Abusing Independent Contractors: KY Business Ordered to Pay Millions in Back Pay

Kentucky-based cable installer Bowlin Group, LLC has been ordered to pay $1,075,000 in back wages and damages to 196 employees after the Department of Labor (DOL) obtained a consent judgement from a federal court.  

The decision concludes an investigation which found that 77 of Bowlin Group’s workers were misclassified as independent contractors. The company failed to comply with the Fair Labor Standards Act (FLSA) and underpaid workers for overtime. They also did not maintain accurate payroll records.

The case revolves around the practice of Bowlin Group paying their workers a “per piece” rate instead of an hourly rate. The company’s determination did not meet the IRS standard of what constitutes an Independent Contractor. According to acting Secretary of Labor Seth D. Harris:

“This judgment rightfully provides wages to the workers who earned them.  The misclassification of employees as independent contractors cheats workers of wages and benefits to which they would otherwise be entitled to under the law, subsequently hurting our economy. It also leads to unfair competition because businesses that play by the rules operate at a disadvantage to those that don’t.”

According to the DOL Wage and Hour Division (WHD), the details of the case show an intent to misclassify:

Bowlin Group LLC maintains its principal office in Walton, Ky., and operates five subsidiaries throughout Ohio and Kentucky. One such subsidiary is Bowlin Services LLC, which until May 2012 performed installation services under contract to Insight Communications, a cable, telephone and Internet provider in Kentucky. An investigation by the division’s Louisville District Office found that this employer classified some of its cable installers as employees but misclassified other installers doing the same work as independent contractors.

The agency’s investigation found that all nonexempt employees, regardless of their classification by the employer as either an employee or independent contractor, were paid based upon the pieces of equipment they installed rather than at an hourly rate. They were thereby denied overtime compensation, which should have been time and one-half their regular rates of pay for hours worked beyond 40 in a workweek. Additionally, the employer failed to keep accurate records of the number of hours worked by each installer as well as employees performing fiber optic splicing, and falsified payroll records to minimize the numbers of hours worked.

The case is an important one insofar as it helps set precedent for companies pulling this trick out of from the bag of malfeasance. Cathy Ruckelshaus of the National Employment Law Project explains:

“It’s really important what the department has done with this case,” Ruckelshaus said. “These are very fact-intensive cases. The real question is: ‘Is the worker running a business for him- or herself or is it an employer-employee relationship?”

She noted that the cable installers in this case and similar lawsuits can’t set rates and are told where to go by a dispatcher, among other indicators.

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