Office of the Attorney General for the District of Columbia Sues Construction Companies and Labor Brokers for Worker Misclassification Scheme

The Attorney General for the District of Columbia announced a lawsuit against construction companies and labor brokers alleging that they misclassified workers as independent contractors.

Attorney General Brian L. Schwalb today filed a lawsuit against five companies for engaging in a widespread misclassification scheme that deprived hundreds of District construction workers the wages and benefits they were entitled to under DC law. The Office of the Attorney General’s (OAG) investigation found that the Whiting-Turner Contracting Company (Whiting-Turner), W.G./Welch Mechanical Contractors, LLC (Welch), and three labor brokers—Mechanical Plumbing Crew, Co. (MPC), Ramirez Plumbing, Inc. (Ramirez), and GINCO HVAC, LLC (GINCO)—violated the District’s wage-and-hour laws. Welch and the labor brokers misclassified workers as independent contractors instead of employees in a scheme that resulted in an unjust windfall to Whiting-Turner, one of Welch’s major general contractors.

“It is unacceptable for businesses operating in the District of Columbia to boost their profits by stealing from workers,” said Attorney General Schwalb. “Welch and its subcontractors—labor brokers that provide low-cost workers to trade contractors—tried to cut corners and reduce costs by illegally misclassifying over 370 employees as independent contractors, denying them minimum wage, overtime, paid sick leave, and other benefits they were legally entitled to. Labor brokers and the contractors that employ them not only steal from workers responsible for building our city but exact an unfair competitive advantage over businesses that play by the rules. My office will always have workers’ backs and ensure that all businesses in the District compete on a level playing field.”

“The construction industry is loaded with nonunion contractors who hire subcontractors called labor brokers to act as intermediaries between the workers and the construction companies,” said Chuck Sewell, Marketing Director for the International Association of Sheet Metal, Air, Rail, and Transportation Workers (SMART) Local 100. “This leads to a diffusion of responsibility, where neither the broker nor the construction company takes full responsibility for the workers’ conditions, rights, and welfare. Labor brokers often put their workers on projects without sufficient training, risking their safety and resulting in poor quality workmanship. They misclassify workers to avoid paying taxes, workman’s compensation insurance, and many other things they are required by law to pay. These cost-cutting measures allow nonunion contractors to underbid union contractors, harming our building trades unions by eroding membership, undermining collective bargaining, suppressing wages, and threatening job security. We thank OAG for working to ensure the industry is safe and fair for all contractors and workers in Washington, DC by tackling the illegal use of labor brokers and bad contractors.”

This lawsuit builds on OAG’s work to stop the unlawful use of labor brokers in the construction industry. These entities provide low-cost laborers to upstream construction companies like Welch that, in turn, pass those savings onto general contractors like Whiting-Turner. Labor brokers do not provide a supervisory or decision-making role in the projects—they simply find workers, who are usually misclassified and denied employment rights under District law and send them to the worksite. The labor brokers then receive a cut of the workers’ pay or other compensation from the upstream construction companies.

Welch—the company at the center of the lawsuit—has a significant presence in the District’s construction industry, with contracts worth tens of millions of dollars to perform mechanical services such as installing HVAC systems, plumbing pipes and fixtures, and sheet metal work on projects throughout the city.

In the misclassification scheme:

  • A general contractor, such as Whiting-Turner, is hired by developers and property owners to oversee a project and sits atop a “contracting chain.” The general contractor typically subcontracts out the installation of major building systems (e.g., mechanical, electrical, drywall, and plumbing) to trade subcontractors like Welch.
  • To boost its profits, Welch knowingly obtains these workers from labor brokers (including MPC, Ramirez, and GINCO) that, in order to minimize their costs, misclassify workers as independent contractors, denying them minimum wage, overtime pay, and sick leave. These labor brokers are economically dependent on Welch, as Welch projects represent a substantial amount of their annual business.
  • These cost reductions from worker misclassification benefit the general contractors like Whiting-Turner, creating a systemic scheme of worker misclassification throughout the entire contracting chain.

OAG’s 2019 economic analysis of misclassification in the construction industry found companies that misclassify workers canillegally reduce their labor costs by anywhere from 16.7 to 40 percent. This financially incentivizes misclassification by giving employers an anticompetitive edge over law-abidingcompanies, illegally suppressing labor costs throughout the entire construction industry, where contracts are often awarded through competitive bidding.

One of Welch’s most high-profile projects is the City Ridge mixed-use development on Wisconsin Avenue NW, consisting of 360,000 square feet of commercial space, including the District’s first Wegmans Food Market, and a 690-unit residential building. Whiting-Turner, as the general contractor, executed a $19 million contract with Welch, which in turn contracted with labor brokers MPC, GINCO, and Ramirez to provide low cost, misclassified workers to Whiting-Turner for construction on City Ridge.

With this lawsuit, OAG is seeking restitution and penalties from Welch and the other four defendants, and to force all five companies into compliance with the District’s Workplace Fraud Act, Minimum Wage Revision Act, and Sick and Safe Leave Act.

The full complaint is available here.

This matter is being handled by Assistant Attorney General Jude Nwaokobia and Workers’ Rights and Antifraud Section Chief Graham Lake.

OAG’s Efforts to Protect Workers   

OAG’s Workers’ Rights and Antifraud Section is dedicated to fighting wage theft and protecting District workers. Since January 2023, OAG has secured more than $10 million for workers and the District. In total, since gaining wage theft enforcement authority, OAG has secured over $25 million by bringing investigations and lawsuits against employers who violate District law. OAG’s wage theft enforcement efforts have focused on industries with high populations of vulnerable workers, such as construction, restaurants and hospitality, healthcare, and the gig economy.

How to Report Wage and Hour Violations

Workers who believe that their rights have been violated, or that they have experienced wage theft or other wage and hour violations, can contact OAG by calling (202) 724-7730 or emailing workers@dc.gov or trabajadores@dc.gov.

Source: Attorney General Schwalb Sues 5 Construction Companies and Labor Brokers for Widespread Illegal Worker Misclassification Scheme

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