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U.S. DEPARTMENT OF LABOR

ESA Press Release: Massachusetts Temp Firms Ordered To Pay $150,000 In Civil Money Penalties For Willful Violations Of Federal Wage & Hour Law [06/12/1996]

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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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