Misclassification under the Fair Labor Standards Act (FLSA) is one of the biggest HR compliance problems plaguing employers today. As part of its comprehensive human resources services, G&A Partners conducts initial HR audits when new clients come on board. The following case study outlines how G&A’s HR experts were able to save one client time, money and its reputation by uncovering and resolving what proved to be an extensive misclassification issue.
When a new human resources manager joined a Texas-based pharmaceutical manufacturing company, she quickly realized that several of the employees were not classified in accordance with the regulations of the Fair Labor Standards Act (FLSA), the main federal piece of legislation regarding minimum wage and overtime requirements. While she knew the costs of FLSA noncompliance could be quite high, the HR manager also knew that she didn’t have the resources (being the only HR professional on staff) to manage the problem internally.
Upon hearing this news, the company – which was already displeased by the fragmented and disorganized service the company was receiving from its current HR and administrative services provider – began searching for a new HR outsourcing partner, one that would be able to tackle the company’s standard human resources and compliance functions while also serving as a resource and sounding board for the company’s HR manager.
The HR manager knew that only a professional employer organization (PEO) would be able to provide the level of service and expertise the company wanted. After a few months of research, the company decided to choose G&A Partners as its new PEO. G&A was able to offer the streamlined approach to HR outsourcing they were looking for, as well as the flexibility and scalability the company needed as a growing business.
As part of the onboarding process, G&A’s team of HR experts conducted an initial HR audit to identify any potential compliance concerns. While the client had expected the audit to uncover a few misclassified employees, they were alarmed to discover that the problem was more widespread than they had anticipated. G&A Partners provided the guidance and resources the client needed to accurately assess each misclassified position and determine the amount of back pay owed to those employees. G&A’s team of HR advisors also worked closely with the HR manager and executives to develop and implement a comprehensive and compliant communication plan to notify the affected employees about what had happened and how the issue was being addressed.
While the amount of back pay the client was required to pay was substantial (about $50,000), the final total ended up being significantly less than the HR manager had originally expected. By uncovering and proactively addressing the problem before the US Department of Labor got involved, G&A Partners was able to help protect the client from future litigation, the costs of which could have easily doubled the amount the client had to pay. What’s more, not one employee was upset or outraged about the errors. Instead, the client’s concern and the way they handled the situation made employees feel that their employer truly valued the work they did.