The Attorney General for Washington DC sued a staffing buyer and two staffing suppliers claiming they misclassified at least 535 workers as independent contractors.
Power Design Inc., a national electrical contractor, misclassified the workers as independent contractors to cut costs and avoid legal responsibility, according to the Attorney General’s Office. The misclassification also resulted in workers not getting minimum wages, overtime or sick leave. The Attorney General’s Office said the company also failed to maintain required payroll records and did not pay unemployment insurance for the misclassified workers.
Two staffing suppliers also sued were JVA Services LLC and DDK Electric Inc. Both firms are based in Maryland and supplying Power Design is their primary business.
Power Design could face penalties in the millions of dollars. The Attorney General’s office reported it is seeking between $1,000 and $5,000 in unpaid unemployment insurance taxes and penalties for each worker.
The office reported that Power Design is an electrical contractor based in Florida with an estimated $100 million in annual revenue. It worked on at least 10 large construction projects in DC, including the LINE hotel in Adams Morgan and several apartment complexes.
Washington DC has the Workplace Fraud Act, which applies only to the construction industry and requires companies to classify workers as employees in most circumstances. To classify workers as independent contractors, construction firms must prove that a worker is typically self-employed and that their work is not within the core business of the company.
“Power Design cheated hundreds of district workers out of their hard-earned wages and stripped them of their legal rights,” Attorney General Karl Racine said in a statement. “When companies misclassify employees as independent contractors, they steal from their workers and gain an unfair advantage over competitors that follow the law. Today’s lawsuit is about protecting employees and businesses that play by the rules and punishing businesses that do not.