The U.S. Department of Labor has recovered $219,390 in back wages and liquidated damages for 44 Boston-area restaurant employees. Investigations conducted by the Labor Department's Wage and Hour Division found that 1760 Society Inc., doing business as The Sherborn Inn and The Sherborn Out in Sherborn, and D'Ann's Restaurant Inc., doing business as D'Ann's in Abington, had misclassified employees as independent contractors and, as a result, violated the Fair Labor Standards Act by denying them proper compensation for all hours worked.

The Wage and Hour Division determined that the Sherborn restaurants and D'Ann's contracted with Operations Management Group, a staffing agency, to move many of their existing employees to OMG's payroll, resulting in the employees receiving less pay than the law requires. The restaurants set the hourly rate the employees would be paid and would report to OMG the number of hours each employee worked. Although the employees had received overtime pay when they were on the restaurants' payrolls, OMG paid them "straight time" at the rate set by the restaurants for all hours worked, including overtime hours, and failed to withhold tax deductions from their wages. New workers were also put on the OMG payroll and were likewise paid improperly.

The misclassification of employees as independent contractors is an alarming trend, particularly in industries that employ many low-wage workers and in which the Wage and Hour Division historically has found significant wage violations, such as the restaurant industry.

"The Wage and Hour Division wants to send a strong message that employers cannot evade their responsibility under the law by using staffing agencies or labor contractors," said Nancy J. Leppink, acting administrator of the Wage and Hour Division. "These business practices are not a legal way to reduce labor costs."

Sherborn and D'Ann's have agreed to put the employees back on their payrolls, and to pay them the back wages and an equal amount in liquidated damages that they are owed under the FLSA. The Sherborn Inn agreed to pay $36,202 in back wages and an equal amount in liquidated damages for a total of $72,404 to 28 employees. D'Ann's agreed to pay $73,493 in back wages and an equal amount in liquidated damages for a total of $146,986 to 16 employees.

The FLSA provides that employers who violate the law are, as a general rule, liable to employees for their back wages and an equal amount in liquidated damages. Liquidated damages are paid directly to the affected employees.

In addressing the trend of misclassification, the Wage and Hour Division plans to coordinate with relevant state agencies responsible for enforcing state laws that address such violations and may also refer these types of cases to the Internal Revenue Service.