The Department of Labor (DOL) has recovered a total of more than $4.5 million in back wages and penalties from employers after two recent investigations.
Failure to pay prevailing wage rate. In one investigation, the DOL recovered nearly $2.9 million in back wages for more than 500 employees of Stanley Associates Inc., and several subcontractors at various locations, due to violations of the McNamara-O'Hara Service Contract Act (SCA). The SCA requires government contractors on federal or District of Columbia service contracts in excess of $2,500 to pay their service workers at no less than the minimum wage rate that the Secretary of Labor finds prevailing for corresponding classes of service employees in the locality (prevailing wage rate), or at the rate provided in a collective bargaining agreement. However, the rate cannot be less than the required minimum wage rate under the Fair Labor Standards Act (FLSA).
Stanley Associates and its subcontractors employed workers at the Vermont Service Center under a service contract subject to the McNamara-O'Hara Service Contract Act's prevailing wage provisions, as well as the overtime requirements in the FLSA. An investigation by the DOL's Wage and Hour Division (WHD) found that the employers had improperly classified several hundred of their employees. The actual duties and nature of the work being performed by the employees did not match the proper SCA classifications listed in the contract's wage determination. As a result, these workers were paid less than the prevailing wage rates guaranteed them under the terms of the federally-funded contract, and many were denied proper overtime compensation.
The employers have agreed to pay a total of $2,898,214 in back wages and have committed to ensuring that employees are correctly classified and compensated in the future [WHD News Release, 11-0631-BOS, 5/3/11].
Double-dipping. Henry's Turkey Service paid $65 a month in cash wages to 31 workers who have disabilities even when the workers' weekly time sheets included more than 40 hours of work. Besides employing the workers, the company provided in-kind care, and room and board. It served as the workers' caretaker as well as the designated representative payee for their Social Security benefits. The company claimed credit for the food, housing, and care against its wage obligation; however, it also reimbursed itself for the above expenses using the workers' Social Security benefits. A federal district court determined that the company failed to show that it incurred any costs above the amount received from the Social Security benefits and denied the credit toward the workers' wages.
The DOL has obtained a partial summary judgment against the company, and its president Kenneth Henry, that requires them to pay over $880,000 in back wages, and an equal amount in liquidated damages, for violating the minimum wage and overtime provisions in the FLSA [WHD News Release, 11-0595-KAN, 4/27/11].