A Rhode Island construction firm settles allegations for a near-record fine but still faces kickback allegations. Separately, a security provider in Michigan and a South Carolina construction company must pay back wages to employees misclassified as ICs.

Historic Rhode Island Penalty

A construction company in the Ocean State faces a $869,000 fine and allegations of a kickback scheme. In other independent contractor news, the US Department of Labor in separate cases ordered a security company in Michigan and a construction company in South Carolina to pay back wages after investigation found they misclassified employees as independent contractors.

The Rhode Island Department of Labor and Training fined a company $869,000 for wage theft, misclassifying employees and falsifying payroll on three public works projects in Rhode Island, The Boston Globe reported. The case has also been referred to the attorney general’s office to review allegations of a kickback scheme.

Department records show the settlement with Fall River, Rhode Island-based WL Builders, which includes penalties and wages owed to employees, is the second largest that DLT has had in more than decade, according to the Globe.

WL Builders is owned by Wallyson Domingues De Almeida, a Brazilian national who employed other immigrants, and he admitted to the DLT that neither he nor his employees had green cards or documents authorizing them to work in the US. Despite that, a Feb. 16 decision found WL Builders was hired as a subcontractor on three multimillion-dollar projects — Rhode Island College’s Horace Mann Hall renovations and additions, the Cumberland High School transitional building and Cumberland Hill Elementary School — and paid employees far less than the law requires and misclassified them as independent contractors, the newspaper reported.

Michigan Security Company to Pay Back Wages

The US Department of Labor entered a consent judgement and order to recover $151,208 in back wages and $75,604 in fines due to misclassification and other violations involving 64 security guards employed by Koda Group Inc. and its owner and president, Timothy Gilbert.

On Feb. 8, US District Judge Matthew Leitman of the Eastern District of Michigan ordered the recovery of $151,208 in back wages and liquidated damages and for violation of the Fair Labor Standards Act.

Filed in conjunction with the complaint, investigations by the Department of Labor’s Wage and Hour Division found that the Northville, Michigan-based employer misclassified security guards as independent contractors despite their status as employees. They paid guards a flat rate for all hours worked and failed to pay them time and one-half their hourly rate for hours over 40 in a workweek. The company also failed to post notices explaining FLSA regulations.

Koda Group agreed to pay back wages in monthly installments through Nov. 1, 2024, and provide all employees with federal wage protections to maintain accurate payroll records.

“Koda Group created schedules for its security guards who performed work necessary for their employer’s business, assigned them work tasks and required them to followed detailed policies and procedures,” said Wage and Hour District Director Timolin Mitchell in Detroit. “These factors are among those that define them as employees and not independent contractors in control of their own work schedules and jobs.”

South Carolina Construction Company Faces Fines

The DOL also recovered $37,155 in back wages for 37 workers employed at EAS Homes LLC commercial construction company.

The Wage and Hour Division of the department on Feb. 22 reported that Charleston, North Carolina-based EAS Homes wrongly categorized its employees as independent contractors, leading to a violation of the FLSA due to failure to provide an additional half-time in pay for hours worked beyond 40 in a workweek.

“Misclassification of workers as independent contractors denies them overtime wages and benefits they legally earned and rightly deserve. In addition, it denies them employer contributions toward their social security benefits,” said Wage and Hour Division District Director Jamie Benefiel in Columbia, South Carolina. “It would be wise for employers to review their pay practices and take advantage of the many tools the Wage and Hour Division has to assist them in complying with the law.”

Evan Stahl, president of EAS Companies, refutes the allegations that the workers were denied overtime.

“I simply was misinformed by our legal team on how to structure my company. I had everyone classified as subcontractors,” Stahl stated in an email to CWS 3.0. “They were paid very well with bonus. Once audited by the department of labor, I was found not to be in compliance. Since then, we have made the proper strides forward to insure we are doing things properly. Never was my intention to not do things right. I was advised wrong. I took full responsibility, paid the fine and switched the companies structure.”

The Wage and Hour Division has published a controversial final rule — now scheduled to take effect March 11 — and revised guidance on how to determine whether a worker is an employee or an independent contractor under the FLSA.