Construction Company to Pay DOL $600,000 for Misclassified Workers Provided By Labor Contractor

On May 19, the U.S. Department of Labor’s Wage and Hour Division (WHD) filed a consent judgment in the U.S. District Court for the District of Arizona to collect $556,000 in overtime back wages and liquidated damages for at least 445 current and former employees of Paul Johnson Drywall (PJD). PJD also agreed to pay $44,000 in civil monetary penalties – all for violations associated with the Fair Labor Standards Act (FLSA). The judgment resolves an investigation by the WHD in Phoenix that began to look into construction contracts solicited by Arizona Tract LLC, a construction labor contractor, after investigators found that Arizona Tract misclassified former PJD workers as “member/owners” instead of employees.  The investigation also established that PJD, prior to being solicited by Arizona Tract, failed to pay piece-rate workers the proper overtime at time and one-half their regular rates of pay for all hours worked beyond 40 in a single workweek. In addition, investigators found that PJD failed to keep complete and accurate records, which is also required under the FLSA. In addition to the payment of $600,000 in back wages, damages and penalties, PJD also agreed to take specific proactive steps to ensure that its workers are properly classified and paid as employees and to generally improve compliance in the construction industry. As a result, PJD plans to hire a third-party company to monitor its compliance.  In addition, PJD must ensure that all of its subcontractors are properly licensed and insured, comply with the FLSA and conduct regular training of supervisors and employees regarding the requirements of the FLSA.  Outside of its own company, PJD agreed to implement an educational campaign to promote awareness of the importance of compliance with the FLSA in the Arizona residential construction industry. Under the FLSA, employers must distinguish employees from bona fide independent contractors. The inquiry to determine a worker's status as employee or independent contractor is whether the worker, as a matter of economic reality, is dependent on the employer or in business for himself. For more information, visit http://www.dol.gov/whd/regs/compliance/whdfs13.htm. For more information on the FLSA, visit the Labor and HR Topical Resources section of the AGC website.  The primary category is “Compensation” and the secondary category is “Fair Labor Standards Act.”  For more information on independent contractor classification, select the primary category “Other Legal Issues” and the secondary category “Independent Contractors.”