More than 1,200 construction workers will receive restitution for lost compensation and sick leave as part of the largest workers’ rights settlement in the District’s history, according to the D.C. Office of the Attorney General.
Under the terms of the settlement, a construction firm that has worked on more than 200 projects in the region has agreed to pay out $3.75 million in back pay, civil penalties and attorney’s fees as part of a broader push by the attorney general’s office to enforce D.C. wage laws.
“The landmark settlement reflects the ongoing commitment of my office to holding accountable any company that exploits its workers to gain an unfair competitive advantage,” D.C. Attorney General Brian L. Schwalb (D) said in a news release.
Schwalb’s office alleged the lead plaintiff, Power Design, and general contractor John Moriarty & Associates of Virginia worked with subcontractors to misclassify hundreds of construction workers as independent contractors instead of employees. The structure allowed the companies, which have denied wrongdoing, to skirt payroll taxes and avoid having to pay the workers sick leave, the lawsuit originally filed in 2022 states.
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Power Design, a national firm with projects in 25 states, has a broad development footprint in D.C., with a portfolio that includes dozens of apartment buildings in neighborhoods across the District — from Buzzard Point to Fort Totten. Though the suit does not allege which projects made use of improperly classified workers, the company’s website lists a number of D.C.-based partnerships with John Moriarty & Associates, including apartment buildings in rapidly developing neighborhoods such as Union Market, NoMa and Navy Yard, along with a student housing building by Georgetown’s law school.
Typically, according to the attorney general’s lawsuit, John Moriarty & Associates would hire Power Design to install electrical systems in the projects. In turn, Power Design worked with labor subcontractors to find electrical workers — whom they improperly classified as independent contractors, denying them proper overtime pay and other benefits, the lawsuit states. The lawsuit alleged that Power Design should be held accountable for its subcontractors’ alleged violations of D.C.’s wage laws because it exercised significant authority and control over both the companies and the workers they employed.
“Worker misclassification harms hard-working Washingtonians, deprives the District of tax revenue needed to fund critical citywide programs, and unfairly undercuts law-abiding competition,” Schwalb said. The office reports securing more than $30 million in wage theft settlements since gaining authority to pursue such cases in 2017 — more than half of which have come since Schwalb assumed his role in January 2023.
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The companies denied the claims against them throughout the course of litigation and argued they followed all D.C. wage laws.
A spokesperson for Power Design wrote in an emailed statement that it took “swift, corrective action” to address employee misclassification errors made by two of its subcontractors several years ago. The spokesperson said that it terminated the contracts with the two offending subcontractors and instituted new procedures to monitor payroll for its remaining subcontractors.
“Since implementing the improvements in January 2021, Power Design has had zero compliance issues,” said the spokesperson, Megan Arnold, adding that though the company has agreed on a settlement in the 2022 lawsuit, it denies all of the suit’s allegations. “Our dedication to fair and equitable compensation remains unwavering, reflecting our core values of integrity and accountability.”
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Under the terms of the settlement, the companies agreed to alter their business practices and sharpen oversight of labor subcontractors. Power Design, for example, agreed to stop working with labor subcontractors who have misclassified workers, according to the settlement agreement. The company also agreed to require its labor subcontractors to submit documentation that workers are receiving proper compensation, and to create a hotline or other communication method for workers to report suspected wage law violations. John Moriarty & Associates also agreed to post notices in English and Spanish on all its D.C. job sites informing workers of their rights and letting them know to contact the Office of the Attorney General if they are not receiving paid sick leave.
John Moriarty & Associates in an emailed statement said that the company has “never been part of any scheme to pay reduced wages to workers." The company agreed to the settlement terms to make it easier for the attorney general’s office to develop future cases against subcontractors who violate the law, according to the statement.
“As part of this injunctive relief, and out of goodwill for the District, JMA agreed to strengthen its already existing subcontract provisions and to supplement its ongoing worksite signage informing D.C. workers of their rights,” the statement said.
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End of carouselThe companies’ alleged actions follow a pattern that is common in the construction industry, according to a 2019 industry analysis by the attorney general’s office. Because work in the construction industry is awarded by competitive bid, companies are rewarded for cutting costs — which can incentivize them to misclassify workers. Companies can save anywhere from 16 to 40 percent in labor costs when they classify workers as independent contractors instead of employees, the analysis concluded.
The lawsuit is the second wage theft action that the D.C. attorney general’s office has filed against Power Design. An earlier lawsuit, in which the attorney general’s office alleged Power Design was also systematically misclassifying electrical workers as independent contractors and denying them overtime pay, was settled in 2020.
The lawsuit against Power Design is one of a series of actions the attorney general’s office has taken to target construction companies for alleged wage theft. In June, the office sued a group of companies that worked on the large mixed-use City Ridge project in Northwest Washington, alleging they misclassified hundreds of construction workers, paying them subminimum wages and denying them sick leave.
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The office’s enforcement actions have also extended to other industries — including restaurants, retail, health care and the gig economy. In March, the office reached a $3 million settlement with a company that employed at-home customer service call workers. The company allegedly misclassified more than 200 workers, failing to pay them minimum wages, overtime and paid sick leave, according to a lawsuit filed by the attorney general’s office.
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