MA construction companies shell out $2.4M to settle overtime wage fraud charges

Dive Brief:

Two Massachusetts construction companies — Force Corp. and AB Construction Group — have agreed to pay $2.4 million in back wages and $262,900 in civil penalties to settle claims by the U.S. Department of Labor that they failed to pay 478 workers required overtime wages, according to The Boston Globe.
The DOL said the two firms misclassified hundreds of workers as independent contractors in order to skirt overtime wage requirements and the benefits that are legally obligated for overtime work.
Force Corp. has faced ongoing concerns regarding its practices in the legal and safety realms, according to The Globe. OSHA has cited the company several times in the past for safety violations. Force said it is working to improve its payment system.

Dive Insight:

The misclassification of employees has become a heightened area of focus for prosecutors recently. Last week, the DOL ordered Arizona homebuilder DCO Custom Builders to pay $48,000 in back wages and penalties for misclassifying workers as independent contractors and not paying employees at overtime rates when required — in violation of the Fair Labor Standards Act.

A 2014 report by journalists at The McClatchy Co. uncovered rampant worker misclassification in the construction industry. The report found that employers often claimed that legitimate employees were independent contractors so they would not have to pay them payroll taxes, unemployment, or workers' compensation.

A new DOL overtime rule is scheduled to go into effect Dec. 1 and will raise the salaried worker exempt threshold from $23,660 to $47,476 annually. Currently, salaried workers making at least $23,660 are exempt from overtime pay rules, but once the rule goes into effect, a salaried worker must be paid at least $47,476 in order for an employer not to have to pay overtime.

Proponents of the new rule have said that it will result in employers paying a higher base wage in order to avoid having to pay overtime, but construction industry associations have said the rule will have the opposite effect and will actually result in employers cutting workers hours.