As small and midsize business owners, it is crucial to be aware of the legal implications and penalties associated with employee misclassification. A recent investigation by the U.S. Department of Labor highlights the consequences faced by a federal contractor who misclassified workers during the 2020 and 2021 wildfires. KL Farms/Fire LLC, based in Oregon, misclassified firefighters and truck drivers as independent contractors, resulting in the denial of overtime wages and benefits totaling $152,003.  


This article aims to educate business owners on the importance of proper employee classification and provide actionable steps to avoid non-compliance with the law. 


Asure helps small and midsize businesses stay in compliance with federal and state laws to avoid painful penalties. Learn more here.  

Understanding the Violation 

KL Farms/Fire LLC paid a flat daily rate to their workers, regardless of the actual hours worked, which violated provisions of the McNamara-O’Hara Service Contract and Contract Work Hours and Safety Standards Acts. These acts establish minimum wage rates and benefits for work funded by federal contracts.  


By failing to meet these requirements, the company not only denied the firefighters their rightful wages and benefits but also incurred overtime violations under the Fair Labor Standards Act (FLSA). Additionally, violations of recordkeeping requirements and the Migrant and Seasonal Agricultural Worker Protection Act were identified. 


Penalties and Recovered Amounts 

As a result of the investigation, the U.S. Department of Labor’s Wage and Hour Division recovered $152,003 in overtime wages and fringe benefits for the affected workers. Liquidated damages amounting to $12,577 were also awarded. The recovered back wages ranged from $101 to $14,783 per worker. Furthermore, the company was assessed $16,981 in civil money penalties for the violations. That’s a total obligation of $181,561.  


Action Steps to Avoid Non-Compliance 

Understand Employee Classification Laws 

Familiarize yourself with federal laws such as the McNamara-O’Hara Service Contract and Contract Work Hours and Safety Standards Acts, the Fair Labor Standards Act (FLSA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). Educate yourself on the specific requirements and guidelines related to employee classification and compensation. 


Consult Legal Professionals 

Seek guidance from legal professionals or human resources experts who specialize in employment law to ensure compliance with employee classification regulations. They can help you navigate the complexities of the law and provide tailored advice for your specific business needs. 


Properly Classify Workers 

Accurately classify your workers as either employees or independent contractors based on established criteria. Consider factors such as control over work, integration into the business, and independence. Ensure that workers classified as employees receive appropriate wages, benefits, and overtime pay. 


Maintain Accurate Records 

Implement robust recordkeeping practices to maintain accurate and detailed records of employee hours, wages, benefits, and any other relevant information. Compliance with recordkeeping requirements will help demonstrate your commitment to fair employment practices and protect you in case of an audit or investigation. 


Regularly Review and Update Practices 

Continuously review your employment practices and policies to ensure compliance with changing laws and regulations. Regularly assess the classification of your workers to ensure it aligns with their job duties and legal requirements. Seek professional guidance when needed to avoid potential misclassification risks. 



The recent investigation of KL Farms/Fire LLC serves as a reminder of the severe penalties and financial consequences businesses face for employee misclassification in federal contracting. By understanding the applicable laws, properly classifying workers, maintaining accurate records, and seeking professional guidance, small and midsize business owners can avoid non-compliance and protect themselves from legal issues and penalties.  


Remember, compliance with employee classification laws not only safeguards the rights and well-being of your workers but also ensures the long-term success and reputation of your business. For more information on contractor wage laws and other laws enforced by the Wage and Hour Division, you can contact their toll-free helpline at 866-4US-WAGE (487-9243).  

It is essential to stay informed and proactive in your compliance efforts to protect your business and uphold the rights of your employees. 

Asure helps over 90,000 small and midsize businesses with HR and Payroll Compliance. Learn how your business may benefit here.

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