Maryland construction company owes the District money for trying to cheat its employees

Posted by National Alliance for Fair Contracting on

Author: Samantha Gilstrap
Updated: 8:07 PM EDT April 18, 2023

As part of the settlement, the company also agreed not to bid on or provide work under any D.C. government contracts for one year.

WASHINGTON — A construction company operating out of Washington, D.C. owes the District money after trying to cheat its employees out of sick leave and other employment benefits to which they were legally owed, according to the Attorney General’s Office.

Authorities say Maryland Applicators intentionally misclassified employees as independent contractors to avoid having to provide them with the proper sick leave and other employment benefits. Now, the company must pay $835,000 to the District.

As part of the settlement, the company also agreed not to bid on or provide work under any D.C. government contracts for one year, D.C. Attorney General Brian Schwalb said.

“Maryland Applicators denied District workers the sick leave and other employment benefits they had earned by misclassifying them as independent contractors rather than employees. This not only cheated the workers but gave Maryland Applicators an unfair advantage over their competitors who follow the law,” Schwalb said. “My office is committed to protecting District workers, ensuring they receive the wages and benefits they are legally owed, and leveling the playing field for all law-abiding District businesses.”

Maryland Applicators is a Maryland corporation that provides construction services on projects in Washington, D.C.

Authorities claim it employed dozens of misclassified workers and also secured the services of hundreds of additional misclassified workers through subcontracts with other companies.

The misclassification is as a form of wage theft that reduces costs for companies at the expense of employees, Schwalb said.

Authorities say misclassifying employees as independent contractors deprives them of rights that employees are entitled to, such as the minimum wage, overtime compensation, and paid sick leave.

Illegal misclassification also deprives the District of tax revenue, unemployment insurance premiums, and workers compensation contributions.

D.C. construction companies that misclassify workers unlawfully avoid at least 16.7% in labor costs compared to companies following the law, providing an unfair advantage over their competition.

As a result of the settlement, Maryland Applicators must:

  • Pay $835,000 divided as follows:
    • $489,000 will be paid to the District.
    • $346,000 will be paid to affected workers.
  • Change its practices to ensure that all workers hired for projects in the District are properly classified in compliance with District law and receive the wages and benefits they are legally owed.
  • Refrain from bidding on or providing work on contracts paid by the District government in the District for one year.

(See Article)

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USDOL Wage and Hour Division to Host Prevailing Wage Seminars

Posted by National Alliance for Fair Contracting on
May 2019

 

Our 2019 seminars will be held in the following locations:
  • Austin, TX, June 18th – 20th: Register Here
  • Anchorage, AK, June 25th – 27th: Register Here
  • Sacramento, CA, July 23rd – 25th
  • Washington, DC, August 13th – 15th
  • Indianapolis, IN, August 27th – 29th
Please note these locations may change.
If you would like to receive email updates about our seminars, please sign up for our mailing list here. (In the category “Wage and Hour” select “WHD – Prevailing Wage Seminar Announcements”)
The Wage and Hour Division (WHD) Prevailing Wage Seminars (Prevailing Wage Seminars) are three-day compliance trainings designed for regional stakeholders (unions, private contractors, state agencies, federal agencies and workers). In these seminars, conference participants will learn about the following:
  • The Davis-Bacon Act and McNamara O’Hara Service Contract Act
  • Executive Order 13495 “Nondisplacement of Qualified Workers”
  • Executive Order 13658 “Establishing a Minimum Wage for Contractors”
  • The process of obtaining wage determinations and adding classifications
  • Compliance assistance and enforcement processes
  • The process for appealing wage rates, coverage, and compliance determinations
Prevailing Wage Seminars for 2018 were held in the following cities:
  • Jacksonville, FL – April 10-12th, 2018
  • San Diego, CA – May 22-24th, 2018
  • Kansas City, MO – June 12-14th, 2018
  • Hato Rey, Puerto Rico – August 27-28th, 2018
If you have any questions please email WHD-PWS@dol.gov

DC Suit of Florida Company is a Primer on Misclassification (DC)

Posted by National Alliance for Fair Contracting on

by Jim Kollaer | January 18, 2019

The recent lawsuit filed by the District of Colombia attorney general against Florida Company Power Design, Inc., labor brokers JVA Services, LLC and DDK Electric Inc., that alleges 535 workers were misclassified as Independent Contractors, or 1099 workers, provides a primer on the way that some construction companies create vehicles to avoid taxes, the payment of overtime, the provision of worker’s compensation, or medical benefits. The lawsuit demands a jury trial where the defendants will have the chance to defend themselves, but the charges detailed give a full picture of how to set up and execute a plan to use independent contractors to act as subcontractors on specific projects for a specific company.

Generally, the process that the attorney general alleges representatives of Power Design used to set up the labor brokers in business and then use those labor brokers to provide manpower for their projects, specifically in the DC area, is being repeated across the country every day. This happens specifically in the construction industry, but it also is being used in various iterations by companies in a broad range of other industries and services as well.

The details of the lawsuit are very specific in how the companies were set up, legalized on a Friday and working on Power Design projects on a Monday. Companies were allegedly set up under names and with owners who had no experience in running a company but who were coached and given contracts and employment documents allegedly by Power Design. They, in turn, provided workers who allegedly worked for Power Design as independent contractors for sub-par wages and with none of the protections provided to Power Design’s jobsite superintendents and foreman on the same jobs.

(Read More)

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DC Attorney General alleges electrical contractor misclassified 535 workers (DC)

Posted by National Alliance for Fair Contracting on

By Laurie Cowin
Date: Aug. 7, 2018

Dive Brief:

  • The attorney general for the District of Columbia sued Power Design on Monday, alleging that the Florida-based electrical contractor purposefully misclassified at least 535 construction workers as independent contractors so that it could cut costs, avoid legal responsibilities and evade taxes. The lawsuit also alleges various minimum wage, overtime and other labor violations and claims that senior management was involved in the scheme. In a request for comment, Power Design told Construction Dive that it had not yet been served and that Power Design believes it is in compliance with all applicable laws and regulations in the district.
  • In addition to Power Design, Attorney General Karl A. Racine’s suit also names JVA Services LLC and DDK Electric Inc., two labor brokers hired to staff Power Design work sites.
  • The lawsuit alleges the companies violated the District’s Workplace Fraud Act, which requires companies to classify workers as employees in in most circumstances, as well as the Minimum Wage Revision Act, Sick and Safe Leave Act and Unemployment Compensation Act from 2014 through 2017. It seeks monetary and injunctive relief for the affected employees and recovery of penalties to the District of Columbia, which could be $1,000 to $5,000 for each misclassified worker. Injunctive relief is a court order for a defendant to stop a specified act or behavior.

Dive Insight:

Misclassifying construction-industry employees is an offense many states are taking measures to combat. For example, Colorado’s governor, John Hickenlooper, issued an executive order in June that created a task force to investigate and find ways to address the misclassification of construction employees as independent contractors. Such misclassification not only hurts employees, but because the misclassification is an attempt to have a lower cost of doing business, it also hurts companies who correctly classify employees and therefore have higher bids.

Employee misclassification also leads to workers’ compensation insurance fraud. William Canak, workers’ comp and employment policy expert and professor at Middle Tennessee State University, estimated that up to 30% of construction workers are misclassified.

(Read More)

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Remove Power Design From D.C. Apprenticeship Program (DC)

Posted by National Alliance for Fair Contracting on

By: Editorial Board
09/14/2018

The D.C. attorney general’s office recently filed a lawsuit against Power Design, a Florida-based electrical contractor. The lawsuit alleges that Power Design, known for its work on D.C. buildings, is at the nexus of one of the largest wage-theft scandals in the city’s history.

Construction companies are required to employ a certain number of apprentices in order to bid on major contracts within the District. Construction companies need approval by the Apprenticeship Council to hire apprentices and comply with this requirement to bid on contracts in the District. This editorial board calls on the D.C. Apprenticeship Council to renounce apprenticeship eligibility status from Power Design due to the company’s egregious violations of workers’ rights.

The D.C. attorney general’s lawsuit alleges that Power Design misclassified electrical workers as independent contractors instead of employees, allowing Power Design to avoid payroll taxes and keeping the workers from receiving benefits such as sick leave. In addition, the lawsuit claims that some workers weren’t paid the appropriate overtime rate and others weren’t even paid the D.C. minimum wage. Over 500 Power Design workers were mischaracterized as independent contractors, 180 were not paid the required overtime rate, and 63 were not paid minimum wage, which demonstrates a codified company culture of mistreatment and abuse.

This isn’t the first time Power Design has been accused of shortchanging its workers. When the company first applied for the D.C. apprenticeship program last year, Attorney General Karl Racine and D.C. Councilmember Elissa Silverman urged the Apprenticeship Council to deny Power Design’s bid. Racine and Silverman referenced lawsuits filed against Power Design claiming that the company did not pay for overtime work and purposefully misclassified workers.

…

Power Design is just one of many companies that have profited from the massive development and construction wave that the city has undergone in the last few years. By consistently failing to pay their workers their proper wages and benefits, the company has ensured that regular city residents don’t benefit from this development. Rather than allowing Power Design to continue their abuse of the city’s workers, the Apprenticeship Council should follow the lead of their colleagues in the attorney general’s office and demand real changes from Power Design. Doing so would ensure that all of the city’s residents get to benefit from its growth.

While Racine’s thorough investigation into Power Design is vitally important, other branches of the District government must form a united front in combating wage theft in the city. A so-called progressive city government should not be aligning itself with a company that mistreats its workers so egregiously. The government can begin by taking a stand against companies that have abused the rights of D.C. workers.

(Read More)

Many DC projects don’t comply with local hiring mandate (DC)

Posted by National Alliance for Fair Contracting on

Kim Slowey
PUBLISHED July 2, 2018

Dive Brief:

  • An April audit of Washington, D.C.’s First Source mandate, which requires local workers be given employment preference for construction projects receiving taxpayer assistance, revealed that contractors and developers are not meeting the program guidelines and that the Department of Employment Services (DOES) is doing relatively little to make sure companies are in compliance, according to The Washington Times. Companies building qualifying projects of $300,000 to $5 million must hire 51% local residents, and those in charge of projects valued at more than $5 million must meet a higher percentage in several categories.
  • Lawrence Perry, deputy auditor for the Office of the D.C. Auditor, testified before the District council’s Committee on Labor and Workforce Development on June 21 and told the committee members that the agency in charge of enforcing the First Source program was insufficiently monitoring qualifying companies to make sure they entered into a First Source agreement; lacked written policies and procedures necessary to monitor and judge the success of First Source and did not have written guidelines for enforcement and imposition of fines, with only one financial penalty being issued in the history of the program. The auditor’s report also called attention to the fact that companies are allowed to self-report project data with little or no verification by the DOES.
  • Construction industry groups have said the program paperwork is too burdensome. They also said there is a shortage of skilled workers and that the lack of affordable housing is forcing the First Source-qualified employees that once lived in the District to the suburbs, shrinking the pool of craft workers even more. One council member said developers and contractors consider the possibility of a low fine just another cost of doing business.

Dive Insight:

Other local governments have no problem enforcing local hiring mandates and levying large fines against contractors that miss the mark.

Detroit fined contractors working on the $868 million Little Caesars Arena, now home to the NHL’s Red Wings hockey team and the NBA’s Detroit Pistons, a total of $5.2 million for not meeting the city’s 51% local-hire goals. The Michigan city said that, of the project’s three million man-hours, Detroit residents worked only 25%.

(Read More)

Many DC projects don’t comply with local hiring mandate (DC)

Posted by National Alliance for Fair Contracting on

Kim Slowey
PUBLISHED July 2, 2018

Dive Brief:

An April audit of Washington, D.C.’s First Source mandate, which requires local workers be given employment preference for construction projects receiving taxpayer assistance, revealed that contractors and developers are not meeting the program guidelines and that the Department of Employment Services (DOES) is doing relatively little to make sure companies are in compliance, according to The Washington Times. Companies building qualifying projects of $300,000 to $5 million must hire 51% local residents, and those in charge of projects valued at more than $5 million must meet a higher percentage in several categories.

Lawrence Perry, deputy auditor for the Office of the D.C. Auditor, testified before the District council’s Committee on Labor and Workforce Development on June 21 and told the committee members that the agency in charge of enforcing the First Source program was insufficiently monitoring qualifying companies to make sure they entered into a First Source agreement; lacked written policies and procedures necessary to monitor and judge the success of First Source and did not have written guidelines for enforcement and imposition of fines, with only one financial penalty being issued in the history of the program. The auditor’s report also called attention to the fact that companies are allowed to self-report project data with little or no verification by the DOES.

Construction industry groups have said the program paperwork is too burdensome. They also said there is a shortage of skilled workers and that the lack of affordable housing is forcing the First Source-qualified employees that once lived in the District to the suburbs, shrinking the pool of craft workers even more. One council member said developers and contractors consider the possibility of a low fine just another cost of doing business.

Dive Insight:

Other local governments have no problem enforcing local hiring mandates and levying large fines against contractors that miss the mark.

Detroit fined contractors working on the $868 million Little Caesars Arena, now home to the NHL’s Red Wings hockey team and the NBA’s Detroit Pistons, a total of $5.2 million for not meeting the city’s 51% local-hire goals. The Michigan city said that, of the project’s three million man-hours, Detroit residents worked only 25%.

(Read More)

May Day Parade Stands Up Against Wage Theft (DC)

Posted by National Alliance for Fair Contracting on

May 07, 2018
by Negin Owliaei

As buildings rise in Navy Yard, so too do rents. The rapidly gentrifying pocket of Washington, D.C. has been lining the pockets of developers for years, but the money doesn’t always make its way to the construction workers building the luxury apartments popping up around the neighborhood.

That’s especially true for the workers contracted out by Power Design, a Florida-based electrical company that’s been sued more than a dozen times for wage theft. Activists targeted the firm’s Navy Yard construction sites on May Day to educate workers on their rights and remind the companies working with Power Design that they’re responsible for wage theft that happens on their watch.

The local DC chapter of Jobs with Justice has been leading the charge to hold Power Design accountable for its poor labor practices and to push city officials to uphold the laws meant to keep the company in check. A report released by the group earlier this year highlighted the company’s “race to the bottom” mentality.

Power Design, the report says, has faced at least 13 lawsuits around the country for wage theft. The report also details the company’s practice of classifying workers as independent contractors rather than employees, cutting corners on crucial protections and taxes and allowing Power Design to underbid other companies that uphold labor standards.

DC Jobs with Justice Executive Director Elizabeth Falcon shared this information with parade-goers as she led the crowd to various construction sites that contract to Power Design around D.C.’s Navy Yard neighborhood. “We need these developers who are taking these bids to understand we see them,” Falcon said.

(Read More)

D.C. ‘Rolled Out the Red Carpet’ for a Company Accused of Wage Fraud

Posted by National Alliance for Fair Contracting on
Councilmember, others call foul.

 

Jeffrey Anderson
JUL 27, 2017 – 5 AM

With the building boom unabated, one issue D.C. voters can expect to hear a lot about come election year is jobs. Every public land sale, commercial project, mixed-use development, or residential complex comes with mayoral promises of opportunities for a growing labor force.

But the D.C. Apprenticeship Council’s recent certification of an out-of-state contractor and accusations of wage fraud have prompted an investigation by Attorney General Karl Racineand claims by unions and labor advocates that a bad actor is going unchecked. At-large D.C. Councilmember Elissa Silverman worries that the District isn’t enforcing its own labor laws.

“We don’t want to be approving apprenticeships for companies that don’t follow the law, don’t pay employees a fair wage, and engage in bad labor practices,” she says. “We don’t want to rely on bad actors to train employees.”

The apprenticeship council is an 11-member body within the Department of Employment Services that is supposed to ensure compliance with local and federal labor laws and standards. In order to bid on major projects, contractors must have a certain number of licensed skilled workers and apprentices on the job. Certification as an apprenticeship sponsor helps contractors compete for those projects.

Certifying companies that fail to meet wage and overtime standards, labor sources say, is a disincentive for those companies to properly classify and train electricians, plumbers, and drywall and HVAC installers. Profit margins become irresistible to unscrupulous contractors at the expense of workers who are underpaid and struggling to advance in their trades.

Power Design, a Florida-based electrical contractor, received certification from the apprenticeship council last month. The firm has contracts at 16 major building sites in D.C., some publicly funded and most run by the city’s top construction companies. Clark Construction and its related CBG Building Company have hired the firm as an electrical contractor at six of those sites. Other major companies such as Hitt Construction, Davis Construction, Donohoe Construction, and Walsh Construction have also hired Power Design.

(Read More)

NIH Contractor Accused of Underpaying Workers Agrees to Settlement

Posted by National Alliance for Fair Contracting on

In a related case, a subcontractor for the company admitted to hiring illegal aliens for demolition work at the Bethesda research center

BY ANDREW METCALF
Published: 2016.02.22 11:00
Federal prosecutors announced Monday that a Washington, D.C., construction and cleaning firm has agreed to pay at least $450,000 to settle a case in which it was accused by whistleblowers of not paying its workers legally required wages while they were working at the National Institutes of Health in Bethesda.

…

The settlement stemmed out of a larger case in which multiple construction firms were accused by electricians and other employees of underpaying their workers, but then telling the federal government they were adhering to prevailing wage requirements as required by their federal contracts.

(Read More)