In what the Washington, DC, attorney general called the district’s largest workers’ rights settlement Story A major specialty contractor and other construction companies must pay more than $1.75 million in restitution to about 1,200 construction workers who were denied overtime pay, sick leave and other benefits as result of being misclassified as independent contractors on construction projects in the city.
Totaling $3.45 million, including civil penalties and attorney fees, the settlement announced July 29 by Attorney General Brian Schwalb’s office resolves a lawsuit it filed in 2022 against Power Design Inc. , an electrical contractor based in St. Petersburg, Florida; general contractor John Moriarty & Associates, Arlington, Va.; several local job brokers; and electrical subcontractors including MBJ Electric and K&K Electric & Construction, both of Maryland.
The misclassification practices, which spanned eight Power Design projects in the District of Columbia, were part of a deliberate attempt to suppress labor costs and increase profits, the lawsuit claimed. The city said Power Design has worked on more than 200 projects in the Washington, D.C., region and is often used as a subcontractor by Moriarty. Because city law holds general contractors liable for labor violations committed by the subcontractors they work for, the agency sought to hold Moriarty liable for subcontracting with companies that systematically misclassified workers.
In addition to the monetary payments, the terms of the settlement require the companies to review their payroll and hiring practices to avoid misclassifying workers in the future.
Power Design ranks 28th on ENR’s current list of the top 600 specialty contractors, with $987 million in revenue by 2022. The company must provide certified reports to Schwalb over the next three years to demonstrate compliance of the settlement agreement and the law of the District of Columbia. Moriarty must include language in all future subcontracts for local projects requiring subcontractors to strictly comply with all wage and hour laws, list the names of all persons working on the projects, and prominently post bilingual notices of workplace that inform workers of their rights under the city’s labor laws.
By accepting the settlement, Power Design and Moriarty do not admit any wrongdoing or liability. In a statement to ENR, Power Design claims that while it was paying workers “amounts in accordance with law,” its subcontractors MBJ and K&K “were not passing these benefits on to employees who were actively working” on those projects on time.
The statement added that Power Design took “prompt corrective action to quickly address the subcontractors’ errors and fully compensate affected employees,” while also severing its relationship with the two companies. According to a Power Design spokesperson, fewer than 100 MBJ and K&K employees were working on their projects when the alleged misclassification errors occurred.
ENR could not reach the two subcontractors for comment.
In a separate statement, Moriarty said the company “has never been part of any scheme to pay reduced wages to workers” and agreed to the precautionary terms of the settlement “to assist the Attorney General’s Office in developing future cases against subcontractors who they don’t follow the law.” .”
Power Design and its labor brokers faced a similar earlier misclassification lawsuit from the District of Columbia Attorney General, which led to a $2.75 million settlement in 2020. According to Power Design’s statement, the adjustments to the company’s subcontracting program were completed the following year “ensuring all subcontractors involved [firm] Projects strictly adheres to rigorous payroll procedures, including working with a third-party payroll auditor and ensuring the correct classification of compensation for each employee who contributes to a project.” The statement adds that Power Design does not has had any compliance issues since implementing the improvements.
The January 2021 policy changes “were unrelated to the 2020 agreement, which we have fully complied with,” a company spokesperson told ENR. “These updates were proactive and voluntary measures stemming from our ongoing compliance efforts.
“They exceeded the 2020 settlement requirements, targeting areas for improvement [city] subcontractor practices,” the spokesperson says.
But the attorney general says he discovered evidence that Power Design failed to comply with the requirements of the 2020 settlement because it “failed to implement sufficient policies to ensure compliance” with the district’s Workplace Fraud Act and the Minimum Wage Review Act, which led to the 2022 demand.
