Attorney General Brian L. Schwalb today announced that the Office of the Attorney General (OAG) has secured the largest recovery in a workers’ rights enforcement action in District history. Under the terms of the settlement, Power Design, a major construction firm, will pay $3.75 million, which includes restitution to construction workers and penalties and fees to the District.

The settlement resolves a lawsuit that OAG filed against Power Design, general contractor John Moriarty & Associates of Virginia (Moriarty), and multiple labor brokers for misclassifying hundreds of construction workers as independent contractors rather than employees, all as part of an unlawful scheme to avoid paying sick leave and payroll taxes. Under the terms of the settlement agreement, Power Design will pay more than $1.7 million to over 1,200 harmed construction workers, more than $1.2 million in penalties to DC, and $880,000 in attorney’s fees. The settlement agreement also includes robust injunctive terms under which all defendants will be required to overhaul their payroll and contracting practices to prevent future worker misclassification.

“Worker misclassification harms hardworking Washingtonians, deprives the District of tax revenues needed to fund critical city-wide programs, and unfairly undercuts law-abiding competition,” said Attorney General Schwalb. “This landmark settlement reflects the ongoing commitment of my office to holding accountable any company that exploits its workers to boost profits or gain an unfair competitive advantage.”

Power Design, Inc. is a national construction firm that provides contracting services across multiple trades, including electrical, mechanical, and plumbing.  It has worked on more than 200 construction projects across the DC region. Moriarty is a general contracting and construction management company that has frequently subcontracted with Power Design. Under DC law, general contractors are liable for labor violations committed by subcontractors they employ.

Under the terms of the settlement, Power Design must:

• Pay $3.75 million, including:
   
  • $1,742,000 in restitution to workers. Over 1,200 construction workers who were misclassified or unlawfully denied paid sick leave will receive restitution. Eligible workers will be contacted by a claims administrator in the coming weeks.
     
  • $1,128,000 in civil penalties to the District.
     
  • $880,000 in attorney’s fees.
     
• Significantly reform its subcontracting practices. Power Design has agreed to a broad array of terms to ensure its subcontractors comply with District law.
   
• Submit to three years of compliance monitoring. For three years, Power Design must provide certified reports to OAG to demonstrate compliance with the terms of the settlement agreement and with District law. 
   
• Stop working with labor brokers that have misclassified construction workers. Power Design will stop working with labor brokers who have misclassified electrical workers as independent contractors or who have failed to provide paid sick leave to properly classified workers.

Moriarty, a general contractor that worked extensively with Power Design, must:

• Reform its subcontracting practices in DC. Moriarty must include language in all future subcontracts for DC projects requiring subcontractors to strictly adhere to all District wage and hour laws.
   
• Gather and retain detailed information from subcontractors. As part of future subcontracts for DC projects, Moriarty must collect information from subcontractors all the way down the contracting chain about what software or company they use to do their payroll and the names of every person who did work on the Moriarty project.
• Inform DC workers of their rights. Moriarty must post notices in English and Spanish at prominent locations on DC jobsites, informing workers of their rights under District wage and hour laws.

A copy of the settlement agreement is available here.  

What is Worker Misclassification?

Under DC law, businesses must pay employees a minimum wage of $17.50 per hour, provide overtime pay, allow workers to accrue paid sick leave, and contribute toward their federal and state taxes. Businesses do not have the same responsibilities to independent contractors, who must pay all their own taxes, are not protected by most labor laws, and do not have access to workers’ compensation or unemployment insurance.

Businesses must meet specific legal requirements to classify workers as independent contractors instead of employees. However, some unscrupulous companies misclassify workers as independent contractors to reduce costs, evade taxes, and strip workers of labor protections. DC’s Workplace Fraud Act requires construction companies to classify workers as employees in most cases. Those who violate this law can face significant monetary penalties.

OAG’s Efforts to Protect Workers  

OAG’s Workers’ Rights and Antifraud Section is dedicated to fighting wage theft and protecting DC workers. Since gaining wage theft enforcement authority, OAG has secured over $30 million through investigations and lawsuits against employers who violate District labor laws, including more than $14 million since January 2023 when Attorney General Schwalb was sworn in. 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.