WASHINGTON — A nearly five-year federal investigation of illegal business practices by 16 defendants in Utah and Arizona has yielded $700,000 in back wages, damages, penalties and other guarantees for more than 1,000 construction industry workers in the Southwest, the U.S. Department of Labor announced today.

Consent judgments put an end to an effort by the defendants — operating collectively as CSG Workforce Partners, Universal Contracting, LLC and Arizona Tract/Arizona CLA — to claim that their workers were not employees. The defendants required the construction workers to become "member/owners" of limited liability companies, stripping them of federal and state protections that come with employee status. These construction workers were building houses in Utah and Arizona as employees one day and then the next day were performing the same work on the same job sites for the same companies but without the protection of federal and state wage and safety laws. The companies, in turn, avoided paying hundreds of thousands of dollars in payroll taxes.

"Hiding behind deceptive legal partnerships to reduce wages owed to employees is wrong. We will not tolerate denying overtime and other employment rights to workers," said U.S. Secretary of Labor Thomas E. Perez. "We will combat schemes like these with every enforcement tool we have, including partnering with other federal and state agencies to ensure that workers are not misclassified as owners or members of LLCs or otherwise. Deceptions like these deny workers hard-earned wages, hurt families who depend most on those wages, and leave workers without important protections if they're injured on the job or laid off."

A misclassified employee — with independent contractor or other non-employee status — lacks minimum wage, overtime, workers compensation, unemployment insurance, and other workplace protections. Employers often misclassify workers to reduce labor costs and avoid employment taxes. By not complying with the law, these employers have an unfair advantage over competitors who pay fair wages, taxes due, and ensure wage and other protections for their employees. These illegal practices lower standards for all workers, especially in highly competitive markets and industries where employers try to reduce overhead, often at the expense of their workers.

"Employers who misclassify workers do not pay their fair share of payroll taxes, which cheats critical state and federal programs," Perez added. "The misclassification of workers shortchanges every single taxpayer by forcing them to pick up the slack for those who break the law."

The consent judgments are the result of a combined effort of the U.S. Department of Labor, U.S. Department of Justice and the state of Utah. The investigation began in southern Utah and then moved to Arizona after the passage of state legislation in Utah that required LLCs to provide workers' compensation and unemployment insurance to their "members." To avoid legal jeopardy in Utah, the defendants moved their operations south to Arizona.

Utah officials assisted the department by sharing information through the state's Worker Classification Coordinated Enforcement Council, an entity created by the state legislature to combat misclassification. Working together in the investigation and litigation, the U.S. Attorney's Office for the District of Utah and the U.S. Department of Labor presented findings to federal courts in Utah and Arizona. The courts, in turn, approved consent judgments on April 21 against the above-named companies and their respective owners.

The consent judgments require the defendants to:

• Pay $600,000 in back wages and liquidated damages to employees in Utah and Arizona and an additional $100,000 in civil penalties;
• Stop using limited liability companies to avoid Fair Labor Standards Act compliance;
• Treat themselves as "employers" and their current and future workers as "employees" under the FLSA;
• Comply with the FLSA's minimum wage, overtime, recordkeeping, and anti-retaliation provisions;
• Pay all applicable federal, state and local taxes; and
• Work with the department to identify those workers who were harmed by their misclassification scheme and determine proper individual payment of back wages.

"Legitimate independent contractors are valuable contributors to our economy, but those who deliberately misclassify actual employees as independent contractors — or partners — are a serious problem in many industries, especially in construction," said Wage and Hour Division Administrator David Weil. "We will continue to work together with other enforcement authorities to ensure a fair and level playing field for businesses, and fair and full pay for workers."

"We are pleased that this multi-agency effort has helped so many workers find justice, and produced a change in business practices in the regional construction industry," said M. Patricia Smith, U.S. Solicitor of Labor. "This kind of cooperation among state and federal law enforcement authorities will serve as a model for preventing misclassification and similar practices that deny workers' their wages and protections, and undermine law-abiding employers. The resolution of this case should send a strong message to any other employers, in any industry, contemplating such a scheme."

Workers who believe they might be owed back wages by the defendants can contact the Wage and Hour Division's Salt Lake City District Office at 801-524-5706, or Arizona District Office at 602-514-7100.

In a separate but related case, the department obtained a consent judgment against a major client of the Arizona defendants in this case. The judgement in the U.S. District Court for the District of Arizona against Paul Johnson Drywall, LLC, required the company to stop using the Arizona defendants' unlawful LLC business model and to pay $600,000 in back wages, liquidated damages and civil money penalties.

The Wage and Hour Division has aggressively expanded its efforts to combat employee misclassification in sectors where workers are especially vulnerable and violations are rampant. The department currently has 20 Memoranda of Understanding with states, including the Utah Labor Commission, through which it collaborates with states agencies to combat misclassification. More information is available on the department's misclassification Web page at http://www.dol.gov/misclassification.

The FLSA requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus time and one-half their regular rates of pay, including commissions, bonuses, piece-rate earnings and incentive pay, for hours worked beyond 40 per week. Additionally, the law requires that accurate records of employees' wages, hours and other conditions of employment be maintained.

For more information about the FLSA and other federal wage laws, call the Wage and Hour Division's toll-free helpline at 866-4US-WAGE (487-9243). Information also is available at http://www.dol.gov/whd.

The named defendants are:

Arizona Arizona CLA, LLC Arizona Tract, LLC Arizona Superstition Management, LLC Cory Atkinson Jared Martin Glen Ormiston Alpine Building, LLC

Utah Universal Contracting, LLC Grove Creek, LLC CSG Workforce Partners, LLC CSG Exteriors, LLC CSG Drywall, LLC CSG Framing, LLC CSG Interiors, LLC CSG Painting, LLC CSG Landscaping, LLC. Cory Atkinson Jared Martin Alpine Building, LLC Arizona CLA, LLC

Perez v. Universal Contracting LLC et al Civil Action Number: 2:13-cv-253-DS

Perez v. Arizona CLA LLC et al

Civil Action Number: 2:15-cv-00461-JAT

Arizona press should contact Leo Kay, and Utah press should contact Juan Rodriguez using the contact information provided above.

NEW YORK — The U.S. Department of Labor has obtained a settlement by consent judgment that provides for the recovery of $1.42 million in back wages and liquidated damages for more than 300 current and former employees of four Long Island City plumbing and heating contractors. The related businesses are Danica Group LLC; Copper Plumbing & Heating LLC; Copper II Plumbing & Heating LLC; Copper III Plumbing & Heating LLC, and the owners are Thomas Andreadakis, Leonidas Andreadakis and Helen Andreadakis.

Investigations by the department's Wage and Hour Division found that the contractors violated the overtime and recordkeeping requirements of the Fair Labor Standards Act. Specifically, they paid employees straight time wages rather than time and one-half when employees worked beyond 40 hours in a workweek, and issued separate paychecks for the overtime hours from a petty cash account.

Additionally, they misclassified at least 25 employees as independent contractors, paying them a weekly salary that did not compensate the employees at time and one-half when employees worked beyond 40 hours in a workweek. The defendants also frequently paid many employees late, sometimes requiring workers to wait several weeks to be paid. Finally, they maintained incomplete and inaccurate payroll records.

"Hundreds of workers were denied their lawful pay when they were not paid promptly and correctly or were misclassified as independent contractors," said Dr. David Weil, administrator for the Wage and Hour Division. "The misclassification of employees as independent contractors deprives workers of wages and benefits they are entitled to under the law, thereby hurting our economy. It also leads to unfair competition because businesses that play by the rules operate at a disadvantage to those that don't."

Under the terms of a consent judgment entered with the U.S. District Court for the Eastern District of New York, the defendants will pay the workers $710,000 in back wages covering the time period between September 2010 and April 2014, and an equal amount in liquidated damages. The judgment also includes enhanced compliance provisions that will commit the defendants to taking effective steps to improve their payroll recordkeeping, ensure that employees are paid on time each week, reclassify as employees those who were previously misclassified as independent contractors and properly pay them.

"Underpaying and misclassifying employees as independent contractors are illegal and unacceptable actions. The Labor Department will pursue all available legal measures to ensure that workers are properly classified and compensated for their work," said Jeffrey Rogoff, regional Solicitor of Labor in New York. "If the defendants fail to adhere to the terms of the judgment, they could be subject to contempt sanctions by the Court."

The case was investigated by the Wage and Hour Division's New York City District Office and litigated by the Department's regional Office of the Solicitor in New York City.

Under the FLSA, employers misclassify workers by failing to distinguish employees from bona fide independent contractors. An employee — as distinguished from a person who is engaged in a business of his or her own — is one who, as a matter of economic reality, follows the usual path of an employee and is dependent on the business that he or she serves. For more information, visit http://www.dol.gov/whd/regs/compliance/whdfs13.htm.

The FLSA requires that covered employees be paid at least the federal minimum wage of $7.25 for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Employers also must maintain accurate time and payroll records. The FLSA provides that employers who violate the law are liable to employees for their back wages and an equal amount in liquidated damages. Liquidated damages are paid directly to the affected employees.

The case was investigated by the Wage and Hour Division's New York City District Office and litigated by attorneys Daniel Hennefeld, Lindsey Rothfeder and Orly Shoham of the department's Regional Office of the Solicitor in New York City.

For more information about the FLSA, call the Wage and Hour Division's New York City District Office in Manhattan at 212-264-8185 or its toll-free helpline at 866-4US-WAGE (487-9243). Information is also available at http://www.dol.gov/whd.

# # #

Perez v. Thomas Andreadakis; Leonidas Andreadakis; Helen Andreadakis; Danica Group LLC; Copper Plumbing & Heating LLC; Copper II Plumbing & Heating LLC; Copper III Plumbing & Heating LLC Civil action number: CV13-5155

SEATTLE — Although a Bellingham restaurant and a spa have closed, 101 workers once employed by the businesses will receive more than $1.3 million in back wages and damages, thanks to a Washington State jury. The decision is the result of a U.S. Department of Labor investigation that revealed numerous violations of federal labor law.

A unanimous verdict found that the workers were systematically denied minimum wage and overtime pay under the Fair Labor Standards Act by business owners Huang "Jackie" Jie and Zhao "Jenny" Zeng Hong. The lawsuit was filed in 2013 against the two owners and their companies, Pacific Coast Foods, Inc., doing business as J&J Mongolian Grill, and J&J Comfort Zone, Inc., doing business as Spa Therapy. The jury also found that the defendants interfered with and retaliated against workers, most of whom spoke little to no English, who cooperated in the Labor Department's investigation.

"No one who works hard and plays by the rules should be cheated out of the wages to which they are legally entitled," said U.S. Secretary of Labor Thomas E. Perez. "In this case, the business owners took advantage of their workers and continued to do so even after being informed by investigators that they were operating in violation of federal labor law. That's unconscionable. We will hold accountable those businesses that break the law, and just like in this case, ensure that justice prevails for workers."

The department's Wage and Hour Division found that employees of the J&J Mongolian Grill and Spa Therapy put in on average more than 70 hours during a six to seven day workweek. A number of the workers were paid less than the federal minimum wage of $7.25 per hour, and none of them received overtime pay for hours worked beyond 40 in a workweek. Both businesses were located in Bellingham's Bellis Fair Mall.

"Dozens of brave men and women will now get the long overdue back wages they rightfully earned following years of abuse, trickery and retaliation," said Janet Herold, the department's regional solicitor in San Francisco. "This verdict is a warning to others: We will find you and the courts will back us when employers try to shortchange their workers to maximize profits."

The department brought the case to court to stop the business owners, who have since divorced, from continuing to break the law and to recover wages owed to 101 cooks, kitchen helpers, cashiers and masseurs. The jury awarded the back wages and also awarded compensatory damages to four employees who had suffered retaliation, including threats, reduction of hours and, finally, termination of employment because they refused to be silenced about the defendants' labor law violations.

The FLSA requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 per hour as well as time and one-half their regular rates for every hour they work beyond 40 per week. The FLSA also prohibits employers from retaliating against employees and requires employers to maintain accurate records.

These proceedings were held in the U.S. District Court for the Western District of Washington. The department was represented by its regional Office of the Solicitor in Seattle. For more information about the FLSA, call the Wage and Hour Division's toll-free helpline at 866-4US-WAGE (487-9243) or its Seattle office at 206-398-8039. Information also is available at http://www.dol.gov/whd/.

HONOLULU — A federal electrical contractor, Lighting Services Inc. will pay 38 electricians/technicians more than $1.2 million in back wages after U.S. Department of Labor's Wage and Hour Division investigators determined the company did not pay required prevailing wages to workers at Marine Corps Base Hawaii in Kaneohe Bay. The division also found the employer submitted falsified payrolls and told workers to provide false information to investigators.

Lighting Services Inc. violated the Davis-Bacon and Related Acts and the Contract Work Hours and Safety Standards Act and, as a result, the company and owner Scott Wilks are excluded from obtaining federal contracts for three years.

"Businesses that benefit from federal dollars have a responsibility to play by the rules, and that includes paying employees legally required wages," said U.S. Secretary of Labor Thomas E. Perez. "Having a federal contract is a privilege, not a right. And we will remain steadfast in our enforcement of laws that level the playing field for those employers who are doing the right thing."

Investigators found that Lighting Services and Wilks committed multiple egregious violations, including:

• Instructing employees to misrepresent to investigators the type of work that they did
• Requiring employees to falsify time records
• Failing to list numerous workers on certified payroll records
• Paying rates more than $20/hour below required wage rates

The department's regional solicitor in San Francisco brought charges against the contractor, seeking payment of back wages and debarment from federal contracts. The department resolved the charges and obtained appropriate remedies through consent findings approved by an administrative law judge last month.

"An employer cannot reduce its labor costs by underpaying workers the required wage standards in a federally funded construction contract," said Terence Trotter, the division's district director in Hawaii. "Just as standards of quality must be met on completed electrical work, employers must also adhere to federal standards that safeguard the electricians' pay and working conditions."

The DBRA requires that all contractors and subcontractors performing work on federal and certain federally funded construction projects pay their laborers and mechanics at least the prevailing wage rates associated with their occupations, as determined by the secretary of labor. The CWHSSA, which applies to federal service contracts and federally funded and assisted construction contracts exceeding $100,000, requires workers to be paid one and one-half times their basic rate of pay for all hours worked over 40 in a workweek.

For more information about federal wage laws administered by the Wage and Hour Division, call the agency's toll-free helpline at 866-4US-WAGE (487-9243). Information also is available at http://www.dol.gov/whd.

MOUNTAINSIDE, N.J. — In the past five years, more than 1,100 attendants at Shell, Exxon, BP and other leading brand gas stations in New Jersey have been denied the minimum wage and, in some cases, overtime pay. These workers have received $5.5 million in back wages and damages recovered thanks to a multiyear enforcement initiative conducted by the U.S. Department of Labor's Wage and Hour Division.

"The wages recovered for these low-wage workers will help them pay rent and put food on the table for their families. These wages will also fuel the local economy," said Secretary of Labor Thomas E. Perez. "The U.S. Labor Department is determined to ensure that employers follow the law and to create a level playing field for those competitors who pay their workers all of the wages they have rightfully earned."

"Our investigations of the New Jersey gas station industry found widespread violations of the federal Fair Labor Standards Act's minimum wage, overtime and record-keeping provisions," said Mark Watson, regional administrator of the Wage and Hour Division in the Northeast. "To combat these violations, we are engaged in strategic enforcement and outreach efforts with employer organizations and employee advocacy groups to educate all parties on their rights and responsibilities. Our efforts are having an impact on the industry."

In fiscal year 2014, the division recovered nearly $300,000 in back wages and damages for nearly 100 employees, about $3,000 per worker. While that amount is significant, it has dropped to its lowest point since the initiative began in 2010. In addition, ample evidence shows the division's enforcement efforts have impacted the industry. The division's investigators report that some gas stations hired more employees to avoid overtime violations; purchased time clocks to track hours worked; and contacted the Wage and Hour Division for help in providing intensive training for managers on overtime and minimum wage laws. The division will continue to monitor this industry for continued compliance in fiscal year 2015.

The FLSA requires that covered employees be paid at least the federal minimum wage of $7.25 per hour. Nonagricultural and other nonexempt employees are entitled to time and one-half their regular rates for every hour they work beyond 40 per week. The law also requires employers to maintain accurate records of employees' wages, hours and other conditions of employment, and prohibits employers from retaliating against employees who exercise their rights under the law. The FLSA provides that employers who violate the law are, as a general rule, liable to employees for back wages and an equal amount in liquidated damages.

When employees are denied their hard-earned income, the Wage and Hour Division is committed to ensuring that workers receive wages earned and needed for basic expenses such as rent, transportation and food. Since 2009, the division's investigations have resulted in the recovery of more than $1.3 billion dollars in back wages for more than 1.5 million workers.

For more information about federal wage laws, or to file a complaint, call the Wage and Hour Division's toll-free helpline at 866-4US-WAGE (487-9243), or the division's Northern New Jersey District Office, which is leading the enforcement initiative, at 908-317-8611. Information also is available at http://www.dol.gov/whd/.

Participants: Wage and Hour Division, Wisconsin Department of Workforce Development

Description: Officials from the U.S. Department of Labor and the Wisconsin Department of Workforce Development signed a memorandum of understanding with the goal of protecting the rights of employees by preventing their misclassification as independent contractors or other nonemployee statuses. Under the agreement both agencies will share information and coordinate law enforcement.

Background: The memorandum of understanding represents a new effort on the part of the agencies to work together to protect the rights of employees and level the playing field for responsible employers by reducing the practice of misclassification. The Wisconsin Department of Workforce Development is the latest state agency to partner with the Labor Department. Alabama, California, Colorado, Connecticut, Florida, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New Hampshire, New York, Utah and Washington state agencies have signed similar agreements. More information is available on the Department of Labor's misclassification website at http://www.dol.gov/misclassification/.

Duration: 3 years

Quotes: "Misclassification deprives workers of rightfully-earned wages and undercuts law-abiding businesses. This memorandum of understanding sends a clear message that we are standing together with the state of Wisconsin to protect workers and responsible employers and ensure everyone has the opportunity to succeed."

— Dr. David Weil, Administrator, Wage and Hour Division.

"Working with the states is an important tool in ending misclassification. These collaborations allow us to better coordinate compliance with both federal and state laws alike."

— Karen Chaikin, Regional Administrator for the Midwest, Wage and Hour Division

WASHINGTON — Officials from the U.S. Department of Labor and the Florida Department of Revenue today signed a memorandum of understanding with the goal of protecting the rights of employees by preventing their misclassification as independent contractors or other nonemployee statuses. Under the agreement, both agencies will share information and coordinate law enforcement. The MOU represents a new effort on the part of the agencies to work together to protect the rights of employees and level the playing field for responsible employers by reducing the practice of misclassification. The Florida Department of Revenue is the latest state agency to partner with the Labor Department.

In Fiscal Year 2013, WHD investigations resulted in more than $83,051,159 in back wages for more than 108,050 workers in industries, such as janitorial, food, construction, day care, hospitality and garment. WHD regularly finds large concentrations of misclassified workers in low-wage industries.

"Misclassification deprives workers of rightfully-earned wages and undercuts law-abiding businesses," said Dr. David Weil, administrator of the Wage and Hour Division. "This memorandum of understanding sends a clear message that we are standing together with the state of Florida to protect workers and responsible employers and ensure everyone has the opportunity to succeed."

"Working with the states is an important tool in ending misclassification," said Wayne Kotowski, the Wage and Hour Division's regional administrator for the southeast. "These collaborations allow us to better coordinate compliance with both federal and state laws alike."

"By partnering with the U.S. Department of Labor we are actively working to level the playing field for Florida's businesses to stop the misclassification of workers. Businesses that misreport workers obtain an unfair advantage over other law-abiding businesses," said Florida Department of Revenue Executive Director, Marshall Stranburg.

Business models that attempt to change or obscure the employment relationship through the use of independent contractors are not inherently illegal, but they may not be used to evade compliance with federal labor law. Although legitimate independent contractors are an important part of our economy, the misclassification of employees presents a serious problem. Independent contractors are often denied access to critical benefits and protections, such as family and medical leave, overtime compensation, minimum wage pay and unemployment insurance, to which they are entitled. In addition, misclassification can create economic pressure for law-abiding business owners, who often find it difficult to compete with those who are skirting the law.

Memoranda of understanding with state government agencies arose as part of the department's Misclassification Initiative, with the goal of preventing, detecting and remedying employee misclassification. Alabama, California, Colorado, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New York, Utah and Washington state agencies have signed similar agreements. More information is available on the Department of Labor's misclassification website at http://www.dol.gov/misclassification/.

The mission of the department is to foster, promote and develop the welfare of the wage earners, job seekers and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and ensure work-related benefits and rights. To learn more about the FLSA's requirements, call the Wage and Hour Division's toll-free hotline at 866-4US-WAGE (487-9243) or visit its website at http://www.dol.gov/whd/.

PHILADELPHIA — Thousands of workers employed by contractors engaged in natural gas extraction in the Marcellus Shale region of Pennsylvania and West Virginia are putting in a fair day's work but not receiving a fair day's pay. An ongoing multiyear enforcement initiative conducted by the U.S. Department of Labor's Wage and Hour Division offices in Wilkes-Barre and Pittsburgh from 2012 to 2014 found significant violations of the Fair Labor Standards Act which resulted in employers agreeing to pay $4,498,547 in back wages to 5,310 employees. Wage and Hour Division investigators attribute the labor violations in part to the industry's structure.

"The Department of Labor is committed to protecting working families who bear the greatest burden when labor standards are violated," said U.S. Secretary of Labor Thomas E. Perez. "Recovering wages for these workers will help them pay the rent, buy food for the table and clothing for their children. And it will help ensure that employers who play by the rules and pay their employees the wages they have earned are not undercut by those who gain advantage by cheating the system and their workers."

"The oil and gas industry is one of the most fissured industries. Job sites that used to be run by a single company can now have dozens of smaller contractors performing work, which can create downward economic pressure on lower level subcontractors," said Dr. David Weil, administrator of the Wage and Hour Division. "Given the fissured landscape, this is an industry ripe for noncompliance."

The majority of violations were due to improper payment of overtime. In some cases, employees' production bonuses were not included in the regular rate of pay to determine the correct overtime rate of pay. Under the FLSA, all pay received by employees during the workweek must be factored in when determining the overtime premium to be paid. Investigators also found that some salaried employees were misclassified as exempt from the FLSA overtime provision, and were not paid an overtime premium regardless of the number of hours they worked.

Large energy providers such as Chesapeake Energy, Citrus Energy and Anadarko Petroleum are engaged in site exploration and production in the Marcellus Shale region. These companies own the mineral rights and secure the technical and specialized workforce needed to identify natural gas well extraction sites, develop well sites, complete drilling and bring wells on-line for production. The providers then use subcontractors for the majority of the work performed on the extraction, or "well" site. The subcontractors include drilling and geological services, land leasing and acquisition service, and oilfield support services companies.

Secondary subcontractors are often hired for more specialized work and ancillary support services like welding, laboratory services, landscaping, pipeline maintenance, safety and traffic control, and water treatment. Frequently, this level of services does not take place directly at the well sites.

"The more fractured an industry is, the more likely there will be significant labor law violations," said Mark Watson, regional administrator for the Northeast. "Companies further down the contracting chain feel pressured to provide services at a competitive and often cut-rate price point. They are also more likely to cut corners and offer a low bid to secure a business opportunity."

The ongoing enforcement initiative began in 2012. In addition to investigations in Pennsylvania and West Virginia, the agency is examining potential wage and hour violations like these in other parts of the country.

The FLSA requires that covered employees be paid at least the federal minimum wage of $7.25 per hour, as well as time and one-half their regular rates for every hour they work beyond 40 per week. The law also requires employers to maintain accurate records of employees' wages, hours and other conditions of employment, and prohibits employers from retaliating against employees who exercise their rights under the law. The FLSA provides that employers that violate the law are, as a general rule, liable to employees for back wages and liquidated damages payable to the workers.

For more information about the FLSA, call the Wage and Hour Division's Philadelphia Regional Office at 215-861-5800 or call the division's toll-free helpline at 866-4US-WAGE (487-9243). Information is also available at http://www.dol.gov/whd/.

NEW YORK — MDG Design & Construction LLC has reached a settlement with the U.S. Department of Labor that resolves wage violations at the federally-assisted Grand Street Guild construction project in New York City's Lower East Side. MDG and other respondents will pay $3.8 million in back wages and fringe benefits to about 200 of MDG's subcontractors' construction workers. Previous, separate investigations led to the repayment of more than $1.1 million in back wages to approximately 300 laborers and mechanics who worked for MDG's subcontractors on the Lower East Side project.

MDG was the general contractor for the Grand Street Guild project, which involved the refurbishment and rehabilitation of three 26-story apartment towers. The department's Wage and Hour Division found numerous Davis-Bacon and Related Acts violations by MDG subcontractors on the project, including failure to pay required prevailing wages and submitting inaccurate or falsified payroll records to the government.

"This settlement reinforces the Labor Department's commitment to take strong action to ensure that workers are properly compensated for their work," said Dr. David Weil, administrator of the Wage and Hour Division. "General contractors on federally-assisted projects have a responsibility to ensure that their subcontractors comply with prevailing wage laws and properly compensate their employees."

"The department will take steps to get workers their hard earned wages and prevent future violations," said Carl P. Smith, northeast deputy regional administrator of the division. "Failure to adhere to this agreement and obey wage laws can result in the debarment of MDG and its affiliates from seeking and obtaining future federal contracts."

Under the settlement, MDG commits to implementing and abiding by a comprehensive enhanced compliance agreement to ensure future compliance with the Davis-Bacon and Related Acts, the Fair Labor Standards Act, and applicable state and local wage laws. MDG will also take steps to require that its subcontractors comply with applicable wage and hour laws.

As part of the settlement, MDG will retain an independent monitor, approved by the Wage and Hour Division, for a period of three years with responsibilities for conducting regular reviews of the company and its subcontractors to confirm compliance with applicable wage and hour laws on all prevailing wage and federally-assisted projects. The monitor's findings will be reported to the division. The monitor will also provide training to MDG staff, as well as to MDG subcontractors, and establish a hotline, staffed 24 hours a day, to collect confidential reports of wage violations and other instances of noncompliance.

MDG has agreed to implement substantial internal control measures at its prevailing wage and federally-assisted projects. These measures include: assigning dedicated supervisors to these projects, providing written notification of pay rates to employees and taking steps to determine whether subcontractor bids ensure the payment of prevailing wage rates.

The apartment towers for the Grand Street Guild project are located at 410 Grand St., 460 Grand St. and 131 Broome St. MDG, formed in 1988, specializes in the moderate rehabilitation and new construction of residential apartment buildings in New York City and Long Island, according to the company's website.

In addition to MDG, the settlement agreement includes Charis Consulting LLC, Kona Contracting LLC, as well as Michael Rooney and Nicola DeAcetis — owners of all three companies — and Neys Escobar, an owner of Kona. All of the companies are based in Huntington Station, New York.

Previously, the Wage and Hour Division obtained debarments for a period of three years for the following MDG subcontractors that worked on the Grand Street Guild project: ACJ Construction Corp., JECA Construction Corp., Millennium Century Construction Inc. and Omega Interior Corp.

The MDG settlement was negotiated by the northeast regional office of the Wage and Hour Division and the department's regional Office of the Solicitor in New York. It is contained in a consent findings and order that was submitted to and is subject to the approval of the department's Office of Administrative Law Judges.

The Davis-Bacon and Related Acts requires all contractors and subcontractors performing work on federal and certain federally-funded projects to pay the proper prevailing wage rates and fringe benefits as determined by the secretary of labor. The Contract Work Hours and Safety Standards Act also applies to contractors and subcontractors with federal service contracts and federally-funded and assisted construction contracts exceeding $100,000.

For information on federal wage requirements and laws, contact the Wage and Hour Division's New York City District Office at 212-264-8185 or its toll-free helpline at 866-4US-WAGE (487-9243). Information also is available at http://www.dol.gov/whd/.

PHOENIX — As a result of a Wage and Hour investigation, Paul Johnson Drywall Inc. severed its relationship with Arizona Tract LLC., a construction labor contractor. Beginning April 2013, Paul Johnson Drywall entered into a contract with Arizona Tract for the provision of drywall labor. Arizona Tract classified former Paul Johnson Drywall workers as "member/owners" instead of employees, which stripped them of basic worker protections afforded to employees.

Today, the U.S. Department of Labor filed a consent judgment in the U.S. District Court for the District of Arizona by which Prescott-based Paul Johnson Drywall Inc., and its owner Robert Cole Johnson, agreed to take concrete steps to ensure that misclassification of its workforce does not occur again and to pay $556,000 in overtime back wages and liquidated damages to at least 445 current and former employees. The employer also agreed to pay $44,000 in civil monetary penalties.

"This case exemplifies our commitment to eradicating unfair competition and pay schemes that result in employees not getting their fair pay for honest, hard work," said Administrator of the Wage and Hour Division Dr. David Weil. "Employers in this industry and others should take notice that we will not tolerate the misclassification of employees as independent contractors, and we will use all legal remedies available to recover unpaid wages for these workers."

The judgment resolves an investigation by the department's Wage and Hour Division in Phoenix that began to look into construction contractors Arizona Tract solicited. Investigators found that the drywall contractor violated the Fair Labor Standards Act's overtime and record-keeping provisions.

"This resolution will bring a lot of positive change for hundreds of employees working in residential construction," said Janet Herold, the department's regional solicitor in San Francisco. "Paul Johnson Drywall is a leader in this industry in Arizona, and we are pleased that, as a result of our investigation, the company has taken such a public stand against the scourge of misclassification, which deprives vulnerable workers of their wages and the full rights and benefits of employee status and deprives taxpayers of the payroll taxes. Everyone but the misclassifying employer loses, and loses greatly, when misclassification occurs."

As part of the resolution in this case, Paul Johnson Drywall agreed that all workers will be properly classified as employees and paid FLSA's required wages. The investigation also established that the employer, prior to being solicited by Arizona Tract, failed to pay employees paid on a piece-rate basis – the proper overtime at time and one-half their regular rates of pay for all hours worked beyond 40 in a single workweek. In addition, investigators found that Paul Johnson Drywall failed to keep complete and accurate records, which is also required under the FLSA.

In addition to the payment of $600,000 in back wages, damages and penalties, Paul Johnson Drywall has agreed to take specific proactive steps to ensure that its workers are properly classified and paid as employees and to improve compliance in the construction industry. Paul Johnson Drywall will hire a third-party monitor to ensure compliance by the company and require any drywall subcontractors to conduct regular training of supervisors and employees regarding the requirements under the FLSA. Furthermore, if Paul Johnson Drywall hires a subcontractor, the consent judgment requires the company to ensure that the subcontractor is properly licensed and insured, and that the subcontractor complies with the FLSA.

"With increasing frequency, we are entering into agreements, like this one, with employers found in violation," said Ruben Rosalez, regional administrator for the Wage and Hour Division's west region. "In addition to paying back wages, damages, and penalties, ongoing efforts like those called for with Paul Johnson Drywall keep compliance prominently on the employer's radar. These agreements greatly enhance our efforts to maintain compliance and to protect workers' wages long after an investigation."

Paul Johnson Drywall also agreed to implement an educational campaign to promote awareness of the importance of compliance with the FLSA in the Arizona residential construction industry. In the months ahead, Paul Johnson Drywall will make presentations to local home builder associations addressing the importance of properly classifying and paying workers in the drywall industry as employees and identify the costs workers, taxpayers and law-abiding employers, due to the resulting unfair competition, endure from the unlawful misclassification of employees as independent contractors.

Under the FLSA, employers must distinguish employees from bona fide independent contractors. The inquiry to determine a worker's status as employee or independent contractor is whether the worker, as a matter of economic reality, is dependent on the employer or in business for himself. For more information, visit http://www.dol.gov/whd/regs/compliance/whdfs13.htm.

The FLSA requires that covered employees be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Employers also must maintain accurate time and payroll records. The FLSA provides that employers who violate the law are liable to employees for their back wages and an equal amount in liquidated damages. Liquidated damages are paid directly to the affected employees.

For more information about the FLSA, call the Wage and Hour Division's Phoenix District Office at 602-514-7100 or call the division's toll-free helpline at 866-4US-WAGE (487-9243). Information is also available at http://www.dol.gov/whd/.