Skip page header and navigation

IC misclassification: DC sees record $3.75M settlement; Dallas HVAC firm pays $1.5M

CWS 3.0 - Contingent Workforce Strategies

IC misclassification: DC sees record $3.75M settlement; Dallas HVAC firm pays $1.5M

Katherine Alvarez
| July 30, 2024
Image
Judges Or Auctioneer Gavel On The Dollar Cash Background, Concept For Corruption, Bankruptcy, Auction Bidding, Fines

main content

National construction firm Power Design settled allegations it misclassified hundreds of construction workers, while The US Department of Labor recouped unpaid overtime wages and damages from C&G HVAC in Dallas for misclassifying 430 technicians as independent contractors.

Power Design.  National construction firm Power Design will pay $3.75 million to settle allegations it misclassified hundreds of construction workers as independent contractors rather than employees, the Office of the Attorney General for the District of Columbia announced July 29.

The settlement, which includes restitution to construction workers and penalties and fees to the district, is the largest workers’ rights enforcement action in district’s history, according to the OAG.

The settlement resolves a lawsuit the OAG filed against Power Design, general contractor John Moriarty & Associates of Virginia and multiple labor brokers for misclassifying hundreds of construction workers as independent contractors rather than employees, therefore avoiding paying sick leave and payroll taxes, according to the attorney general. Under the terms of the settlement agreement, Power Design will pay more than $1.7 million to over 1,200 misclassified construction workers, more than $1.2 million in penalties to DC and $880,000 in attorney’s fees.

Power Design provides contracting services across multiple trades including electrical, mechanical and plumbing, according to the OAG, and has worked on more than 200 construction projects across the DC region. Moriarty is a general contracting and construction management company that has frequently subcontracted with Power Design. Under DC law, general contractors are liable for labor violations committed by subcontractors they employ.

The settlement agreement also requires all defendants to revise their payroll and contracting practices to prevent future worker misclassification.

A Power Design spokesperson provided Staffing Industry Analysts with the following statement:

“Power Design has been diligently working and cooperating with the Office of Attorney General for the District of Columbia for the past few years regarding employee misclassification errors made by two subcontractors that worked on a total of eight Power Design projects in 2019. The discrepancies uncovered were made directly by MBJ Electric and K&K Electric & Construction, not Power Design. Power Design paid amounts in accordance with the law but found that the subcontractors were not passing down those benefits to the employees who were actively working on the eight Power Design projects at the time. Swift, corrective action was taken to promptly address the subcontractors’ errors and the directly affected employees were fully compensated by Power Design. … In May 2022, the Office of Attorney General for the District of Columbia brought the lawsuit against Power Design alleging violations of various wage and hour claims. Though we have agreed on a settlement, Power Design denies all allegations. Our dedication to fair and equitable compensation remains unwavering, reflecting our core values of integrity and accountability.”

John Moriarty & Associates also provided a statement to SIA:

“JMA has never been part of any scheme to pay reduced wages to workers, and neither the District’s lawsuit nor the Consent Order alleges that JMA did anything wrong. JMA agreed to the District’s request for injunctive terms in order to assist the attorney general’s office in developing future cases against subcontractors who do not follow the law.  As part of this injunctive relief, and out of goodwill for the District, JMA agreed to strengthen its already existing subcontract provisions and to supplement its ongoing worksite signage informing D.C. workers of their rights.”

“Worker misclassification harms hardworking Washingtonians, deprives the District of tax revenues needed to fund critical city-wide programs and unfairly undercuts law-abiding competition,” said Attorney General Brian L. Schwalb. “This landmark settlement reflects the ongoing commitment of my office to holding accountable any company that exploits its workers to boost profits or gain an unfair competitive advantage.”

C&G HVAC in Dallas. The US Department of Labor recouped more than $1.5 million in unpaid overtime wages and damages from a Dallas-based heating, ventilation and air conditioning company for misclassifying 430 technicians as independent contractors.

Established in 2017, C&G HVAC provides heating, ventilation and air conditioning repair services in North Texas.

The department called the recovery “one of the largest recoveries of its kind” in a press release. It follows an investigation by the department’s Wage and Hour Division that found C&G HVAC in Dallas owed the affected technicians $756,158 in unpaid overtime wages and an equal amount in liquidated damages, according to the department.

C&G HVAC in Dallas has been contacted for comment.

In fiscal year 2023, the Wage and Hour Division recovered over $24.5 million in back wages for about 20,000 misclassified workers nationwide. In Texas, the division recovered $2.2 million for 5,100 misclassified workers.