Willful Misclassification Costs Staffing Agency $7.2 Million

Author: Michael Cardman, Brightmine Legal Editor

February 7, 2022

A medical staffing agency has been ordered to pay more than $7.2 million in back wages and other damages because it willfully misclassified about 1,100 workers as independent contractors rather than employees. As a result, the workers were denied overtime when they worked more than 40 hours in a workweek, as required by the Fair Labor Standards Act (FLSA).

A federal district court ordered Medical Staffing of America LLC of Norfolk, Virginia, to pay the employees about $3.6 million in back wages (or about $3,300 per worker) and then doubled that amount as liquidated damages. These amounts will increase slightly because the original award was based on a period between 2015 and 2021, and the court ordered the US Department of Labor (DOL) to recalculate damages through to the present.

Employers can shield themselves from liquidated damages if they can show their violations were in good faith and that they had reasonable grounds for believing that their actions were not a violation of the FLSA. However, the court rejected this defense because the staffing agency failed to seek legal advice on the classification of its workers or take any proactive steps to educate itself on the FLSA before the DOL opened an investigation.

Many businesses have expected the DOL to take a more aggressive approach to enforcing the FLSA and other federal employment laws under the Biden administration.

The DOL plans to hire an additional 100 investigators this year. And President Biden's nominee to head the DOL's Wage and Hour Division, David Weil, who led the division during the Obama administration, is expected to target enforcement efforts at industries that use franchising, independent contractors, subcontracting and third-party intermediaries such as temporary employment agencies or labor brokers.

In a statement, the DOL said the court's judgment sends an "unequivocal message" to employers that the agency will work to recover stolen wages when employers violate the law.

However, the judgment against Medical Staffing of America cannot be attributed entirely to the Biden administration since the DOL began its investigation in 2018 under the Trump administration.