Dive Brief:
- Zenefits, the insurance software startup, will pay $3.4 million to 743 account executives and salespeople for denying them overtime pay, according to a DOL report. The firm paid workers in Arizona and California a flat fee, despite work hours, training hours and minimum-wage mandates.
- The Labor Department's Wage and Hour Division (WHD) charged Benefits with violating the National Labor Relations Act (NLRA) by misclassifying these workers.
- Zenefits cooperated with WHD, agreeing to let the DOL monitor its practices to ensure that no future violations will occur.
Dive Insight:
It's not clear whether Zenefits viewed the account executives and salespeople as employees or independent contractors, but conditions in the case made the WHD believe it was necessary to intervene on the workers' behalf.
Zenefits had to overcome problems with its business model early last year when it was revealed that the company had not properly licensed brokers who were selling insurance for them in multiple states — on top of various claims of debauchery at their Silicon Valley offices. A startup that had massive levels of growth, Zenefits did not put much focus on compliance or HR initiatives at first, leading to problems that eventually caused founder Parker Conrad to resign. Consequences of not having a department focused on employee compliance early on can extend far into the future if a company isn't careful.
On top of that, employee classification has been a hot button issue as of late. Employers must take precautions and act appropriately when classifying workers as independent contractors, and take care to ensure the workers truly are independent to avoid any future litigation.
