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Lansing business pays employees back $94K after misclassification

More than $22.7 million was recovered in the Midwest alone for healthcare workers from violations of worker protections.
(Mitchell Blahut - WTAP)
Published: Apr. 28, 2022 at 1:49 PM EDT
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LANSING, Mich. (WILX) - Is that contractor really independent? One Lansing business was just ordered to pay the better part of $100,000 over the issue, but it’s more widespread than many realize.

An independent contractor is a person who has a business of their own, while an employee is dependent on the business which they serve. There are rules in place to protect employees that do not cover independent contractors.

The Department of Labor gets involved when employers misclassify their employees.

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Thursday, the Department of Labor announced they ordered an adult foster care company in Lansing to pay $94,706 to employees they found were misclassified as being independent contractors.

The company was paying employees who worked as residential healthcare workers a fixed monthly salary for all hours worked. As a result, the Department found seven workers at the employer’s two Lansing locations were denied their full overtime wages, a violation of the Fair Labor Standards Act.

The investigation led to the recovery of $94,706 of earned wages for the affected workers.

Beyond shorting wages, misclassifying employees as independent contractors deprives them of unemployment insurance, worker’s compensation and makes workers fully responsible for paying Social Security and tax withholdings.

“Residential healthcare workers provide vital services to adults unable to care for themselves and allow families some peace of mind knowing their loved one’s basic living needs are being addressed,” said Wage and Hour Division District Director Mary O’Rourke. “In return, these workers deserve to be paid all of their hard-earned wages.”

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The problem is more prevalent than some realize.

From 2019 to 2021, Wage and Hour Division investigations recovered more than $22.7 million in the Midwest alone for healthcare workers from violations of worker protections under the Fair Labor Standards Act. In February, the Bureau of Labor Statistics reported that the 699,000 healthcare and social services workers left their positions.

O’Rourke said, “Industry employers that fail to pay wages as the law requires have to remember that retaining and recruiting the people they need to do these jobs is more difficult as workers in today’s labor market can choose where, and for whom, they work.”

A manager at the Lansing business said they have already paid the money, and that it’s an easy mistake to make as an employer.

The Department of Labor judges the nature of the business relationship by “economic reality” rather than “technical concepts.” Among the factors which the Court has considered significant are:

  • The extent to which the services rendered are an integral part of the principal’s business.
  • The permanency of the relationship.
  • The amount of the alleged contractor’s investment in facilities and equipment.
  • The nature and degree of control by the principal.
  • The alleged contractor’s opportunities for profit and loss.
  • The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
  • The degree of independent business organization and operation.

If you think you’ve been misclassified as an independent contractor, or if you’d like to check that you haven’t misclassified your employees, contact the US Department of Labor.

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