Via Staffing Industry Analysts (SIA), the Washington DC Attorney General announced a settlement of claims that electrical workers were misclassified as independent contractors. The Attorney General’s press release:
WASHINGTON, D.C. – Attorney General Karl A. Racine today announced that Power Design, Inc., a national electrical contractor, will be required to pay $2.75 million to workers and the District as part of a settlement in a wage theft and worker misclassification case. The settlement with the Office of the Attorney General (OAG) resolves a 2018 lawsuit against Power Design and two subcontractors that staffed its worksites for allegedly misclassifying more than 500 electrical workers as independent contractors instead of employees to cut labor costs. OAG also alleged that Power Design cheated workers out of wages and benefits and failed to pay District unemployment insurance taxes. This settlement is OAG’s largest recovery to date in a wage enforcement action.
“This settlement should be a wake-up call to District employers: if you cheat workers out of wages and benefits they’ve earned, or commit payroll fraud to gain an unlawful edge, you will be held accountable,” said AG Racine. “The District has strong laws on the books to protect District workers from exploitation and ensure that businesses can compete on a level playing field, and the Office of the Attorney General is committed to enforcing them.”
Power Design, Inc. is a major electrical contractor headquartered in Florida which has an estimated annual revenue of over $100 million. The company has worked on at least 10 large construction projects in the District, including the LINE hotel in Adams Morgan and several luxury apartment complexes. JVA Services, LLC and DDK Electric, Inc. are “labor brokers”—subcontractors whose primary business involved hiring workers and supplying them to Power Design worksites.
In 2018, OAG sued Power Design, JVA Services, and DDK Electric for allegedly misclassifying 500+ workers as independent contractors instead of properly classifying them as direct employees. OAG also alleged that Power Design and its labor brokers failed to pay workers minimum wage and overtime, failed to provide legally-required paid sick leave, and failed to pay District payroll taxes related to unemployment insurance. DDK Electric did not respond to the lawsuit and a default judgment was entered against the company in February 2019. Power Design and JVA Services contested OAG’s allegations, but the companies have now agreed to a Consent Order to resolve the lawsuit and avoid further litigation.
Under the terms of the settlement, Power Design will be required to:
- Pay $879,056 in back wages to workers: Power Design is required to pay $879,056 in restitution that will be used to compensate electrical workers who did not receive minimum wage, were not paid overtime wages, or were denied paid sick leave. A claims process will be finalized separately and eligible electrical workers will be notified.
- Pay $1,820,944 to the District: Power Design is required to pay $1,820,944 to resolve hundreds of allegations of worker misclassification and other forms of wage theft.
- Pay $50,000 to support apprenticeships, job training, or workforce development programs: Power Design is required to pay $50,000 to support programs that provide apprenticeships, job training, or workforce development opportunities to District residents.
- Implement measures to ensure compliance with the District’s worker protections: Power Design must implement new policies and procedures to ensure compliance with the District’s minimum wage, overtime, paid sick leave, and worker misclassification laws. Power Design is also required to report to the District on these new policies and procedures, as well as the company’s use of subcontractors in 2020 and 2021.
A copy of the Consent Order is available at: https://oag.dc.gov/sites/default/files/2020-01/Power-Design-Consent-Order.pdf