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Secretary of Labor Thomas E. Perez
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News Release

WHD News Release: [03/13/2012]
Contact Name: Elizabeth Todd or Juan Rodriguez
Phone Number: (972) 850-4710 or x4709
Release Number: 12-0240-DAL

US Labor Department launches initiative to enforce wage and hour laws in Texas hotel and motel industry

Effort aims to prevent misclassification of employees as independent contractors

DALLAS — The U.S. Department of Labor's Wage and Hour Division has launched a concentrated enforcement initiative focusing on the hotel and motel industry in the Dallas/Fort Worth metroplex. Previous investigations in this industry have found significant and systemic violations of the minimum wage, overtime pay and record-keeping provisions of the Fair Labor Standards Act.

For example, investigations conducted by the division's Dallas District Office in 2011 found widespread FLSA violations such as failing to accurately calculate hours worked at multiple job sites, paying housekeepers on a per-room basis without regard to hours worked or overtime, making improper deductions from employees' wages and paying "straight time" for hours worked over 40 in a week rather than time and one-half employees' regular rates. Many of these violations stemmed from the practice of misclassifying employees as independent contractors.

The hotel and motel industry is characterized by a wide variety of employment arrangements such as subcontracting, franchising, third-party management, the use of staffing agencies and other practices that obscure the worker-employer relationship. The division has found that staffing agencies often provide workers for a variety of jobs in the industry, including housekeeping, food service, landscaping and janitorial maintenance, and sometimes misclassify these employees as independent contractors. The division is examining the structure and complexity of these employment relationships to better target enforcement efforts and to pinpoint sources of violations.

"Hotels and motels subject to the FLSA cannot use staffing agencies to escape their responsibilities to properly classify and compensate employees for all hours worked," said Cynthia Watson, regional administrator for the Wage and Hour Division in the Southwest. "These types of businesses employ large numbers of low-wage and vulnerable workers who are less likely to step forward and complain when subjected to wage violations. This initiative should put hotels, motels and staffing agencies on notice that the Labor Department will use every enforcement tool available to ensure compliance and accountability under the law."

The misclassification of employees as independent contractors presents a serious problem, as these employees often are denied access to critical benefits and protections to which they are entitled, such as family and medical leave, overtime compensation, minimum wage pay and Unemployment Insurance. Employee misclassification also generates substantial losses for state unemployment insurance programs, workers' compensation funds and the Internal Revenue Service. In 2011 alone, the Wage and Hour Division found that more than $5.3 million in back wages was due to more than 7,700 employees who had been misclassified.

During this initiative, Wage and Hour Division investigators will make unannounced visits to area hotels and motels. When violations are found, the division will vigorously pursue corrective action, including the collection and payment of back wages, the assessment of civil money penalties and liquidated damages, and litigation to ensure accountability and deter future violations. The division also will seek a commitment from major employers to ensure lasting and systemwide compliance, and will engage parent companies of local hotels and motels to enlist their cooperation in ensuring compliance among franchisee-operated establishments.

Additionally, the division will engage the public, employer and employee associations, community organizations, unions and other stakeholders to raise awareness and promote compliance with the FLSA. Establishments investigated as part of this initiative will be included in the division's enforcement database, available at http://ogesdw.dol.gov and accessible via the "Eat Shop Sleep" smartphone application. Consumers, employees and other members of the public can now use the app, available at https://sites.google.com/site/eatshopsleepdol, to learn if a hotel has been investigated by the division and whether FLSA violations were found.

Under the FLSA, an employment relationship must be distinguished from a strictly contractual one. An employee — as distinguished from a person who is engaged in a business of his or her own — is one who, as a matter of economic reality, follows the usual path of an employee and is dependent on the business that he or she serves. For more information, visit http://www.dol.gov/whd/regs/compliance/whdfs13.htm.

The FLSA requires that covered employees be paid at least the federal minimum wage of $7.25 for all hours worked, plus time and one-half their regular rates of pay, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Additionally, employers must maintain accurate time and payroll records.

For more information about federal wage laws, call the Wage and Hour Division's toll-free helpline at 866-4US-WAGE (487-9243) or its Dallas office at 817-861-2150. Information also is available at http://www.dol.gov/whd/.