Misclassification, OT Errors Cost Firm $1.5 Million

A North Texas company made a very expensive mistake. It misclassified workers as contractors and didn’t pay them for overtime put in.

The Department of Labor’s (DOL) wage & hour division determined that 430 heating, ventilation and air-conditioning (HVAC) technicians got stiffed by C&G HVAC, a contracting company in Dallas. DOL estimated the workers lost a combined $756K in OT and then tacked on an additional $756K in damages to the consent decree the company agreed to.

“C&G HVAC denied these technicians their full wages, hurt taxpayers by not paying related payroll taxes and gained an unfair advantage over their law-abiding competition,” says the DOL. “These employees, who do essential work installing, maintaining and repairing cooling systems in North Texas, stand to collect thousands of dollars in back wages and damages owed to them for their hard work.”

DOL charged C&G under the Fair Labor Standards Act (FLSA). In fiscal year 2023, DOL’s wage & hour division recovered $24.5 million in back wages for 20,000-plus misclassified workers nationwide. In Texas alone, employers were dinged $2.2 million for misclassifying and underpaying 5,100 workers.

Misclassification Mistakes Could Grow Under New OT Rule

Before an employer classifies a worker as an employee or an independent contractor, there are a series of questions that need to be answered first. One of the questions is: Is the worker [or workers] providing services that are a key aspect of your business’ work or earnings?

At quick glance, it appears the HVAC technicians for C&G were performing critical work key to the company attracting and retaining customers, and making money. C&G failed to classify the tech as employees who were entitled to OT. Many companies, particularly in the trades and construction, make the same mistake.

Tricia Richardson, a payroll consultant and speaker, discussed the tricky situations where an IC can become a de facto employee over time. Richardson urges employers to consider a dozen-plus questions so they’ll be in compliance with the FLSA. She discussed them during a recent webinar with Premier Learning.