Two Massachusetts firms—one with operations in Connecticut—have been hit hard for misclassifying workers and now must pay a total of $2,359,685 in overtime and liquidated damages to 478 employees and take other corrective actions to prevent future violations of federal labor law.
Under a consent judgment they will also pay $262,900 in civil money penalties due to the willful nature of their violations.
An investigation by the U.S. Department of Labor’s Wage and Hour Division found that Force Corp., AB Construction Group Inc., and employers Juliano Fernandes and Anderson Dos Santos misclassified the bulk of their employees as independent contractors to avoid paying them overtime wages and other benefits to which they were entitled under the Fair Labor Standards Act.
In addition, the defendants used a combination of payroll checks and cash/check payments to pay their employees straight time when overtime pay was required, and they kept inadequate and inaccurate time and payroll records.
Force Corp. is a year-round construction company operating in Massachusetts, Connecticut, and Maine.
The investigation determined that the defendants created AB Construction to provide Force Corp. with much of its labor, and that Force Corp. prepared and controlled the payroll and payment procedures for both companies.
Misclassification of employees undercuts law-abiding employers who pay their workers legally and play by the rules.
- Pay a total of $2,359,685—$1,179,842 in back wages and an equal amount in liquidated damages—to 478 employees
- Refrain from 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,” says Michael Felsen, the Labor 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.”
The $2,359,685 is the division’s largest such FLSA wage recovery in Massachusetts since 2009.
FLSA Changes Ahead
Changes in the FLSA regulations defining who is exempt from the overtime requirements are scheduled to take effect Dec. 1, 2016.
As a result, the number of workers eligible for overtime wages is expected to significantly increase, highlighting the importance of understanding the new mandates and noncompliance liability.
On Sept. 21, 2016, labor law experts from around the state will address these changes—as well as proper worker classification, recordkeeping, and wage payment obligations—at CBIA's Wage & Hour Update in Wallingford. Don't miss it!