An employer and a staffing agency have agreed to pay $1.4 million in back wages and damages to resolve U.S. Department of Labor (DOL) allegations that the staffing agency created multiple companies in an effort to skirt overtime requirements.

ASI Group, the staffing agency, “developed a scheme under which they created additional company names,” DOL alleged following an investigation. The workers were employed at United Plastics and that employer knew they were not receiving overtime required by the Fair Labor Standards Act (FLSA), DOL announced in a press release. When employees worked more than 40 hours per week, the staffing agency recorded their overtime hours under a shell company and paid them at a straight-time rate, DOL said.

Because United Plastics was a joint employer, it also is liable for the back wages, damages, and a civil penalty, DOL explained. “Joint employment,” as defined by the department, can exist in many situations, including when one employer provides labor to another employer and the workers are economically dependent on both employers.

To settle the allegations, the companies agreed to:

• Pay a total of $716,809 in back wages and an equal amount in damages to 566 workers;
• Pay an additional $100,000 in civil penalties; and
• Hire consultants to create compliant pay and recordkeeping systems and to provide quarterly reports to DOL.

“Employers who use staffing agencies as a cover for short-changing workers of their hard-earned wages are breaking the law, plain, and simple,” said Mark Watson, Jr. a regional administrator for DOL’s Wage and Hour Division. “The resolution of this case should send a strong message that employers can’t hide behind staffing agencies to avoid their responsibilities to their workers.”

The investigation was part of DOL’s recent focus on 'fissured' workplaces.