Staffing firm pays $10 mln in Labor Dept overtime pay case

The United States Department of Labor is seen in Washington, D.C., U.S., August 30, 2020. REUTERS/Andrew Kelly
  • Company denied workers OT pay by labeling them as contractors
  • Settlement is among largest in recent Labor Department cases

(Reuters) - A Philadelphia healthcare staffing company will pay $10 million to settle the U.S. Department of Labor's claims that it purposely misclassified more than 1,700 employees as independent contractors in order to deny them overtime pay.

U.S. District Judge Mark Kearney in Philadelphia approved the settlement on Monday, the same day DOL filed a complaint and consent judgment with U.S. Medical Staffing Inc. The company did not admit or deny wrongdoing.

The agreement includes $4.65 million in back wages for affected workers and an equal amount in liquidated damages, along with a $700,000 penalty.

The settlement is among the largest in recent years in a DOL case alleging violations of federal wage law. The department's cases typically involve fewer workers and rarely result in seven-figure settlements.

U.S. Medical Staffing provides workers, including aides, personal care assistants and licensed practical nurses, to schools and group homes.

DOL claimed those workers were treated as independent contractors, who are not eligible for overtime pay under federal law, even though they were actually the company's employees because U.S. Medical Staffing recruited and hired them and set their rate of pay.

U.S. Medical Staffing and its lawyers at Ballard Spahr did not immediately respond to a request for comment.

Jessica Looman, the principal deputy administrator of DOL's Wage and Hour Division, in a statement said the settlement sends a message that the agency will hold employers accountable when they misclassify employees in order to cut labor costs.

DOL is expected to unveil a proposed rule in the coming weeks that would make it more difficult for companies to treat workers as independent contractors. The agency has said it is moving to crack down on rampant misclassification of workers in certain industries, including healthcare.

The case is Walsh v. U.S. Medical Staffing Inc, U.S. District Court for the Eastern District of Pennsylvania, No. 2:22-cv-03540.

For DOL: Andrea Luby

For U.S. Medical Staffing: Meredith Dante of Ballard Spahr

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Dan Wiessner (@danwiessner) reports on labor and employment and immigration law, including litigation and policy making. He can be reached at daniel.wiessner@thomsonreuters.com.