Monday, 06 January 2014 11:19
By Gina Helou
The five men worked exclusively for a construction company owned solely by a son but operated and managed by his father. Each of the five men was hired by the father, and he set their daily and weekly work schedules. The men were paid by the hour, not by a preset price or by the job. Their hourly rates varied, some lower than the applicable federal minimum wage rate of $7.25 per hour, and some earned $8.00 per hour. However, the Illinois minimum wage rate prevailed over the federal rate because it is higher, at a rate of $8.25 per hour. The men were responsible for their own taxes, but based on the facts and circumstances of their employment, they were not considered independent contractors; rather, they were classified as employees of the construction company.
During the time period at issue, the men worked in an office building performing construction and maintenance work. The men were assigned foremen who kept up with their attendance, schedules and hours worked. They used company tools at the construction site and company vehicles to run errands to purchase materials for the work performed. When the men ran these errands, they were not always paid for time away from the site, even though the time was spent on work-related errands. The court found the men’s testimony and evidence adequate to show they performed work and work related duties for which they were not compensated.
Testimony and evidence developed during the lawsuit revealed the construction company drafted a waiver and release of all claims and attempted to have the men sign the waiver to drop the lawsuit, specifically all wage/hour claims. Some conflicting and questionable testimony from the construction company revealed they did not have a copy of the waiver, could not remember statements within the waiver, and could not recall who originally drafted the waiver or who requested the men sign it. One of the employees bringing the lawsuit, however, took a picture of the waiver on his cell phone, which the court permitted to be entered into evidence. The waiver stated the signing party would withdraw as a plaintiff in the lawsuit and bring no further causes of action regarding the FLSA and/or Illinois minimum wage violations against the construction company. When the men refused to sign the waiver, they were terminated. The men testified the construction company owner told them they were fired because they would not withdraw their legal claims. The lawsuit ensued.
The FLSA requires employers to pay their employees a minimum hourly wage and one and one-half times that wage for every hour of overtime worked in any given week where the employee works over 40 hours. The court found the men were legally defined as employees of the company regardless of the fact they paid their own taxes. The payroll records provided by the company showed the men regularly worked over 40 hours per week, but they were not properly paid at the applicable overtime wage rate. The court further found the men were not paid the applicable minimum wage. Although some men earned more than the federal minimum wage of $7.25 per hour, where a state’s minimum wage is greater than the federal standard, employers must follow the state minimum wage. Illinois provided for a minimum wage of $8.25 per hour, which none of the men earned. The Court found in favor of the five employees, stating the construction company offered no evidence they acted in good faith or with reasonable grounds to believe they were in compliance with the FLSA of state wage laws.
The take away
It is essential for all employers to know both the federal and applicable state wage laws when factoring employees’ pay rates. It is also paramount for employers to properly understand and define the individuals in their employ. The FLSA, and state wage and hour statutes, have many exceptions to the rules, including where an individual is classified as an employee or an independent contractor. The FLSA can be a tricky maze to maneuver, but it is essential employers follow it to the letter, or else risk costly lawsuits often resulting in class actions.