US Labor Department investigation results in judgment against Phoenix-based Colmenero’s Pallets

PHOENIX – The U.S. Department of Labor sued a Phoenix-based pallet manufacturer after an investigation found that the company employed a combination of tactics to circumvent federal labor laws, including using fictitious names for workers, improperly labeling others as ‘vendors,’ and routinely destroying time cards at the end of each pay period.

The Department’s Wage and Hour Division conducted an investigation of Colmenero’s Pallets Inc. and found that the manufacturer violated the overtime and recordkeeping provisions of the Fair Labor Standards Act.

The employer attempted to conceal the employment of many of the workers by fraudulently claiming them as “vendors” rather than employees. These workers were paid straight time for all the hours they worked, including those over forty in a workweek, when the law requires those hours to be paid as overtime, at time and a half the workers’ regular rates. The employer did not deduct federal or state income taxes, social security or Medicare taxes from these employees’ wages, and did not pay the employer’s share of social security or Medicare taxes, worker’s compensation or unemployment insurance premiums.

The company allowed another group of workers, whom they did classify as employees, to record only up to 80 hours of work in a 2 week pay period, regardless of how many hours they actually worked. These employees regularly worked more than 60 hours per week, yet were paid only at straight time rates for their overtime hours, either in a separate check, often made out to a fictitious worker, or in cash.

Investigators established that Colmenero’s Pallets destroyed timecards at the end of each pay period, in violation of the recordkeeping provisions of the FLSA, and began to falsify time records during the investigation by clocking workers out prior to 40 hours in the work week, paying the overtime hours worked in cash, off-the-books.

“The Wage and Hour Division will not tolerate egregious violations such as those found in this case.  Denying these hard-working employees their rightful pay and misclassifying employees as vendors or independent contractors are unacceptable actions,” said Eric Murray, director of the division’s Phoenix District Office. “The court order obtained in this case demonstrates our commitment to pursue all available legal measures to ensure that workers are properly classified and compensated for their work. Other employers should take note, and ensure that they are paying their employees in compliance with the law.”

After the investigation findings and subsequent litigation, the U.S. District Court for the District of Arizona has ordered Colmenero’s Pallets to pay $139,154 in back wages and an equal amount in liquidated damages to 58 current and former workers. The employer will also pay an additional $21,692 in civil money penalties because of the willful nature of the violations. As part of the consent judgment reached, the company has agreed to notify all current and former employees of the case’s resolution, and to provide employees copies of their time cards showing the accurate number of hours worked. In addition, the Wage and Hour Division will provide worker education and training.

Employees misclassified as independent contractors, or in this case, vendors, are often denied access to critical benefits and protections to which they are entitled, such as minimum wage and overtime, family and medical leave, and unemployment insurance. Misclassification of workers may also generate losses to the U.S. Treasury, and Social Security and Medicare funds, and to state unemployment insurance and worker compensation funds. For more information about whether a worker is an “employee” under the FLSA, visithttp://www.dol.gov/whd/regs/compliance/whdfs13.htm http://www.dol.gov/whd/regs/compliance/whdfs13.pdf

The FLSA 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 FLSA provides that employers who violate the law are liable to employees for back wages and an equal amount in liquidated damages.

For additional information about the FLSA, call the Wage and Hour Division’s toll-free helpline at 866-4US-WAGE (487-9243). Information also is available at http://www.dol.gov/whd/.

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