Startup ordered to pay $3.4 million in unpaid overtime

Employers in Tennessee and around the country are required to follow the provisions of the Fair Labor Standards Act, and they can be ordered to pay penalties, fines and damages when their worker compensation policies violate the landmark 1938 law. A June 20 news brief from the Department of Labor suggests that technology startup Zenefits has avoided such sanctions, but the human resources and insurance software developer has agreed to pay more than $3 million in unpaid overtime to 743 of its sales representatives and account executives.

According to the DOL's Wage and Hour Division, the workers were not paid according to federal wage and hour laws because they had been misclassified by Zenefits. This misclassification allowed Zenefits to deny them overtime pay guaranteed by the FLSA. A senior DOL figure said that the workers were paid a flat rate regardless of the amount of overtime they worked or the number of hours they spent in sales training sessions.

Zenefits has also agreed to allow DOL officials to monitor its future employment practices to ensure that they comply with federal law. The DOL investigation does not mark the first time that official watchdogs have scrutinized the San Francisco-based company. The California Department of Insurance fined Zenefits $7 million in 2016, and regulators in Washington acted after determining that the company's marketing practices violated state inducement laws.

Attorneys with experience in cases involving wage and hours laws may encourage employers to settle these matters quickly to avoid possible official sanctions. While claims of harassment or discrimination are sometimes difficult to prove, violations of federal laws like the FLSA may sometimes be established by simply examining the kind of documents that workers would have in their possession such as pay stubs or employment agreements.

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