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Labor Department audit may trigger huge lawsuit

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in Compensation and Benefits,Human Resources

You may think that by cooperating with a U.S. Labor Department audit under Fair Labor Standards Act (FLSA), you’ll avoid a lawsuit. Unfortunately, the fact is that the audit may be only the beginning of your troubles—even if you go ahead and pay everything the department says you owe.

That’s why it’s absolutely essential you do everything you can to understand overtime and other FLSA traps. Consider this recent case and conduct your own internal audit before Labor steps in.

Recent case: When investigators from Labor came calling, OHC Environmental Engineering cooperated. The department looked at how the company paid its independent contractors. It determined that Michael Hasier, who was no longer with the company, had been misclassified as an independent contractor. The department then calculated how much overtime OHC owed Hasier, and OHC agreed to pay.

The department excused the penalties (usually double the amount due) and—since OHC couldn’t locate Hasier—took the money and placed it in a special fund.

That’s when Hasier hired an attorney, who sued on behalf of Hasier and all other similarly situated employees. OHC wanted the case dismissed, reasoning it had admitted its error and paid what was owed. But the court said the case could go forward, and said it would decide whether Hasier and others were due double their unpaid overtime, plus attorneys’ fees. (Hasier v. OHC Environmental Engineering, No. 8:07-CV-721, MD FL, 2007)

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