In the case of Martin J. Walsh v. G.E.M. Interiors, Inc., et al., the construction company based in Ohio was sued by the U.S. Department of Labor for violating the Fair Labor Standards Act (FLSA) by failing to pay overtime compensation to its employees.
The DOL revealed that GEM Interiors used many different methods of denying their employees proper compensation for overtime pay. They had divided employees’ overtime hours by ⅓ and wrongly recorded it as overtime compensation on their payroll. Besides that, they had also misclassified their employees as independent contractors, in order to avoid providing overtime pay to them.
A settlement of $265,000 was proposed for the company to pay 182 employees. As part of the judgment, GEM Interiors had agreed to make such payments but in a 36-month installment starting from April 2023. It also face a total of $42,000 in civil damages for violation of FLSA.
To avoid such issues again, GEM Interiors had to make extra commitments stating that they will refrain from hiring workers as independent contractors and only hire those who are registered in the state of the work that is to be performed. They will also hire an auditor from a third-party company to review their records to ensure that they comply with FLSA moving forward.
Key lessons from this case:
- It is important to remember that misclassification of employees is illegal in Ohio and should be avoided by all employers.
- The employer was subjected to implement several “safety measures,” such as hiring an auditor and avoiding the hire of independent contractors. This shows how important it is to ensure compliance with Ohio overtime laws.
- It is important to ensure proper overtime compensation calculations. In this case, the employer had purposely divided employees’ work hours by ⅓ to avoid paying an overtime rate. This is a violation of overtime laws.
Learn more about Ohio Overtime Laws through our detailed guide.
