BLOG: The Big Miss: When Job Misclassification Strikes Hard

August 23, 2019

By Nichole D. Atallah
Practice Areas: Government Contracts Law and Labor & Employment Law

Everywhere you look companies are being hit hard with claims of misclassification of workers under labor regulations. So far in August 2019, Department of Labor (DOL) has announced over $2 Million in damages paid to employees, and this doesn’t even include voluntary settlements handled outside of DOL. In fact, General Dynamics was recently hit with a $170,000 settlement regarding claims that the company misclassified call center workers under the Service Contract Act (SCA). To avoid such penalties and to remain legally compliant, employers—including government contractors—should seek experienced legal counsel to help them properly classify a position, as well as create a system for future classifications.

Misclassification of work under prevailing wage laws and the Fair Labor Standards Act (FLSA) is one of the most common infractions cited by DOL and settled by employers. Whether an employer is determining whether employees are exempt or non-exempt from the overtime requirements of the FLSA or subject to more particular classification under the Davis-Bacon Act (DBA) or the SCA, classification is one of the most difficult components of hiring and the most difficult to negotiate when faced with a claim. Why? Because a classification determination is extremely fact specific and subject to varying interpretations of job duties. 

For example, under the FLSA administrative exemption, employers must meet both the salary-basis requirements and a complex duties test. These can be difficult to meet for many mid-level positions that seem like they should be professional, but do not fit nicely into a DOL-prescribed exemption. Under the SCA and the DBA, government contractors must go one step further. After determining an employee is non-exempt, they must find a listed job classification published by DOL that at least loosely fits the work employees are actually performing. The catch is that contractors should be making this determination before they submit their bid for the work; however, they often only have a description of work set out in a solicitation or information about a prior contractor’s classification of the work. In a perfect world, this would be at the complete discretion of the contractor, but often customer demands complicate the contractor’s vision at the time of bid. 

Moreover, the world and scope of jobs is rapidly expanding, which continues to challenge traditional assumptions about job classifications. Likewise, DOL then has leeway to interpret to their liking the aging rules of classification. As the classification landscape continues to expand, so too will the challenges to employers when classifying employees and the judgements waged against them. Employers should ensure:

1.     they take the deliberate step of recording their rationale behind classification of each position,

2.     their rationale is in line with DOL requirements, and

3.     that employees continue to work within their prescribed job descriptions. 

If you need assistance in classifying a position or help creating a system for classification that is legally compliant, please contact a member of PilieroMazza’s Labor & Employment Law team.

Nichole Atallah, the author of this blog, is a Partner in the Firm’s Labor & Employment Law and Government Contracts Law practice groups.

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