The District is suing Power Design Inc., accusing the electrical contractor of “cheating” wages from 535 employees.
D.C. Attorney General Karl Racine announced a $2.6 million lawsuit against Power Design for classifying electricians it hired as independent contractors “in a scheme to cut costs and avoid legal responsibilities.”
“When companies misclassify employees as independent contractors, they steal from their workers and gain an unfair advantage over competitors that follow the law,” Mr. Racine said Monday in a statement. “District employers that illegally misclassify workers are now on notice that their theft will not be tolerated.”
D.C. Councilmember Elissa Silverman, at-large independent and chair of the Labor Committee, said Tuesday that she was “thrilled” to hear of the lawsuit.
Ms. Silverman said it’s good news for the companies who testified in a labor oversight hearing earlier this year to asked her for more wage law enforcement in the city.
“They want bad actors like Power Design to be taken to court and taken to task for not following the law,” she said, “because it puts Power Design at a competitive advantage when they are not following our labor laws and they are able to undercut other contractors for bid proposals.”
Power Design did not return phone calls Monday and Tuesday seeking comment.
Labor groups in the city have long said that contractors underbid each other for projects by skirting the District’s Workplace Fraud Act. The law requires contractors to consider their workers as employees with minimum wage and benefits like sick leave and overtime. Workers can be classified as independent contractors only if the company can prove they are self-employed and not hired for “core” company work.
Firms that intentionally misclassify employees as independent contractors to cut costs can face fines from $1,000 to $5,000 per worker.
The D.C. attorney general’s office wrote in its lawsuit that Power Design hired two Maryland labor brokers JVA Services LLC and DDK Electric Inc. — also named in the suit — to procure workers and mislabel them.
Councilmember Charles Allen, Ward 6 Democrat, wrote to the attorney general in March requesting investigators be sent to the company’s work sites after labor groups had approached him with concerns about the practice.
Ms. Silverman also has warned city officials for the past year that Power Design has a history of bad business. She was referring to almost 20 lawsuits in 20 years against Power Design for unfair pay, not paying benefits, negligence, injuries, and discrimination, according to The Washington City Paper.
Despite her objections, the D.C. Department of Employment recertified Power Design for business last July, saying the company had settled the lawsuits.
Power Design has since secured bids for major projects in the District, including the Adam’s Morgan Line Hotel and the Bower luxury apartments at the Navy Yard. The Florida-based company currently is valued at more than $100 million, according to the attorney general’s office.
The attorney general’s lawsuit also claims that Power Design paid at least 64 workers less than minimum wage and failed to maintain adequate payroll records or pay the District’s unemployment insurance tax.
Labor activist coalition D.C. Jobs with Justice staged protests outside several of Power Design’s work sites over the past year, citing concerns about the company’s wage practices.
Power Design previously called activists’ allegations about wage theft “unfounded” in an December interview with The Times. Elizabeth Falcon, executive director D.C. Jobs with Justice said Tuesday she hopes the lawsuit,”would raise awareness of how this business model works in the construction industry. And that it’s not a sustainable business model in the District.”
Adams Morgan neighbors earlier this year accused Power Design of reneging on its promise to hire 51 percent local workers in exchange for a 20-year, $46 million tax abatement to rebuild the Line Hotel.
Since then, D.C. Auditor Kathy Patterson reported that the city has largely failed to enforce the its local hiring preference laws in the construction industry, bolstering the activists’ claims. The audit resulted in a D.C. Council hearing, chaired by Ms. Silverman, in which a lawyer for Power Design called the rules a “punitive attack posture.”
Former Advisory Neighborhood Commissioner Bryan Weaver wrote the Adams Morgan deal with Power Design, and has since led a protested against the company for failing to uphold its agreement to hire local and pay fairly.
“The one-two punch of Kathy Patterson’s oversight and Racine’s enforcement might finally give The District of Columbia a carrot and stick in enforcement of Paper Tiger laws that have been on the books for decades but never enforced,” he told The Times in a social media message.