Rockville based contractor Hann & Hann will pay $600,000 plus the plaintffs’ legal fees to settle a wage and overtime based class action suit. As reported in the Washington Post by Rubin Castaneda on January 30, 2010, Hann & Hann agreed to pay overtime plus 50% for every employee working with the company not paid overtime between May 8, 2006 and May 8 2008.

There are a couple important subtexts to this case and settlement. First, reports describe the 200 plus employees and former employees as almost all Spanish speaking immigrants. This naturally raises questions not only of immigration status, but also of whether the contractor was perceived as taking advantage of employees less able to defend themselves. In this case, the employees not only had the Immigrant and Refugee Rights Project at the Washington Lawyers’ Committee for Civil Rights and Urban Affairs on the case, but also were represented by Arnold and Porter pro bono.

Second, claims by employees for unpaid overtime and wages have been a hot topic over the last several years (some more detailed discussion touching on this is available here at Daniel Schwartz’ excellent blog). In many ways, the issue of classification of exempt and non-exempt employees which dictates whether overtime is required dovetails quite closely with distinctions between independent contractors and employees which we recently discussed. Back wages, penalties and attorneys’ fee claims are a big risk in this arena, as is the underlying threat of more involved scrutiny as the weight of the government comes to bear. Contractors should:

• Take employee classifications seriously
• Understand that mistakes in classifications can translate to serious damages
• The short term benefit of cutting corners can come at a cost that buries your company
• As a result, handle classifications conservatively and pay out overtime accordingly