FRIDAY, AUGUST 5, 2022
Over a span of several days, the U.S. Department of Labor reported that it recovered wages for 135 workers across three different cases spanning the country.
In total, the DOL recovered $709,688—a combination of overtime and back wages from the contractors responsible for misclassifying workers as independent contractors, denying overtime and failing to pay correct wages.
Case by Case
At the end of July, the DOL announced that following an investigation, it successfully recovered $178,358 in overtime back wages for 27 employees of a Houston welding and fabrication company.
According to the Department’s Wage and Hour Division, M&M’s Welding & Fabricating—operating as M&M’s Welding—misclassified the workers who specialize in the erection of structural steel buildings as independent contractors. M&M’s Welding was also found to have denied the workers full wages and benefits.
As a result of the misclassification and withholding of full wages, the employer failed to pay the overtime premium for hours over 40 in a workweek and paid only straight time for all hours worked.
“M&M’s Welding & Fabricating exploited vulnerable workers by misclassifying and denying them the overtime pay they earned,” explained Wage and Hour Division District Director Robin Mallett in Houston. “Employers who do this harm workers and their families who depend on their earnings and benefits. They also gain an unfair advantage over their business competitors who abide by the law. The Wage and Hour Division will hold these employers accountable.”
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| Ed Brown, public domain via Wikimedia Commons |
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Over a span of several days, the U.S. Department of Labor reported that it recovered wages for 135 workers across three different cases spanning the country. |
On Tuesday (Aug. 2), the DOL recovered $156,837 in back wages from Honolulu-based contractor Tunista Services LLC. According to the Department’s news release, the contractor paid 46 workers lower wages than the law allows for the type of work they performed under federal contracts awarded by U.S. Marine Corps, Navy, Army and Coast Guard in Hawaii.
Those paid incorrectly included truck drivers, material handling laborers, warehouse specialists, forklift operators, service order dispatchers and janitors, among other workers. The DOL went on to note that several workers were paid lower hourly rates than required for their occupations. The act was a direct violation of the McNamara-O’Hara Service Contract Act.
Tunista Services was also reported to have violated the provisions in the act when they failed to provide required health benefits, paid sick leave, holiday pay and vacation pay. These provisions govern employee pay standards for contractors and subcontractors working on federally funded contracts.
Additionally, the contractor was noted to violate the Contract Work Hours and Safety Standards Act, which requires overtime pay for hours over 40 in a workweek.
The $156,837 recovery includes $84,995 for paying incorrect occupational wages, $56,596 for underpayment of fringe benefits, $14,791 reimbursement for unpaid sick leave and $455 in overtime pay for the affected workers.
“Federal contractors who fail to pay correct wages and fringe benefits shortchange workers, reduce their labor costs illegally and gain unfair advantage over their law-abiding competitors,” said Wage and Hour Division District Director Terence Trotter in Honolulu. “We strongly encourage all federal contractors to review their own pay practices and ensure they comply with the law.”
The following day, the DOL reported the largest recovery in the slew of instances. Following an investigation into Cleveland, Tennessee-based Tom Willumson LLC—operating as Concept Construction—officials recovered $374,493 wages and liquidated damages for 62 construction workers.
According to reports, the contractor denied workers overtime wages and jeopardized the safety of an 11-year-old. The child was reportedly hired as a groundskeeper and was allowed to operate dangerous equipment, which was found to be in direct violation of FLSA child labor provisions.
The pay practices by Tom Willumson violated the Fair Labor Standards Act in the following ways:
As a result of their investigation, the division assessed a $14,944 civil money penalty to the employer for child labor violations.
“Construction industry workers are among those who too often suffer wage theft because their employers either misunderstand their legal obligations or intentionally shortchange them and undercut their competitors at the same time,” said Wage and Hour Division District Director Lisa Kelly in Nashville, Tennessee.
“The U.S. Department of Labor is committed to holding these employers accountable for their actions – in error or by design – to ensure workers are paid all of their hard-earned wages and receive the benefits the law provides.”
In the fiscal year 2021, the DOL’s Wage and Hour Division recovered more than $36 million for more than 21,000 construction industry workers in more than 3,000 investigations.
Recent DOL Wage Efforts
Back in June 2021, Labor Secretary Marty Walsh revealed that the DOL would be again reviewing the overtime threshold under the Fair Labor Standards Act. At the time, Walsh reportedly noted that the threshold, which is just under $36,000 and was finalized in 2019, was “definitely” too low.
Later that summer, the DOL issued a notice of proposed rulemaking to increase the minimum wage for federal contractors. The proposal looked to require federal contractors to pay workers at least $15 an hour by 2022.
In addition to raising the minimum wage for federal contract workers by $4.05 an hour (the current rate is $10.95), the rule also looked to eliminate subminimum wage rates for federal contract workers with disabilities and workers who customarily receive tips.
Although the prior rule applied only to new and renewed federal contracts, the new proposal would apply the $15 minimum wage to existing contracts when agencies opt to purchase additional supplies or services. As specified in the proposed rule, the DOL defines applicable contracts as “all contracts and any subcontracts of any tier thereunder, whether negotiated or advertised, including any procurement actions, lease agreements, cooperative agreements, provider agreements, intergovernmental service agreements, service agreements, licenses, permits or any other type of agreement, regardless of nomenclature, type or particular form, and whether entered into verbally or in writing.”
The DOL further specified that eligible workers include apprentices.
In October, the DOL’s Wage and Hour Division published a new guide aimed at assisting construction contractors and other industry stakeholders in understanding the process of seeking conformance under the Davis-Bacon Act.
According to the DOL, the Davis-Bacon and Related Acts (DBRA) require payment of local prevailing wages to construction workers performing work on federally funded construction projects. The prevailing wage is a combination of the basic hourly wage rate and any fringe benefits rates listed for a specific classification determined by the DBA.
Wage Determinations are issued for four types of construction categories:
The DBA applies to each federal government or District of Columbia contract in excess of $2,000 for the construction, alteration or repair (including painting and decorating) of public buildings or public works and requires that contractors and subcontractors pay their laborers and mechanics employed under such contracts no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area.
The prevailing wage provisions also apply to “Related Acts,” meaning when a federal agency assists construction projects through grants, loans, loan guarantees and insurance.
In March of this year, the DOL proposed a rulemaking for the Davis-Bacon and Related Acts to better reflect the needs of today’s construction industry and planned federal construction investments—a first in 40 years.
According to the DOL, the proposed changes would speed up prevailing wage updates, create several efficiencies in the current system and ensure that prevailing wage rates keep up with actual wages. The department adds that over time, the changes would generate higher wages for workers.
Under the current process, at least 51% of surveyed wages need to be within a “same or similar” margin. If the surveyed wages don’t meet the margin, a weighted average—opposed to a simple average—of all wages is used to determine a rate. The issue with this, according to officials, is that if occurrences of low wages becomes more frequent, the overall rate would also suffer.
To avoid this issue, the DOL proposed returning to how the DBRA was used from 1935-1983 to ensure prevailing wages reflect actual wages paid to workers in the local community.
During that time, a prevailing wage was determined by the 51% threshold. If the threshold wasn’t met, however, the new rule would allow just 30% of same or similar wages to be used. And, if that bar couldn’t be achieved, a weighted average would then be used.
Other proposed changes include:
Although worker groups and unions are reportedly in favor of the proposed changes, construction employer groups are in disagreement.
Tagged categories: Business matters; Contractors; Department of Labor; Ethics; Fraud; Good Technical Practice; Government; Labor; Laws and litigation; Regulations; Workers
