Startup Zenefits owes employees $3.4 million in overtime

Uber CEO Kalanick takes leave of absence
Uber CEO Kalanick takes leave of absence

Zenefits hasn't quite escaped its past.

The marred Silicon Valley human resources startup now has to pay $3.4 million to some workers in unpaid overtime.

It's part of a new settlement with the Department of Labor, which uncovered that Zenefits accidentally underpaid 743 account executives and sales representatives in Arizona and California.

The employees were being paid flat fees -- which did not take into account overtime and training -- which the DOL discovered during a routine wage and hour investigation. Companies including LinkedIn have also had to payout workers for incorrect compensation detected by the DOL.

According to a source familiar with the matter, the investigation began in October 2016. Zenefits will also be monitored by the department to prevent future wage and hour violations.

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A representative at the Department of Labor told CNN Tech that the back wages in penalties were "fairly high" compared to other routine wage and hour investigations. And for Zenefits, it's just the latest hiccup.

Once a Silicon Valley darling, Zenefits aimed to help companies manage a range of administrative functions including payroll and insurance. Valued at $4.5 billion, its trajectory hit massive roadblocks after a Buzzfeed story exposed the company's disastrous culture and fraud.

The company went through multiple rounds of layoffs in less than a year, including laying off 430 employees in February.

"We are pleased that after the Department of Labor's review regarding classification of two jobs at Zenefits, there were no penalties, fines or damages," said Zenefits VP of communications Jessica Hoffman in a statement. "Zenefits fully cooperated with the DOL and we are happy to have this issue behind us."

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