Power Design, an electrical contractor that’s completed more than 1,000 projects nationwide, is facing a lawsuit in the District of Columbia, where officials claim the company illegally misclassified hundreds of workers to lower wages and avoid payroll taxes.
The suit claims that instead of classifying the workers as employees, the St. Petersburg-based company used two labor brokers to classify at least 535 electrical workers as independent contractors. As a result, the workers did not receive overtime, sick pay or, in dozens of cases, even the minimum wage, according to the lawsuit.
“Power Design cheated hundreds of district workers out of their hard-earned wages and stripped them of their legal rights,” District of Columbia Attorney General Karl Racine said in an announcement of the suit. “When companies misclassify employees as independent contractors, they steal from their workers and gain an unfair advantage over competitors that follow the law.”
The District of Columbia’s Workplace Fraud Act requires construction companies to classify workers in most circumstances as employees who are paid at least a minimum wage, overtime and other benefits, officials said.
To classify a worker as an independent contractor, a construction company has to prove that the worker does the job independently, is typically self-employed and does work that falls outside the core business of the company.
Independent contractors must pay all their own taxes, are not protected by most labor laws and do not have access to workers’ compensation or unemployment insurance.
Racine’s office also sued JVA Services and DDK Electric, contending that the Maryland-based companies acted as labor brokers to help Power Design cut costs and avoid its legal responsibilities. Their primary business, officials said, involved supplying Power Design with an average of 30 to 40 workers, but in one case as many as 90, for its projects.
Officials said that from 2014 to 2017 Power Design worked at least 10 large construction projects in the District of Columbia, among them the edgy LINE hotel and several luxury apartment complexes.
According to the lawsuit, the company:
- Never listed the workers in question as employees on Power Design’s payroll.
- Paid less than the district’s minimum wage of $10.50 per hour to 24 workers in early 2016 and less than the minimum of $11.50 per hour to 39 workers after it rose in the middle of that year.
- Did not pay at least 180 workers overtime to which employees are entitled in 2017.
- Did not provide any misclassified employees with sick leave.
- Did not pay unemployment insurance tax for any of the misclassified workers.
- Cut costs to the point that it could submit low bids that won contracts away from competitors who complied with the law.
The Attorney General’s Office said it is seeking to recoup tens of thousands of dollars in unpaid minimum wages and overtime for workers, tens of thousands of dollars more in unpaid unemployment insurance taxes.
It also is seeking penalties from $1,000 to $5,000 for each misclassified worker and each failure to keep payroll records, which officials said could add up to millions of dollars in penalties.
In April, Power Design was ranked No. 2 among large companies in the Times’ annual Top Workplaces survey.
In response to the survey, Power Design said it had 526 employees, more than 130 active projects, a 70,000-square-foot national headquarters facility in St. Petersburg’s Gateway area and accumulative revenue exceeding $1 billion. The company also made the Top Workplaces list from 2013 to 2017.
Just because your employer has classified you a certain way or given you a certain job title does not mean that you are classified correctly as far as the state and federal governments are concerned. In order to qualify for the protection of federal (FLSA) or state labor law, an individual must be classified as an “employee.” Companies will often classify workers as “independent contractors” so they can avoid federal requirements to pay overtime and federal minimum wage.
Many businesses prefer to have their work performed by independent contractors rather than employees in order to avoid employment taxes and employee benefit costs. Employees are entitled to benefits and legal protections that independent contractors are not.