Feds Order $5m in Fines, Sue Two Firms Over Overtime and Sub Rules

The federal government has cracked down on eight construction and logistics companies nationwide so far in August for abusing overtime rules, imposing nearly $5 million in fines on six firms and filing suit against two firms with previous offenses, Department of Labor (DOL) announcements show.

The most recent case was reported Aug. 25, in which DOL said National Freight Inc. will pay $1.07 million to 357 dispatchers and yard spotters who wrongly were declared exempt from the Fair Labor Standards Act’s overtime requirements. "The company paid dispatchers flat salaries, regardless of the number of hours they worked, creating overtime violations when they worked more than 40 hours in a week," DOL said in a news release. "[National Freight] paid yard spotters by the hour, but failed to pay overtime when legally required." The company also failed to maintain payroll records.
DOL

In other cases announced in August:

• Dinh Construction of Riverside, Calif., has paid $65,087 in overtime back wages to 52 workers plus a $4,004 civil penalty for failing to pay time-and-a-half for hours worked beyond a 40-hour week. "Instead, the employer paid overtime hours at straight time rates, with separate checks," DOL's Aug. 23 announcement said. Dinh specializes in moving, installing, remodeling, and demolishing
• Unique Custom Exteriors of West Jordan, Utah, paid $31,833 in back wages for unpaid overtime and another $31,833 in liquidated damages to 27 workers. "The employer failed to pay for all of the overtime hours employees worked," according to DOL's Aug. 22 announcement. "Specifically, the employer reduced the total number of overtime hours worked by one-third on the payroll," thus cutting their total hours so they didn't exceed the 40-hour-a-week threshold. Unique Custom Exteriors specializes in stucco work on residential and commercial buildings.
• DOL filed a lawsuit against Austin Electric Services, claiming the Avondale, Ariz., firm violated the Fair Labor Standards Act's provisions on overtime and recordkeeping. "The latest investigation marks the third time in the past five years the department has found this employer in violation of federal labor laws," DOL said in an Aug. 17 news release. It said Austin Electric pays workers a piece rate, disregarding how many hours they work. "The department also alleges managers instructed electricians who worked between 45 and 70 hours per week to record only 40 hours or less of work on their timesheets," DOL said. Roughly 200 employees are affected. Austin Electric already has paid more than $33,000 in back wages and penalties in two previous cases of misclassification.
• DOL also is suiing West Coast Drywall & Co. (also known as West Coast Drywall and Paint) for wage and hour violations. Supervisors at the Riverside, Calif.-based firm "regularly told employees to falsify timecards to reflect no more than 40 hours when, in fact, they worked more than 40 hours in a workweek," DOL said in an Aug. 10 news release. "In addition, investigators found the company asked some workers to sign untrue statements--once the investigation was underway --claiming their employer always paid properly for overtime. A 2012 investigation on similar charges resulted in $9,115 in back wages getting paid to 101 employees and a promise then to comply with the law. West Coast Drywall's customers include Lennar Homes, Shea Homes, KB Homes, and Standard Pacific, DOL said.
• Uni Floor Inc. of Overland Park, Kan., will pay $79,572 in back wages plus another $79,572 in liquidated damages to 22 workers following a DOL investigation. Uni Floor treated the workers as independent contractors even though it provided the equipment used by the workers, controlled their day-to-day schedules and paid them flat salaries, DOL's Aug. 9 announcement said. The employer also bid for all work and supervised job sites daily, DOL noted.
• Force Corp. of Lunenberg, Mass., and AB Construction Group of Framingham, Mass., have been ordered to pay $3.36 million worth of back wages and liquidated damages to 478 people plus $262,900 in civil penalties for violations of federal labor law, DOL reported on Aug. 2. The government said the firms misclassified most of their employees as independent contractors to avoid paying them overtime wages and other benefits. " 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 kept inadequate and inaccurate time and payroll records," the government said. Force Corp. is a construction company. AB Construction was created to provide Force Corp. with much of its labor, the government said.

The Fair Labor Standards Act requires that covered, nonexempt workers be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus one and one-half times their regular wages for hours worked beyond 40 per week, DOL says. In addition, employers must maintain accurate time and payroll records.

The actions come at a time in which the federal government has dramatically increased its attention to overtime rules and the misclassification of workers as independent contractors. In May, the Obama Administration issued a final rule that will nearly double the threshold salary one must make in order to be regarded just about automatically as being exempt from regular wage and hour regulations. And through all of 2016, DOL has operated under a new, tougher interpretation of who can be regarded by a company as a subcontractor and who is an employee.

"In recent years, the employment relationship between workers and the businesses receiving the benefit of their labor has fissured apart as companies have contracted out or otherwise engaged in efforts to shed their responsibilities as employers," DOL says. "The misclassification of employees as independent contractors is one example of the effects of such splintered relationships in the workplace. To assist in combating the problem, the department has entered into agreements with more than 30 states to share information and to coordinate enforcement efforts. The department also engages in a robust education and outreach, and works with employers and other stakeholders to change behavior at the industry level.