This month we share some cautionary tales for employers in the construction industry. During the past several months the California Labor Commissioner has cited or filed suit against several construction companies. In one investigation, a general contractor was held equally responsible for wages owed by a subcontractor to its employees. The lesson learned from these stories is that now more than ever it is important to have in place proper wage and hour practices and to conduct periodic audits of those practices, including those of your lower tiered contractors, preferably by experienced legal counsel.
Labor Commissioner Sues Contractor Seeking More Than $6 Million in Wages, Damages and Penalties
In August 2017, the Labor Commissioner filed suit against a Glendale construction company seeking more than $6.3 million for multiple wage theft violations. The high amount is based on 249 employees and 175 individuals allegedly misclassified as “independent contractors.” The $6.3 million is split between wages and damages of approximately $2,596,438 payable to the workers and penalties of approximately $3,703,900 payable to the state:
- $352,000 in overtime wages
- $1,244,438 in waiting time penalties
- More than $1,000,000 (specific amount to be determined at trial) for unpaid sick leave and liquidated damages
- $2,625,000 in statutory penalties for willful misclassification
- $78,900 in civil penalties
- More than $1,000,000 (specific amount to be determined at trial) for failure to provide proper wage statements
Contractor Fined More Than $3.5 Million for Misclassifying Workers
In July 2017, the Labor Commissioner cited an Oakland contractor more than $3.5 million in wages and penalties for multiple wage theft and labor law violations. This Oakland construction company was ordered to pay $2,109,480 in wages, liquidated damages and waiting time penalties for 119 workers who were misclassified as independent contractors as well as $1,481,600 in civil penalties.
General Contractor Fined for Subcontractor’s Failure to Pay Minimum Wages and Overtime
In June 2017, the Labor Commissioner held a general contractor responsible for wage theft by its subcontractor by issuing citations under AB 1897 (Section 2810.3 of the Labor Code), signed by Governor Brown in 2014, which took effect on January 1, 2015. The general contractor and the subcontractor were issued citations of $249,879. The general contractor appealed the initial decision but its superintendent admitted the company was aware of the subcontractor’s failure to pay its workers. The general contractor argued that it should not be held liable as defined under Labor Code Section 2810.3. However, the hearing officer affirmed that the general contractor was responsible as a “client employer,” with stipulated citations and penalties owed totaling $249,879 for overtime and minimum wages, liquidated damages, waiting time penalties and civil penalties.