The natives of Papua New Guinea call the hooded pitohui a “garbage bird,” and they don’t eat it or touch it. As Westerners learned more recently, there’s a good reason for the islanders’ hostility.
The hooded pitohui is the first bird confirmed to be poisonous. The bird‘s feathers emit batrachotoxins, which causes numbness and burning in low concentrations. A heavier does can cause paralysis, cardiac arrest and death. In other words, there’s good reason for keeping the hooded pitohui off the menu.
Numbness and burning may also describe the impact of a recent DOL enforcement action on two contractors in Louisiana. They were dealt a double hit—the DOL found independent contractor misclassification and joint employment.
After an investigation, the DOL’s Wage and Hour Division found that hundreds of painters and drywall workers had been misclassified as independent contractors. The company that retained the workers, PL Construction, failed to pay overtime and failed to maintain accurate time records, both violations of the Fair Labor Standards Act (FLSA).
Adding to the pain, the DOL found that a higher tier contractor, Lanehart, was the workers’ joint employer. That meant Lanehart was jointly liable for the violations—even though it had no control over PL Construction’s pay practices.
The DOL recovered more than $240,000 in overtime back wages for 306 workers.
There are several lessons here, both for companies that retain independent contractors directly and for higher tier contractors that engage subcontractors that use ICs.
1. The DOL considers independent contractor misclassification an enforcement priority. The agency is actively looking for violations.
2. The DOL publishes its wins. That means you can expect a press release naming and shaming your company if the DOL finds that there’s a practice of misclassifying workers. Have you heard the old adage that there’s no such thing as bad publicity? It’s not true.
3. Higher tier contractors are taking a risk if they put their head in the sand and disregard misclassification by their lower tier subs—especially if they plan to direct the work of the lower tier sub’s workers.
Here, the DOL found that Lanehart, the higher tier contractor, supervised PL’s workers and maintained records of who worked when. Lanehart’s supervision and direction made it a joint employer of PL’s workers. Under the FLSA, a joint employer is fully liable for wage and hour violations, even where it had no control over how the lower tier sub paid its workers.
4. A lawsuit is not the only way misclassification claims arise. Federal and state agencies can initiate investigations too. And while arbitration agreements with class action waivers can prevent class action litigation, they can’t stop a federal agency from pursuing claims on its own.
The DOL made its position pretty clear in its press release: “Our investigation shows the costly consequences employers face when they or their subcontractors fail to comply with the law. When we determine a joint employment relationship exists, the Wage and Hour Division will hold all responsible employers accountable for the violations.”
Misclassification hurts. Joint employment doubles the pain. The DOL can inflict an uncomfortable burning sensation, even without sending a a hooded pitohui your way.
© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.