Did the car hit the employee or the employee hit the car? This is not the beginning of a logic problem – it’s the question one employer recently encountered when investigating a “he-said, he-said” workplace dispute. Based on the investigation, the employer determined that the employee had lied about the contact with a company vehicle that left the employee bruised. The employer terminated the bruised employee and not the driver. The employee, of course, sued. The Tenth Circuit affirmed what should be obvious but somehow repeatedly becomes an issue in so many cases – can an employer terminate an employee if the employee disputes the allegations against him? So long as the employer (not the employee) “reasonably believed at the time of the termination that the [employee] had violated company policy” and the employer “acted in good faith upon that belief” the answer is an unequivocal yes. “Pretext” is not proven by an employee’s continued insistence that his employer should have believed him over another employee. Even if the employer “got it wrong,” being wrong on a fact dispute during an investigation is not evidence of discrimination. Another reminder of the importance of effective, and well documented, investigations.
For those of you who were able to join us for Sherman & Howard’s Construction Law seminar earlier this month, you may remember our warnings about making sure your company is properly classifying and paying its employees. In case you need a reminder on how serious these issues can become, be sure to consider the 30 month prison sentence one employer from North Carolina just received for failure to report and pay employment taxes, along with a hefty $1.7 million restitution bill. https://www.justice.gov/opa/pr/north-carolina-mental-health-executive-sentenced-prison-failure-pay-employment-taxes. While this may be an extreme example, it is very real and very terrifying.
Remember – when you have one agency knocking at your door, you are likely to hear from more. In fact, here in Colorado the US Department of Labor (“DOL”), the Colorado Department of Labor and Employment (“CDLE”), and the Internal Revenue Service (“IRS”) have been sharing information concerning potentially misclassified employees since 2011. https://www.dol.gov/whd/workers/Misclassification/co.htm; https://www.dol.gov/whd/workers/MOU/irs.pdf. While it is unlikely that a company, or its executives, that unintentionally misclassifies an employee will end up facing jail time, the financial repercussions can still be staggering, with agencies reporting huge recoveries due to misclassification on a regular basis. See, e.g., https://www.dol.gov/newsroom/releases/whd/whd20160817-0 ($365,000 paid – “the Wage and Hour division considers misclassification a top enforcement priority and is working alongside our state, local and federal partners to achieve greater compliance with the law”); https://www.dol.gov/newsroom/releases/whd/whd20110309 (over $700,000 paid – “misclassification of employees as exempt from the FLSA has become a common problem and one the Labor Department is determined to bring to light”); https://www.osha.gov/news/newsreleases/region1/02222016-0 (OSHA fines of over $20,000 upheld against company who attempted to “evade their responsibility by claiming that workers on a job site are independent contractors when the facts show otherwise”).
Don’t be the next news story – avoid the risky business of misclassifying your employees. Conduct an individualized assessment with the assistance of legal counsel, if necessary, to determine whether the classification you are considering using is permissible under the applicable laws before the agencies come knocking.