A construction company and a company it used to keep from fulfilling legal obligations are facing $2.4 million in damages and penalties for overtime wages.
In what is seen as a growing trend among employers, Force Corp. and AB Construction Group intentionally misclassified its employees as independent contractors and are now forced to pay penalties for overtime wages.
The U.S. Department of Labor’s Wage and Hour Division investigated and discovered that employers Juliano Fernandes and Anderson Dos Santos wanted to avoid paying overtime wages and other benefits required under the Fair Labor Standards Act.
Compounding the situation, the employers used payroll checks, cash and other check payments to pay employees straight time when employees were actually owed overtime pay. Incomplete and inaccurate payroll records and time sheets added to the confusion.
“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.”
Penalties for Overtime Wages
Force Corp. is the construction company, which created AB Construction to provide Force with most of its labor.
The companies must pay a total of $2,359,685 in back wages and liquidated damages to 478 employees. Civil money penalties amounting to $262,900 were also given to the companies because of the “willful nature of their violations.”
Penalties for overtime wages are becoming more common as more companies try to shirk their responsibilities of being full-fledged employers. By deeming someone an independent contractor, the employer takes a huge number of obligations off their plate.
The employee misclassification allows the company to avoid paying unemployment insurance, workers’ compensation, Social Security, proper wages and other benefits.
Court Orders Other Sanctions
The penalties for overtime wages go beyond the financial obligation. The department has also obtained a consent judgment in the U.S. District Court for the District of Massachusetts that orders the defendants to:
Stop 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.
Engage one or more qualified independent 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.
“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.
“It robs employees of their rights to proper wages, safe workplaces, social security payments, and unemployment and workers compensation insurance. It deprives federal and state governments of needed tax revenues. And, it undercuts law-abiding employers who pay their workers legally and play by the rules.”