Telemarketing company owners personally liable for $1.4M in classification suit, 9th Cir. says

Dive Brief:

The owners of a Las Vegas telemarketing company must pay more than $1.4 million in back wages and liquidated damages, the U.S. Department of Labor announced Nov. 2.
The payout follows a DOL investigation that found the company and its owners intentionally misclassified workers as independent contractors, paying them only when they made sales. Under the pay structure, some received little to no compensation when they failed to make enough sales, despite working what DOL described as long hours.
The treatment of the workers was willful, DOL said. Its findings, and the subsequent judgement from a Nevada federal court, were affirmed by the 9th U.S. Circuit Court of Appeals.

Dive Insight:

Preventing this kind of exploitation is a priority for DOL’s Wage and Hour Division, Acting Wage and Hour Administrator Jessica Looman said in the agency’s press release. "Employers who misclassify workers as independent contractors deny them their hard earned wages and other benefits such as paid leave and health insurance," she said. "The U.S. Department of Labor will use all the tools available to ensure workers receive the wages they are due."

Employers may be particularly interested in the liability element of this case. The telemarketing company owners were held personally liable — the 9th Circuit ordered them to pay the back wages and liquidated damages.

"The [owners] are being held personally liable because the Fair Labor Standards Act has a provision that holds individual owners or high level managers personally liable when they have sufficient control over the terms and conditions of their workers’ employment," Mike Petersen, Western Regional Director of DOL’s Office of Public Affairs, told HR Dive in an email.

In a September 2018 ruling granting summary judgment, the U.S. District Court of Nevada said that the owners were individually liable because they "closely oversaw the call centers in terms of wages, discipline, hiring and firing, and daily tasks associated with managing and operating the call center businesses." The court noted that the owners were not directly responsible for day-to-day activities, but that fact did not diminish the "constant control" that set them up for liability.