Judge rules Ohio-based Cascom employees misclassified as independent contractors, denied overtime pay in suit brought by US Labor Department

Court yet to determine amount of wages and damages owed; more than $1.6 million sought

DAYTON, Ohio — In a lawsuit filed by the U.S. Department of Labor against Cascom Inc. and president Julia J. Gress alleging wage violations, U.S. District Court Judge Thomas M. Rose has ruled that the Fairfield, Ohio, company violated federal labor laws by misclassifying its employees as independent contractors and, consequently, not compensating them for overtime work, as required under the Fair Labor Standards Act.

Cascom, which provided residential cable television, Internet and telephone installation services for Time Warner in the Dayton area, will be subject to further proceedings to determine the amount of overtime back wages owed to approximately 250 installers. The Labor Department filed its suit two years ago seeking to recover back wages in excess of $800,000 with an equal amount in liquidated damages, based on the findings of an investigation conducted by the Columbus District Office of the department's Wage and Hour Division. The hearing on damages has been set for Nov. 22.

"The misclassification of employees as independent contractors is an alarming trend. The practice is a serious threat to both workers, who are entitled to good and safe jobs, and to employers who obey the law and are undercut when others use illegal practices," said Secretary of Labor Hilda L. Solis. "The Department of Labor is committed to remedying employee misclassification and ensuring compliance to protect and enhance the welfare of the nation's workforce."

Secretary Solis signed a memorandum of understanding with the Internal Revenue Service on Sept. 19 that will improve the Labor Department's efforts to end the business practice of misclassifying employees in order to avoid providing employment protections. The memorandum will enable the department to share information with the IRS in order to level the playing field for law-abiding employers. Several of the department's agencies also entered into memorandums of understanding with a number of states to share information and coordinate law enforcement on misclassification. This collaboration will help law-abiding employers compete, prevent losses to states' unemployment insurance and workers' compensation systems, and ensure that employees receive the protections to which they are entitled under federal and state law. These memorandums of understanding arose as part of the department's misclassification initiative, launched under the auspices of Vice President Biden's Middle Class Task Force, to prevent, detect and remedy employee misclassification.

Business models that attempt to change, obscure or eliminate the employment relationship are not inherently illegal, unless they are used to evade compliance with federal labor laws – for example, if an employee is misclassified as an independent contractor and subsequently denied rights and benefits to which he or she is entitled under the law. In addition, misclassification can create economic pressure for law-abiding business owners.

The Wage and Hour Division enforces the FLSA, which requires covered employees to be paid the federal minimum wage of $7.25 for all hours worked, and time and one-half their regular rates of pay for hours worked over 40 in a week. Employers must also maintain accurate time and payroll records.

To learn more about the FLSA's requirements, call the Wage and Hour Division's toll-free hotline at 866-4US-WAGE (487-9243). Information also can be found on the Internet at http://www.dol.gov/whd/.

Solis v. Cascom Inc. et al. Civil Action Number 3:09-cv-00257 U.S. District Court, Southern District of Ohio, Western Division at Dayton