Construction firms caught misclassifying workers must pay up

The U.S. Department of Labor says a federal investigation has led 16 Utah and Arizona businesses to pay $700,000 in back wages, damages, penalties and other fees for misclassifying construction workers as company owners rather than employees.

The investigation targeted Orem, Utah-based CSG Workforce Partners L.L.C., Universal Contracting L.L.C. in American Fork, Utah, and Arizona CLA L.L.C. in Phoenix, as well as several affiliated businesses and three principals for the companies, the Labor Department said in a statement Friday. The defendants settled the cases earlier this week under consent judgments in U.S. District Courts in Phoenix and Salt Lake City, according to court records.

The department said the businesses required construction workers to become “member/owners” of limited liability companies in order to exempt the companies from complying with state and federal wage laws, as well as from providing workers compensation insurance for those workers.

“By not complying with the law, these employers have an unfair advantage over competitors who pay fair wages, taxes due, and ensure wage and other protections for their employees,” the Labor Department said in a statement. “These illegal practices lower standards for all workers, especially in highly competitive markets and industries where employers try to reduce overhead, often at the expense of their workers.”

The Labor Department, the U.S. Department of Justice and the State of Utah conducted a joint investigation of the three companies after Utah passed a law in 2011 requiring limited liability companies to provide workers comp and unemployment insurance to their employees, the statement said. The companies moved their operations to Arizona from Utah after the passage of that law.