Staffing agency to pay more than $151K in overtime back wages, damages, after misclassifying 275 hotel employees as independent contractors

Employer: Allstars Staffing LLC, an agency providing workers to local resorts and hotels

Location: 925 East Hermosa Drive, Tempe, Arizona

Investigation findings: An investigation by the U.S. Department of Labor’s Wage and Hour Division found Allstars Staffing LLC misclassified hundreds of servers, bussers, cooks, dishwashers and banquet staff as independent contractors rather than employees. As a result, the employer failed to pay overtime when these employees worked more than 40 hours in a workweek, in violation of the Fair Labor Standards Act.

The staffing agency paid overtime only when an employee worked at the same hotel for the entire workweek and the hotel client agreed to pay the required time and a half. Many employees worked more than 40 hours but worked at more than one hotel for the staffing agency during the week. In those instances, the employer failed to pay overtime. The affected employees worked at Phoenix-area hotels, including Tempe Mission Palms, Sheraton, and Fairmont Scottsdale Princess.

Resolution: Allstars Staffing will pay $75,683 in overtime back wages and an equal, additional amount in damages to 275 employees. The employer will also pay a $22,094 civil penalty because of the willful nature of the violations found.

Quote: “Staffing agencies and their employer clients share responsibility to ensure that all employees working on their behalf are paid the wages they are entitled to by law,” said Eric Murray, director of the Wage and Hour Division in Phoenix. “These violations are all too common in the hotel industry. Our agency will do everything in its power to end the willful misclassification of employees as independent contractors. This practice deprives workers of basic wage and employment rights and allows an employer to illegally spare the costs of full wages, payroll taxes and other employment related expenses. This cheats not just the workers and their families – it also the undercuts the competition.”

Information: Misclassifying employees as independent contractors or some other nonemployee status often denies them minimum wage, overtime, workers’ compensation, unemployment insurance and other workplace protections. Employers often intentionally misclassify workers to reduce labor costs and avoid employment taxes. For more information about federal wage laws administered by the Wage and Hour Division, or to file a complaint, call the agency’s toll-free helpline at 866-4US-WAGE (487-9243). All services are free and confidential. Information also is available at http://www.dol.gov/whd/.