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Misclassification roundup: $7.3 million lawsuit settlement; $235,000-plus DOL recovery

A medical technology firm settled a misclassification suit for $7.3 million and agreed to reclassify sales associates as employees; the US Department of Labor recovered more than $235,000 for 131 home health aides misclassified as independent contractors.

Settlement. The United States District Court for the Northern District of California granted preliminary approval of a settlement agreement between a class of independent contractors and Zimmer Biomet Holdings Inc. and its subsidiaries.

In 2018, California sales associate James Karl sued Zimmer US Inc., Biomet US Reconstruction LLC and Biomet Biologics LLC alleging the companies “unlawfully misclassified California sales representatives as independent contractors.”

Karl sold orthopedic devices to physicians and hospitals in San Francisco. Per his sales associate agreement with Zimmer, Karl was classified as an independent contractor. He and his regional sales team were paid on a commission-only “pooled” arrangement.

The proposed settlement creates a $7,380,482.10 fund to compensate a class of approximately 246 members on a pro-rata basis based upon bi-weekly service pay periods. According to Karl, the settlement represents approximately 15.31% of Zimmer’s total exposure in this suit — estimated at $48,196,516. Zimmer will also offer full employment as W-2 employees to the class of workers. In return, the class will release Zimmer from all claims arising from the facts alleged in the case.

DOL investigation. An Atlanta-area home care service company paid $235,501 in back wages for 131 workers after a Department of Labor investigation found they were misclassified as independent contractors.

The department’s Wage and Hour Division determined Able Mabel Assisted In-Home Care Services Inc. — operating as Able Mabel Home Care — misclassified 131 home healthcare aides as independent contractors and failed to pay them overtime when they worked over 40 hours in a week, a violation of the Fair Labor Standards Act. The investigation revealed that the employer paid the misclassified workers their straight-time rate of pay for each hour they worked.

“The US Department of Labor prioritizes work protections in the care industries and we will vigorously combat misclassification of employees as independent contractors to ensure that this hard-working essential workforce is afforded all the protections the law provides,” said Wage and Hour Division District Director Steven Salazar in Atlanta. “The US Department of Labor encourages employers to contact us or use the multiple tools the division offers to help understand the law, both for their benefit and that of their employees.”

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