The recent lawsuit filed by the District of Colombia attorney general against Florida Company Power Design, Inc., labor brokers JVA Services, LLC and DDK Electric Inc., that alleges 535 workers were misclassified as Independent Contractors, or 1099 workers, provides a primer on the way that some construction companies create vehicles to avoid taxes, the payment of overtime, the provision of worker’s compensation, or medical benefits. The lawsuit demands a jury trial where the defendants will have the chance to defend themselves, but the charges detailed give a full picture of how to set up and execute a plan to use independent contractors to act as subcontractors on specific projects for a specific company.
Generally, the process that the attorney general alleges representatives of Power Design used to set up the labor brokers in business and then use those labor brokers to provide manpower for their projects, specifically in the DC area, is being repeated across the country every day. This happens specifically in the construction industry, but it also is being used in various iterations by companies in a broad range of other industries and services as well.
The details of the lawsuit are very specific in how the companies were set up, legalized on a Friday and working on Power Design projects on a Monday. Companies were allegedly set up under names and with owners who had no experience in running a company but who were coached and given contracts and employment documents allegedly by Power Design. They, in turn, provided workers who allegedly worked for Power Design as independent contractors for sub-par wages and with none of the protections provided to Power Design’s jobsite superintendents and foreman on the same jobs.
Construction Dive, in an article written by Laurie Cowin, titled, DC Attorney General alleges electrical contractor misclassified 535 workers, spells out the particulars of the case and lists other cases of misclassification in the northeast. The article also provides a link to a publication at the dcline.org that spells out the case in some additional detail. However, to fully understand the “how to” of using independent contractors to circumvent labor laws, you should read the court filings at: oag.dc.gov/sites/default/files/2018-08/Power_Design_Complaint.pdf .
For a court filing, you will find it interesting, especially to better understand ways that contractors are using misclassification on the jobsite in violation of labor laws.