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Wage Probe Nets 16 Construction Firms

Wednesday, April 29, 2015

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WASHINGTON, D.C.—More than 1,000 employees of homebuilders across Utah and Arizona will collect back wages totaling hundreds of thousands of dollars after a federal investigation unearthed illegal pay practices by their employers.

The nearly-five-year inquiry turned up wrongdoing by 16 defendants in Utah and Arizona. Now, the Department of Labor has announced consent judgments with the employers that will yield $700,000 in back wages, damages, penalties and other guarantees for the workers.

Construction
Pixabay / skeeze

"These construction workers were building houses in Utah and Arizona as employees one day—and then the next day were performing the same work on the same job sites for the same companies, but without the protection of federal and state wage and safety laws," DOL said.

The judgments come less than a year after DOL obtained a similar $600,000 agreement with an Arizona drywaller.

Who's the Boss?

The judgments, approved April 21 by their respective courts, will end the companies' practice of claiming that their workers were not employees. The defendants required their workers to become "member/owners" of limited liability companies, stripping them of federal and state protections that come with employee status.

"These construction workers were building houses in Utah and Arizona as employees one day—and then the next day were performing the same work on the same job sites for the same companies, but without the protection of federal and state wage and safety laws," said DOL, which has been cracking down on the practice.

The employee misclassification also allowed the companies to avoid paying hundreds of thousands of dollars in payroll taxes, the government said.

The 16 defendant firms operated collectively as CSG Workforce Partners, Universal Contracting LLC and Arizona Tract/Arizona CLA, authorities said. Similar consent judgments were reached with each group.

Construction
Pixabay / skeeze

More than 1,000 workers in Utah and Arizona will collect back pay and receive new guarantees under the settlement with 16 employers, the Department of Labor said.

The investigation began in southern Utah and then moved to Arizona after Utah passed a state law that required LLCs to provide workers' compensation and unemployment insurance to their "members."

To dodge that law, the defendants moved their operations south to Arizona. The Labor Department filed its complaint in the case in 2013.

The Cost of Misclassification

A misclassified employee—whether assigned an "independent contractor" or other non-employee status—lacks minimum wage, overtime, workers' compensation, unemployment insurance, and other workplace protections, the Labor Department noted.

Employers often misclassify workers to reduce labor costs and avoid employment taxes. Labor officials say such illegal practices lower standards for all workers, especially in highly competitive markets and industries where employers try to reduce overhead.

"Hiding behind deceptive legal partnerships to reduce wages owed to employees is wrong," said U.S. Secretary of Labor Thomas E. Perez. "We will not tolerate denying overtime and other employment rights to workers."

Agreement Requirements

The consent judgments require the defendants to:

  • Pay $600,000 in back wages and liquidated damages to employees in Utah and Arizona and an additional $100,000 in civil penalties;
  • Stop using limited liability companies to avoid Fair Labor Standards Act compliance;
  • Treat themselves as "employers" and their current and future workers as "employees" under the FLSA;
  • Comply with the FLSA's minimum wage, overtime, recordkeeping, and anti-retaliation provisions;
  • Pay all applicable federal, state and local taxes; and
  • Work with the department to identify those workers harmed by their misclassification scheme and determine proper payment of back wages.
Paperwork
Pixabay / stevepb

Classifying employees as non-employees (owners or independent contractors, for example) helps employers skirt major tax obligations, officials note.

The named defendants are as follows.

Arizona

Arizona CLA, LLC
Arizona Tract, LLC
Arizona Superstition Management, LLC
Cory Atkinson
Jared Martin
Glen Ormiston
Alpine Building, LLC

Utah

Universal Contracting, LLC
Grove Creek, LLC
CSG Workforce Partners, LLC
CSG Exteriors, LLC
CSG Drywall, LLC
CSG Framing, LLC
CSG Interiors, LLC
CSG Painting, LLC
CSG Landscaping, LLC.
Cory Atkinson
Jared Martin
Alpine Building, LLC
Arizona CLA, LLC

Shortchanging Workers and Taxpayers

"Deceptions like these deny workers hard-earned wages, hurt families who depend most on those wages, and leave workers without important protections if they're injured on the job or laid off," said Perez.

"The misclassification of workers shortchanges every single taxpayer by forcing them to pick up the slack for those who break the law."

 

   

Tagged categories: Business management; Department of Labor; Enforcement; Fraud; Residential contractors; Workers

Comment from Tom Schwerdt, (4/29/2015, 8:41 AM)

Pretty minimal penalties. They only really "lost" $100k for trying this scheme - the rest they should have paid the employees anyway.


Comment from john lienert, (4/29/2015, 8:49 AM)

ha-ha..........busted........don't mess w/UNCLE


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