In the last few weeks there have been 3 large scale documented cases published on how the Labor Commissioner is cracking down on companies mis-classifying employees and committing wage theft violations. Over the course of the next few blog posts, we will be discussing the cases against a Glendale construction company, a Chula Vista restaurant, and even a Jack in the Box franchise owner. These cases are excellent examples on how important it is to correctly classify your employees and be aware of minimum wage and overtime protection laws.
What is Wage Theft?
When an employer does not pay their employees according to the law, that is wage theft. Wage theft occurs when an employer does not pay workers overtime, pays less than minimum wage, or neglects to offer employees the opportunity to take breaks.
What is Worker Misclassification?
Employee misclassification happens when an employer incorrectly labels workers as independent contractors, rather than as employees, or an employee exempt from overtime because they are paid a salary. When employees are misclassified as independent contractors, they lose rights to workers’ compensation coverage, family leave, unemployment insurance, and the right to organize or join a union. They lose protection against employer retaliation and may not have access to employer-provided health insurance coverage and pension plans. Misclassified workers are not subject to California minimum wage and overtime protection laws.
An employee classified as exempt is not entitled to overtime pay, but this is taken into consideration in the amount of salary they must be paid to truly be exempt. Just because an employee is classified as exempt from overtime doesn’t mean it is so.
As Stated on the Department of Industrial Relations Website:
“The misclassification of workers as independent contractors creates an unfair playing field for responsible employers who honor their lawful obligations to their employees. The misclassification of workers results in a loss of payroll tax revenue to the State, estimated at $7 billion per year, and increased reliance on the public safety net by workers who are denied access to work-based protections.”
The California Labor Commissioner’s Office enforces the Labor Code and offers classified employees the right to file a complaint. Officially known as the Division of Labor Standards Enforcement, the Labor Commissioner’s Office is a section of the Department of Industrial Relations (DIR). The Labor Commissioner’s Office responsibilities ranges from educating on the public on labor laws, inspecting workplaces for wage and hour violations, adjudicating wage claims, and investigating retaliation complaints.
In a new release published by the State of California Department of Industrial Relations, the release mentions that in the lawsuit against Calcrete Construction, Inc., the Labor Commissioner’s Office is seeking $6,300,338 for several wage theft violations affecting a group of 249 construction workers and the willful misclassification of 175 workers as independent contractors.
An investigation launched in October 2016 uncovered the Glendale-based company’s failure to pay the workers for overtime hours, allocate pay for sick leave and provide proper wage statements. The lawsuit, filed in Los Angeles Superior Court, also seeks civil damages and penalties.
Beginning in August 2016, Calcrete forced its workers under threat of termination to sign contracts stating they were independent contractors. The company then used staffing agencies Dominion Staffing and Southeast Personnel Leasing to pay the workers.
“It is illegal for employers to use subcontractors to distance themselves from the obligation to pay workers, and we will use every tool to dissuade employers from this scheme,” said Labor Commissioner Julie A. Su. “This lawsuit aims to recover the money these misclassified workers should have been paid after years of wage theft.”
Calcrete employees typically worked 10-12 hours Monday through Friday and eight hours on Saturday. They were paid only their regular hourly rate and not for the 18-28 hours of overtime they regularly worked. This underpayment occurred for a nearly two-year period from 2014-16, the lawsuit specifies.
The Carpenters / Contractors Cooperation Committee, a union-affiliated, non-profit organization that advocates for workplace compliance within the construction industry, referred the case to the Labor Commissioner’s Office.
In 2014, Commissioner Su launched the Wage Theft is a Crime multilingual public awareness campaign. The campaign defines wage theft and informs workers of their rights and the resources available to them to recover unpaid wages or report other labor law violations. Employees with work-related questions or complaints may contact DIR’s Call Center in English or Spanish at 844-LABOR-DIR (844-522-6734).
In the upcoming blog posts we will discuss the cases of a Chula Vista restaurant cited for wage theft and labor law violations and a Jack in the Box Franchise owner who misclassified 40 employees and denied them overtime.
