Wage and Hour Division (WHD)
Archived News Release — Caution: Information may be out of date.
Date: Aug. 15, 2013
Contact: Scott Allen or Rhonda Burke
Phone: (312) 353-6976
U.S. Department of Labor
Wage and Hour Division
Release Number: 13-1465-CHI
Midwest Lodging agrees to pay more than $47,000 in back wages to 67 workers following Labor Department investigation of hotel group and its staffing agencies
Company signs compliance agreement to prevent future labor violations of the FLSA
MASON, Ohio. -- Midwest Lodging LLC has agreed to pay 67 workers a total of $47,654 in back wages following an investigation by the U.S. Department of Labor’s Wage and Hour Division. The investigation found that the company utilized temporary staffing agencies to obtain workers for its hotel facilities, but these workers were misclassified as independent contractors and were denied proper compensation for all hours worked, in violation of the Fair Labor Standards Act’s minimum wage, overtime and record-keeping provisions.
“The misclassification of employees as independent contractors denies workers of wages and benefits to which they would otherwise be entitled to under the law. It also leads to unfair competition because businesses that play by the rules operate at a disadvantage to those that don’t,” said George Victory, the division’s district director in Columbus. “Temporary employment agencies serve valuable and legitimate business needs in today’s economy, but employers may not use such services to escape their responsibility to pay their workers the minimum wage and overtime pay they are entitled to under the law. As demonstrated in this case, we are using all enforcement tools available to make whole the affected workers and ensure compliance with the FLSA.”
Midwest Lodging used Luxor Services Inc., Bahor Inc. and BA Cobalt Cleaning Inc., to obtain temporary workers. The Wage and Hour Division analyzed the employment relationship between the companies and determined that the affected workers, who worked as housekeepers, laundry workers, and front desk clerks at various Midwest Lodging-operated area hotels under the supervision of its managers, were jointly employed by Midwest Lodging and the temporary staffing agencies. As a result, the employers are considered to be jointly responsible for compliance with the FLSA. Midwest Lodging LLC was also found to have failed to pay overtime to workers directly employed by the company at its hotels.
The investigation determined that employees of the staffing agencies were misclassified as independent contractors and were denied proper compensation, in violation of the FLSA. Many of these employees were not paid overtime premiums at time and one-half their regular rates of pay for hours worked beyond 40 in a workweek and were not paid for short breaks as required by the FLSA. Additionally, some hourly staffing agency workers who were employed in housekeeping and guest services failed to receive minimum wage, and were paid as little as $7 per hour. Additionally, the staffing company failed to keep accurate records of hours worked, employees’ names, and contact information.
The violations affected employees who were contracted to work for Midwest Lodging LLC which operates the following Ohio hotels: Holiday Inn Express and Suites, Mason; Holiday Inn Express, Sharonville; Holiday Inn and Suites, Blue Ash; and Holiday Inn Hotel and Suites in Lima. The hotels are franchise establishments of InterContinental Hotels Group.
Midwest Lodging LLC has signed an enhanced compliance agreement which includes paying back wages to the employees of the staffing agencies that have ceased operation, creating an employee handbook which details wage specific information, maintaining accurate payroll records, issuing payroll checks with detailed wage statements, and ensuring that any workers supplied by a contracting agency are paid in accordance with the FLSA.
The misclassification of employees as something other than employees, such as independent contractors, presents a serious problem for affected employees, employers, and to the entire economy. Misclassified employees are often denied access to critical benefits and protections – such as family and medical leave, overtime, minimum wage and unemployment insurance – to which they are entitled. Employee misclassification also generates substantial losses to the Treasury and the Social Security and Medicare funds, as well as to state unemployment insurance and workers compensation funds.
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, nonexempt employees be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Employers also are required to maintain accurate time and payroll records. For more information about the FLSA and other federal wage laws, call the Wage and Hour Division’s toll-free helpline at 866-4US-WAGE (487-9243) or visit http://www.dol.gov/whd.
U.S. Department of Labor releases are accessible on the Internet at www.dol.gov. The information in this news release will be made available in alternate format (large print, Braille, audio tape or disc) from the COAST office upon request. Please specify which news release when placing your request at (202) 693-7828 or TTY (202) 693-7755. The Labor Department is committed to providing America’s employers and employees with easy access to understandable information on how to comply with its laws and regulations. For more information, please visit www.dol.gov/compliance.