An Arizona drywall contractor ended its relationship with a labor contractor that misclassified workers as independent contractors, the U.S. Department of Labor announced Monday. The drywall contractor, Paul Johnson Drywall Inc., also agreed to pay $556,000 in overtime back wages and liquidated damages to at least 445 current and former employees. It will also take steps to ensure misclassification does not occur again, and will pay $44,000 in civil penalties.

Paul Johnson Drywall had entered into a contract with a firm called Arizona Tract to supply drywall labor. However, Arizona Tract misclassified workers as “member/owners” and violated overtime and record-keeping provisions of the Fair Labor Standards Act, according to the Department of Labor.

Paul Johnson Drywall also, prior to being solicited by Arizona Tract, failed to pay proper overtime to employees who were paid on a piece-rate basis, according to the Department of Labor. Investigators also found Paul Johnson Drywall failed to keep complete and accurate records.

However, the company also agreed to take steps to ensure its workers are properly classified and paid as employees and to improve compliance in the construction industry, the Department of Labor announced. And the company will hire a third-party monitor to ensure compliance and require any drywall subcontractors to conduct regular training of supervisors and employees regarding the requirements under the FLSA.

Separately, Paul Johnson Drywall announced a classification initiative that includes reactivating 1,325 workers as W-2 employees and hiring 627 new employees as a first step in its FLSA compliance program developed in conjunction with the Department of Labor.

“We pride ourselves on having the most professional crews in the state, and welcomed the opportunity to evaluate employment practices with the DOL,” said Cole Johnson, president of Paul Johnson Drywall. “Our crews allow us to deliver clients unparalleled on-time delivery in the safest manner, and as a result of these high expectations, we consistently pay our crews the highest wages. We’re excited to be taking our business, as well as our trade and related industry, to the next level.”

Established in 1967, Paul Johnson Drywall has offices in Phoenix, Tucson and Prescott, Arizona.