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Two Firms to Pay $2.4M in Wage Probe

Friday, August 5, 2016

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A New England construction concern and a related company have been ordered to pay nearly $2.4 million in back wages and damages to almost 500 employees for misclassifying them as independent contractors in violation of federal labor law.

Force Corp., based in Lunenburg, MA, and AB Construction Group, of Framingham, MA, will also pay $262,900 in civil penalties “due to the willful nature of their violations,” according to the U.S. Department of Labor’s Wage and Hour Division.

wage case
© iStock.com / Courtney Keating

By misclassifying their employees, the contractors avoided paying overtime and other benefits, authorities said, noting that the practice is a "serious problem."

A consent judgement and order against the companies was filed Monday (Aug. 1).

Force Corp. has built commercial and residential projects throughout Massachusetts, Connecticut and Maine. Authorities said leaders of the companies created AB Construction to provide Force Corp. with much of its labor, and that Force Corp. prepared and controlled the payroll and payment procedures for both companies.

Avoiding Overtime

Juliano Fernandes, the general manager of Force Corp., and Anderson Dos Santos, the owner and president of AB Construction, were accused of misclassifying the bulk of their employees as independent contractors to avoid paying them overtime and other benefits they were eligible for under the Fair Labor Standards Act, according to the division’s complaint.

The FLSA requires that covered, nonexempt workers be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus one and one-half times their regular wages for hours worked beyond 40 per week.

Moreover, the parties used a combination of payroll checks and cash/check payments to pay their employees straight time when overtime pay was required, and kept inadequate and inaccurate time and payroll records, the federal investigators alleged.

“American workers go to their jobs each and every day and work hard to help their employers turn a profit,” said U.S. Secretary of Labor Thomas E. Perez. “To be cheated out of wages and denied other workplace protections by an employer who deliberately flouts the rules compounds the struggles too many middle class Americans already face. Workers who play by the rules deserve nothing less than to be paid what they are owed.”

Consent Judgment Details

According to the case documents, the parties are required to:

  • Pay a total of $2,359,685—$1,179,842 in back wages and an equal amount in liquidated damages—to 478 employees;
  • Refrain from evading their responsibilities under the FLSA by misclassifying their employees as independent contractors
  • Make, keep and preserve accurate records of employees’ wages, work hours and working conditions, as required by the FLSA.

Further, the companies were ordered to engage a qualified independent consultant or consultants to create a payroll system or systems that will ensure that the defendants’ payroll and recordkeeping practices comply with the FLSA. The consultants will also review those practices quarterly and submit reports to the division detailing any problems and corrective actions.

Feds: A Serious Problem

In recent years, the employment relationship between workers and businesses has been strained as companies have contracted out or otherwise engaged in efforts to shed their responsibilities as employers, according to the department.

Architect of the Capitol
Architect of the Capitol

Misclassifying workers deprives federal and state governments of needed tax revenues, said Michael Felsen, the department's New England regional solicitor.

“The misclassification of employees as independent contractors is a serious problem that hurts workers, taxpayers, and the entire economy in multiple ways,” said Michael Felsen, the department’s New England regional solicitor. 

Felsen says the misclassification of workers robs them of their rights to safe workplaces, proper wages, unemployment and workers compensation insurance and social security payments. Further, it denies federal and state governments of needed tax revenues, he said.

“And, it undercuts law-abiding employers who pay their workers legally and play by the rules,” Felsen added.

To assist in combating the problem, the Labor Department has entered into agreements with more than 30 states to share information and to coordinate enforcement efforts.

The department also engages in various education and outreach programs, and works with employers and other stakeholders to bring about change at the industry level.

 

   

Tagged categories: Business management; Business matters; Business operations; Construction; Contractors; Department of Labor; Workers

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