DC AG: $2.7 Million For Misclassification From Electrical Contractor

Washington, DC (WorkersCompensation.com) – A national electrical contractor will pay millions in fines and reparations for misclassifying hundreds of workers, according to the Attorney General of the District of Columbia.

According to a consent decree, Power Design, Inc., will pay $2.75 million to settle a lawsuit brought against the company in 2018 by Attorney General Karl Racine. In his suit, Racine alleged that the contractor and two subcontractors, JVA Services and DDK Electric, not only misclassified more than 530 workers as independent contractors in order to save on labor costs, but that it also failed to pay workers minimum wage, overtime and sick leave, as well as failing to pay appropriate payroll taxes, unemployment insurance premiums and workers’ compensation insurance premiums.

“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,” Racine said in a statement. “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.”

The settlement includes

• $879,056 in restitution to workers for unpaid wages
• · $1,820,944 in restitution to the state for unpaid taxes and penalties
• $50,000 for the establishment of apprenticeship programs to be operated in conjunction with the District of Columbia’s Department of Employment Services

Racine said Power Design misclassified the employees as independent contractors of labor brokers JVA Services and DDK Electric. By doing so, the company was able to create lower bids and undercut its competitors, he said. Additionally, because the workers were independent contractors, the company was able to pay at least 64 of its workers less than the minimum wage required by law. And because the workers were not classified as employees, the company did not pay overtime for 180 employees, and failed to provide paid sick leave as required by law.

In his complaint, Racine said Power Design recruited workers, and then instructed them in establishing payroll practices so Power Design could “perpetuate their scheme.”

The complaint also alleged that Power Design failed to maintain its own payroll records for the misclassified employees and failed to pay unemployment insurance tax on the workers.

“Power Design cheated hundreds of District workers out of their hard-earned wages and stripped them of their legal rights,” Racine said in a statement. “When companies misclassify employees as independent contractors, they steal from their workers and gain an unfair advantage over competitors that follow the law. Today’s lawsuit is about protecting employees and businesses that play by the rules and punishing businesses that do not. District employers that illegally misclassify workers are now on notice that their theft will not be tolerated.”

Power Design in one of the largest electrical contracting firms in the country.

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