Staffing Agencies to Fork Over $3.5M to Settle DOL Case Over Illegal Payment of Per Diems

Be careful if you’ve been labeling part of your employees’ wages as “per diem” expense reimbursements. The U.S. Department of Labor is on the hunt to end what it calls an “illegal and alarming trend of employers labeling part of employee wages as per diem payments, often to avoid overtime, payroll taxes and other costs.”

Yesterday the DOL announced that six staffing agencies in the Gulf Coast region had agreed to pay $3.5 million in back wages to more than 3,000 workers  it said were owed back wages. The workers were welders, electricians, pipe fitters, and other craftspeople on maritime vessels and other oil and gas industry projects.

“Companies break the law when they label part of a worker’s regular wages as per diem expense reimbursement instead of wages to lower labor costs, avoid paying overtime, and avoid making payments toward federal and state taxes, workers’ compensation, unemployment insurance and Social Security payments,” said DOL. “By attempting to reduce these obligations illegally with this scheme, these employers also gain an unfair advantage over their competitors.”

“Per diem pay is intended as a way for employers to reimburse workers for lodging, meals and other travel expenses incurred on behalf of their employer. Regular wages mislabeled as per diem cheat workers out of correct overtime wages. The payments may prevent workers from receiving full benefits in the event of a lay-off or workplace injury, and do not make full contributions toward a worker’s Social Security benefits.”

And for you employers out there, you could be liable as a joint employer with a staffing agency “if investigations find workers employed jointly by the staffing agency, and the business that contracted them, received illegal per diem payments.”

To read the DOL’s announcement, and learn the names of the six staffing agencies caught engaging in this illegal practice, click here.



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