ST. PETERSBURG — Power Design, an electrical contractor that's completed more than 1,000 projects nationwide, is facing a lawsuit in the District of Columbia, where officials contend it illegally misclassified hundreds of workers to lower wages and avoid payroll taxes.
Instead of classifying the workers as employees, the suit says, the St. Petersburg-based company used two labor brokers to classify at least 535 electrical workers as independent contractors. As a result, the workers did not receive overtime, sick pay or, in dozens of cases, according to the lawsuit, even the minimum wage.
"Power Design cheated hundreds of district workers out of their hard-earned wages and stripped them of their legal rights," District of Columbia Attorney General Karl Racine said in an announcement of the suit. "When companies misclassify employees as independent contractors, they steal from their workers and gain an unfair advantage over competitors that follow the law."
Power Design's designated media contact said in an email to the Tampa Bay Times Monday afternoon that she had spoken with the company's general counsel.
"We have not been served or heard anything yet," Power Design's Rachel Podos said. "Power Design believes we are in compliance with all applicable laws and regulations in DC."
The District of Columbia's Workplace Fraud Act requires construction companies to classify workers in most circumstances as employees who are paid at least a minimum wage, overtime and other benefits, officials said.
To classify a worker as an independent contractor, officials said, a construction company has to prove that the worker does the job independently, is typically self-employed and does work that falls outside the core business of the company.
Independent contractors must pay all their own taxes, are not protected by most labor laws and do not have access to workers' compensation or unemployment insurance.
Racine's office also sued JVA Services and DDK Electric, contending that the Maryland-based companies acted as labor brokers to help Power Design cut costs and avoid its legal responsibilities. Their primary business, officials said, involved supplying Power Design with an average of 30 to 40 workers, but in one case as many as 90, for its projects.
Officials said that from 2014 to 2017 Power Design worked at least 10 large construction projects in the District of Columbia, among them the edgy LINE hotel and several luxury apartment complexes. The company, according to the lawsuit:
• Never listed the workers in question as employees on Power Design's payroll.
• Paid less than the district's minimum wage of $10.50 per hour to 24 workers in early 2016 and less than the minimum of $11.50 per hour to 39 workers after it rose in the middle of that year.
• Did not pay at least 180 workers overtime to which employees are entitled in 2017.
• Did not provide any misclassified employees with sick leave.
Follow trends affecting the local economy
Subscribe to our free Business by the Bay newsletter
You’re all signed up!
Want more of our free, weekly newsletters in your inbox? Let’s get started.Explore all your options
• Did not pay unemployment insurance tax for any of the misclassified workers.
• Cut costs to the point that it could submit low bids that won contracts away from competitors who complied with the law.
The Attorney General's Office said it is seeking to recoup tens of thousands of dollars in unpaid minimum wages and overtime for workers, tens of thousands of dollars more in unpaid unemployment insurance taxes.
It also is seeking penalties from $1,000 to $5,000 for each misclassified worker and each failure to keep payroll records, which officials said could add up to millions of dollars in penalties.
In April, Power Design was ranked No. 2 among large companies in the Times' annual Top Workplaces survey.
In response to the survey, Power Design said it had 526 employees, more than 130 active projects, a 70,000-square-foot national headquarters facility in St. Petersburg's Gateway area and accumulative revenue exceeding $1 billion. The company also made the Top Workplaces list from 2013 to 2017.
Contact >Richard Danielson