In the case of Agency of Wage and Hour Division v. El Club Mexicano Inc., the national food distribution company based in Asheboro, North Carolina, was investigated by the US DOL Wage and Hour Division for violations of the FLSA. The investigation revealed that the company had misclassified employees as independent contractors and failed to pay them minimum wage or overtime. Employees were paid based on a piece-rate system, which often resulted in wages below the mandated minimum wage of $7.25 per hour.
Additionally, the company neglected to pay overtime to employees who worked more than 40 hours per week, continuing to compensate them solely based on piece rates. The investigation also found that the company had hired minors aged 14 and 15 to operate equipment prohibited for use by workers under 18.
Court Decision: El Club Mexicano Inc. agreed to pay $136,266 in back wages and damages to 47 affected employees. This sum covered $68,133 in minimum wage and overtime back wages, with an equal amount awarded in damages. Additionally, the company was assessed $6,638 in civil money penalties for child labor violations. The employer committed to complying with all FLSA provisions in the future and agreed to pay all back wages, damages, and penalties in full.
Key lessons from this case:
- Employers must accurately classify workers as employees or independent contractors to ensure compliance with labor laws. Misclassification can lead to wage and hour violations, as seen in this case.
- Employers must pay employees at least the minimum wage and provide overtime compensation for hours worked beyond 40 in a workweek. Paying employees based on piece rates does not absolve employers of their obligation to meet these requirements.
- Employers are obligated to guarantee that all FLSA regulations are followed and to commit to future compliance with labor laws.
Learn more about North Carolina Overtime Laws through our detailed guide.
