LinkedIn, U.S. Labor Dept settle overtime case for $6 million
(Reuters) - LinkedIn Corp (LNKD.N) agreed to pay about $6 million in back overtime and damages to 359 current and former employees after a U.S. Department of Labor investigation found the online career networking company violated the country's wage law.
Context & Ripple Effects
The settlement closes a U.S. Department of Labor investigation that found LinkedIn violated federal wage law on overtime for 359 current and former employees, and it lands on top of an existing legal overhang: the company was already sued in 2012 over a breach that exposed six million passwords. For a firm whose valuation rests on being a trusted professional network, compliance failures are becoming a recurring line item.
The story travelled unusually wide for a wage case — pickups at the Wall Street Journal, Ars Technica, Business Insider, Re/code and PC Magazine alongside the Labor Department's own announcement — reflecting how rarely a marquee consumer-internet name gets tagged by federal wage enforcers.
First-order effects
- About $6 million in back overtime and damages flows to 359 current and former LinkedIn employees, and the company must reclassify or re-price the affected roles' compensation going forward.
- LinkedIn absorbs the payout alongside its pending password-breach litigation, stacking legal and compliance costs onto its 2014 operating budget.
Second-order effects
- Other high-growth tech companies using similar exempt classifications for sales and account teams face pressure to audit their own pay practices before the Labor Department comes calling, since the agency has now shown willingness to pursue a household-name employer.
- LinkedIn's finance and HR functions shift toward documented overtime tracking, raising the baseline cost of headcount growth relative to rivals who have not been through enforcement.
Third-order effects
- If the Labor Department keeps testing tech employers' exemption classifications, wage-and-hour exposure becomes a standard diligence item for scaling companies — a structural cost of the sector's 'exempt professional' staffing model rather than a one-off fine.
The trend: Federal wage-and-hour enforcement is extending from traditional industries into consumer internet companies, where fast-scaling sales teams often outpace compliant overtime classification.