THIS column has often stressed the general rule that most employees should be paid overtime rate if they work more than 8 hours per day or 40 hours per week. However, there may be exceptions in the case of some who work in certain industries. It is in this instance that the employers’ classification of workers is important as it determines whether employees should receive higher wages.
For instance, consider the case of Nick Cancilla, who worked as a service specialist for Ecolab, Inc., which provides pest elimination services to commercial and non-residential customers. Cancilla sued Ecolab, claiming that the company misclassified him and others as exempt from overtime, and thus failed to pay them overtime at a rate not less than one and one-half times their regular rate of pay for all hours worked over 40 hours in a workweek. The employees asked the court to proceed to trial as a class on behalf of over 1,000 service specialists.
The employer objected, and argued that under the law, certain employees are exempt from overtime pay if they receive “bona fide” commission payments and are paid at least 1 1/2 times the minimum wage for all the hours they work in a week involving overtime hours, and that there remains a debate over whether the service specialists in Ecolab’s pest-control unit received that type of pay. Despite this, the court certified the class to allow the jury to determine (1) whether Ecolab correctly classified its employees as exempt; and (2) whether Ecolab’s compensation policy enables employees to actually earn twice the minimum wage. After intense litigation, both sides eventually agreed to settle the employees’ claim for $7,500,000.
Another case involves an investigation by the U.S. Department of Labor (DOL) into DirecTV’s pay practices involving its cable installers. The DOL accused DirecTV, and its installation subcontractor, Advanced Information Systems, of violating the minimum wage, overtime and record-keeping laws. DOL investigators found that DirecTV and Advance Information Systems paid employees on a piece-rate basis, which resulted in their hourly rates falling below the federal minimum wage. Installers were not paid for all hours worked nor paid an overtime premium of time and a half for hours worked beyond 40 per week. They did not get paid for time spent on unsuccessful installations, for travel time, for time in the office. They were not reimbursed for business expenses.
DirecTV claimed that it was not the installers’ employer and therefore not responsible for any violation. DirecTV subcontracted with Advanced Information Systems, the company that hired the installers. However, the DOL established that the installers worked only on DirecTV installations, had all conditions of employment specified by DirecTV, drove DirecTV vans, and wore DirecTV clothing. DOL accused DirecTV of structuring the installers’ employment relationship to try to avoid employer liability and responsibility. Because of these and other facts, the court ruled that DirecTV was a joint employer of the installers and was therefore responsible for any violations of the FLSA law that the installers suffered. DirecTV was ordered to pay $395,000 in back wages and damages to 147 installers.
The Cancilla case outlines the misclassification of non-exempt employees into exempt employees. Under California law, employees who are not employed in an executive, administrative, or professional capacity are entitled to overtime pay. True exempt status is determined primarily by an employee’s duties. Exempt employees primarily have managerial duties, such as managing the business, hiring, firing, and disciplining employees, deciding on employee salaries and wages, and creating work policies and procedures.
The DirecTV case outlines the misclassification of employees into independent contractors. True independent contractors have the right to control the manner and means of performing their job. If the employer dictates how the worker should do the work, what tasks to accomplish and how to accomplish them, then the worker is an employee and not an independent contractor. Unlike employees, independent contractors do not have to be paid minimum wage, overtime, or missed meal and rest breaks. They do not have the same protections as employees do.
Misclassification results in loss of significant wages to the employees. Misclassification is against the law. Since the issue may involve legal analysis, seeking the advice of an experienced employment attorney may be a smart option.
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The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost. You can contact the office at (818) 291-0088 or visit www.joesayaslaw.com.
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C. Joe Sayas, Jr., Esq. is an experienced trial attorney who has successfully obtained significant recoveries for thousands of employees and consumers. He is named Top Labor & Employment Attorney in California by the Daily Journal, consistently selected as Super Lawyer by the Los Angeles Magazine, and is a member of the Million Dollar-Advocates Forum.