Common Startup Labor Violations Workers Should Watch Out For

A startup company in Brevard County is under scrutiny after employees have gone public claiming the company isn’t paying them. While the CEO of Oakridge Global Energy Solutions says that pay interruptions are “normal” for startup companies, this alleged failure to pay employees is just one of many blatant labor violations that are often seen in startup companies.

Oakridge Global Energy Solutions — a lithium-ion battery system manufacturer supported by state and local initiatives — has allegedly not paid employees for two pay periods, causing its workers financial hardship.

“We haven’t received a paycheck in two pay periods. All my bills are behind. I’ve got to file for unemployment and I’m about to go file for food assistance,” one Oakridge employee, Candace Wiley, explained to WESH.

Clearly, labor violations can have a devastating impact on the lives of hardworking employees, but not all labor violations are as obvious as the denial or deferral of pay. Some workers don’t know that their company is doing something illegal, while others stay silent about their suspicions of labor violations in fear of being fired.

So, what are the most common types of labor violations alleged in lawsuits and committed by startup companies and what can workers do about it?

Failure to Pay Overtime

A common conception of the startup lifestyle is that of employees working late into the night on various projects. But some employees are eligible for overtime, even if employers or the employees themselves don’t realize it. And perhaps because of that confusion, or intentions of shady employers, failure to pay overtime wages has been the subject of various lawsuits against startup companies, the most recent and notable being a lawsuit against WeWork, a shared workspace startup, which claims that an ex-employee is owed at least $12,000 in unpaid overtime wages.

The question of overtime pay at startups may become an even bigger issue once a new federal rule goes into effect on Dec. 1. The new regulations stipulate that all full-time workers, even some salaried employees, that earn up to $47,476 are eligible for overtime. This could bring major change to startup employees in that pay bracket who work over 40 hours week.

Failure to Pay Minimum Wage

In an effort to reduce costs, some startup companies will attempt to undercut their employees by offering equity in the form of stock options to “supplement” their income. However, this is blatantly illegal and violates the Fair Labor Standards Act’s minimum wage requirements, according to an article by Law360. Stock and stock options don’t count in minimum wage calculation, and startup companies can be penalized for paying under the minimum wage, regardless of how many stocks an employee is granted.

Compensation Deferral

Much like the alleged situation with Oakridge, some startup companies will defer payment to employees in an attempt to save costs between financing rounds. Sometimes startups will even defer wages with the promise to give “bonuses” or higher wages once funding is secured.

This is illegal. All employees — even the founder of the company — must be paid at least minimum wage each designated pay period under at least most state laws.

Misclassifying Employees as Independent Contractors

More and more workers are being classified as independent contractors, largely due to the increase in gig economy startups. But not all independent contractor classifications are legitimate.

In a bid to avoid paying minimum wage and payroll taxes, some startup companies have misclassified their workers. This practice has resulted in many startups being rightfully investigated, as misclassification can impact the benefits and protections a worker can receive.

Just a few companies that have been recently sued or are currently facing lawsuits because of alleged employee misclassification include Uber, GrubHub, DoorDash, Handy, and Homejoy, according to a report by Ars Technica.

In general, if a worker is employed by one company in the long-term, is required to follow company policy, and is supervised by their company in their work, they most likely should be classified as an employee and must receive things like worker’s compensation and overtime.

Speak Up: You Can’t Be Fired for Reporting Labor Violations

As mentioned before, some workers who suspect their company is doing something wrong will often stay quiet about those suspicions out of fear for losing their job. However, under the FLSA, your employer is barred from firing you for reporting your company for a labor violation such as unpaid wages. For example, employees are protected from retaliation when making complaints to the U.S. Department of Labor’s Wage and Hour Division and for filing lawsuits.

If, however, you have spoken out about a labor violation in your company and have been fired, reprimanded, or otherwise punished, you can fight it. Retaliation is illegal and any employee who has experienced it can file a retaliation complaint and pursue a lawsuit to seek damages, according to the FLSA.

Fighting for Unpaid Wages

Labor violations impacting a worker’s wages are all too common, and whether they occur in the food and service industry or startup companies like Oakridge in Brevard County, you don’t have to stand for it. If you believe you have been unfairly denied the wages you have rightfully earned, we may be able to help.

Read more to learn about our labor and employment attorneys in Melbourne and how they fight to ensure workers get compensated fairly. If you are ready to pursue a claim, fill out our free, no-risk case evaluation form today.