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Employees misclassified as independent contractors awarded $1.3 million

A federal judge has ordered kgb USA Inc., the world’s largest independent provider of directory assistance and enhanced information services, to pay $1.3 million in minimum-wage compensation to 14,568 of its current and former employees nationwide for violations of the Fair Labor Standards Act (FLSA).

Judge James Knoll Gardner of the U.S. District Court for the Eastern District of Pennsylvania entered a consent judgment and order against the company, which agreed to the terms. The employees, who were hired to respond to text messages from customers, worked from home throughout the United States. The company’s headquarters are in Bethlehem, Pa.

The consent judgment and order resolve an investigation by the U.S. Department of Labor’s Wage and Hour Division that determined the company misclassified employees as independent contractors and paid them a piece rate based on the numbers of text messages and inquiries they responded to, without regard to the number of hours they worked. FLSA violations resulted when piece-rate earnings failed to yield at least the federal minimum wage of $7.25 per hour.

“Misclassification of workers as independent contractors is a serious threat to their livelihood,” said acting Secretary of Labor Seth D. Harris. “Misclassifying workers also undercuts responsible employers, who must compete with unscrupulous employers who do not obey the law. The Department of Labor is committed to ensuring that employees are classified properly so that they receive both the pay they rightfully earn and the protections to which they are entitled, including minimum and overtime wages, family and medical leave, and unemployment insurance.”

The investigation also revealed that the company failed to record and maintain accurate records of hours worked, in violation of FLSA record-keeping requirements. Under the terms of the consent judgment, kgb USA must pay the back wages found due in full and is enjoined from future FLSA violations. The agreement requires compliance with all of the act’s minimum-wage, overtime and record-keeping provisions and specifies that kgb USA shall not classify any worker as an independent contractor unless the worker is a bona fide independent contractor and fails to meet the definition of an employee under the FLSA.

©2013 SHRM. All rights reserved.

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