Two staffing providers were recently investigated by the U.S. Department of Labor for mischaracterizing wages as per diem payments — resulting in workers being denied overtime. Staffing buyers were not mentioned in either case, but questions remain whether such investigations could have an impact.
In the first case, industrial services employment agency Hutco Inc. agreed to pay $1.9 million in back wages to 2,267 workers assigned to client sites throughout Louisiana, Mississippi and Texas, the U.S. Department of Labor announced on May 6. Hutco mischaracterized wages as per diem payments, resulting in workers missing out on overtime, according to the department.
In the second case, Savard Marine Services Inc., a New Orleans-based construction services employment agency, agreed to pay 107 workers $59,209 in back wages for mischaracterizing per diem payments as wages, the Department of Labor announced on June 17.
“Unfortunately, we are seeing too many companies like Savard Marine Services utilizing the same evasive pay practice to lower overtime premiums,” said Cynthia Watson, regional administrator for the Wage and Hour Division in the Southwest. “We are focused on identifying and remedying labor violations involving temporary employment arrangements, and we are working with stakeholders and state agencies to ensure compliance with all applicable laws.”
A Department of Labor spokesman said Tuesday that the recent investigation only focused on the named company, not its customers.
However, activities by suppliers that run afoul of the Department of Labor should raise red flags for buyers.
“Rate splitting is a very common tactic among unethical suppliers to avoid the payment of employment taxes,” said Bryan Peña, vice president, contingent workforce strategies and research, at Staffing Industry Analysts. “We often see this happening in situations where buyers are getting unusually low markups. While this investigation doesn’t consider the buying company as culpable, it doesn’t mean companies who find themselves in similar situations will be as lucky. Regardless of your preferred pricing strategy, it is always a good idea to periodically audit your suppliers’ pay stubs to ensure compliance.”