Federal Verification Co. to pay 101 employees nearly $281K in back wages and damages following US Labor Department investigation

OLDSMAR, Fla. — The U.S. Department of Labor has secured $140,393 in back wages and an equal amount of liquidated damages totaling $280,786 for 101 individuals employed by Federal Verification Co. Inc., doing business as GSA Applications based in Oldsmar, Florida. Federal Verification prepares applications for businesses that seek to obtain federal contracts. Nearly $200,000 in wages and damages is due to inside salespeople who made less than the federal minimum wage of $7.25 per hour.

An investigation by the U.S. Department of Labor's Wage and Hour Division found that salespeople were misclassified as independent contractors and paid below the federal minimum wage, and denied overtime compensation for hours worked beyond 40 in a workweek. Some employees were also paid commissions that did not equal at least the federal minimum wage. In some cases, they were denied overtime compensation.

"The misclassification of employees as independent contractors to reduce labor costs harms employees, businesses and the economy," said James Schmidt, director of the Wage and Hour Division's Tampa District Office. "Misclassification costs taxpayers millions of dollars each year in uncollected employment taxes, cheats employees out of wages they have rightfully earned and gives unscrupulous employers an unfair advantage. The Wage and Hour Division vigorously purses corrective action when employees are misclassified to recover all wages owed and level the playing field for law-abiding employers."

The misclassification of employees as independent contractors is a serious problem for affected employees, employers and the economy. Misclassified employees often are denied access to critical benefits and protections — such as minimum wage, overtime, family and medical leave and Unemployment Insurance — to which they are entitled. Employee misclassification generates substantial losses to the U.S. Treasury and the Social Security and Medicare funds, as well as to state Unemployment Insurance and workers' compensation funds. Misclassification also creates a competitive disadvantage for employers who comply with the law.

The department and the Internal Revenue Service, through an interagency memorandum of understanding, are working together and sharing general information to reduce the incidence of misclassification of employees, reduce the tax gap and improve compliance with federal labor laws. This case is typical of those the department may refer to the IRS.

The Fair Labor Standards Act requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week.

The division's Tampa office can be reached at 813-626-1242. Information on the FLSA and other wage laws is available by calling the division's toll-free helpline at 866-4US-WAGE (487-9243) and at http://www.dol.gov/whd/.