered to pay thousands of dollars in back wages and damages to a handful of employees. Hinken wrongly classified several employees as independent contractors and didn’t pay overtime when they worked more than 40 hours a week.
The case proves that even small businesses can be the target of a U.S. Department of Labor (DOL) investigation which can result in staggering penalties.
Lawn Service Employees Misclassified, Then Incorrectly Paid
Mr. Hinken’s mom-and-pop business found itself in the crosshairs of the DOL after a disgruntled employee complained that Mr. Hinken was cheating his workers out of overtime.
The DOL sent a Wage and Hour Division (WHD) investigator to inspect and that’s when things got serious. The investigator determined the business violated the Fair Labor Standards Act’s (FLSA) overtime and recordkeeping provisions related to employee classification, payment and recordkeeping.
Among the violations:
- Misclassifying employees as independent contractors
- Failing to pay the misclassified employees overtime when they worked over 40 hours a week
- Paying employees a flat salary, no matter how many hours they worked
- Banking overtime hours to be paid as regular hours in future workweeks
- Not keeping mandatory pay records
A court ordered H&H Lawn Service and Snowplowing to pay $38,000 in back wages and liquidated damages to 11 employees. The judgment also outlined certain requirements for future compliance.
Going forward, H&H Lawn Service must notify its employees in writing about any exemptions to overtime rules that may apply. The business also must provide WHD fact sheets to all employees, explaining the difference between an independent contractor and an employee. Finally, it must hire a certified public accountant to conduct a payroll audit to determine legal compliance.
What H&H Should Have Done Differently
Following the letter of the law is essential if you want to avoid FLSA penalties and the consequences of non-compliance.
Hinken should have:
1. Properly classified his workers as employees instead of independent contractors
2. Paid all employees overtime if they worked more than 40 hours a week
3. Maintained accurate, up-to-date payroll records
Accurate Time and Attendance Tracking Is Key to Avoiding Overtime Violations
Don’t end up like H&H Lawn Service and Plowing! Tracking attendance and hours worked is quick and easy with the right Web-based software. TrackSmart lets you accurately manage exempt and non-exempt employees and contractors. Through this simple online software, you can maintain accurate payroll records, track employee overtime, track shifts worked, manage time off and ensure your payroll records are always accurate. TrackSmart will help you meet all FLSA time-and-pay standards.
