“If I could sum up why I’m committed to the HR Girlfriends community it would come down to because we are ‘….in this together.'”

~Sana’ Rasul, Chief Girlfriend

Q&A: What are the penalties and costs for misclassifying employees?

The answer will depend on a number of factors, such as how many employees are misclassified, how much extra money they would have been paid if properly classified, and whether or not lawyers or regulatory agencies get involved.

Generally, if an employee goes to the federal Department of Labor (DOL) and claims that they’ve been misclassified, the DOL will investigate. If the DOL determines that an employee – or entire group of employees – should have been paid overtime but wasn’t, the employee will be owed up to two years’ worth of unpaid wages (or up to three if the misclassification was “willful”). The organization may also owe the employee or employees liquidated damages equal to the amount of money owed. So, if an employee should have been paid $2,000 in overtime, the organization may owe them $4,000. The organization would also owe the government taxes on those wages, as well as interest on the taxes.

Most states also have their own minimum wage and overtime laws, and often an organization can be held liable under both federal and state law, meaning the employee would be owed additional damages for violations of state wage law. And if you are in a state with late payment penalties, the organization could owe additional damages for not having paid all wages by the time they were due. There’s also a very good chance that the organization will be held liable for attorney’s fees – both the organization’s and the employee’s.

On top of the costs mentioned above, there are potential federal civil penalties of $2,074 per violation (generally one penalty per misclassified employee), state penalties (which will vary), and in some cases the potential for jail time. Finally, statutory interest may immediately begin to accrue on the amount owed.

Kara practiced employment law for five years and worked in Human Resources for several years prior to that. As an attorney, she worked on many wage and hour and discrimination claims in both state and federal court. She holds a Bachelor of Arts degree from Oregon State University and earned her law degree from Lewis and Clark Law School.

Get Certified

The first-ever HR certification designed for professionals who are just beginning their HR career journey.

Leave a comment

0 Comments
Inline Feedbacks
View all comments

Are You IN?
Or Are You OUT?

It’s time you join forces with a community of like-minded peers ready to tackle the issues unique to the women of HR.

How Safe Is Your Organization?

Even with millions spent on cyber security infrastructure, all it takes is one employee clicking on one wrong link to compromise critical data, costing your company millions.

HR Girlfriends™ is a Human Resources networking organization dedicated to advancing the practice and culture of people empowerment. Our team of Girlfriends consult, train, educate, develop, share, promote, and advocate for solutions in the field of human resource management.

  • All
  • Affirmation
  • Career Mondays
  • Certification
  • COVID-19
  • CyberSAFE
  • Guest Blogger
  • HR Advisor
  • HR Law Alert
  • HR Q&A
  • HR Reading
  • HR Reel Talk
  • Join Our Team - Apply Now
  • Membership
All
  • All
  • Affirmation
  • Career Mondays
  • Certification
  • COVID-19
  • CyberSAFE
  • Guest Blogger
  • HR Advisor
  • HR Law Alert
  • HR Q&A
  • HR Reading
  • HR Reel Talk
  • Join Our Team - Apply Now
  • Membership
Affirmation

Affirmation: Take Control Of Your Future By Sharpening Your Foresight

Life is a long journey where it pays to look several steps ahead. It’s impossible to predict everything that will happen, but you can get …

Read More →
Career Mondays

Career Monday: What Will You Do When an Employer Says You’re Overqualified?

Imagine someone refusing to date you because you’re too kind and beautiful. Yet, when you’re job hunting, you may run into employers who tell you …

Read More →
Affirmation

Affirmation: Each Project I Work On Deserves My Best Performance

Each day brings me a new opportunity to give my best to the world. The uncertainty of life demands that I perform at my highest …

Read More →
Share via
Copy link
Powered by Social Snap