WASHINGTON, D.C. – Attorney General Karl A. Racine today announced a new lawsuit against Power Design, Inc., an electrical contractor that has worked on dozens of development projects in the District, for illegally reducing labor costs by cheating hundreds of workers out of wages and benefits—and alleging that Power Design has failed to comply with the terms of a previous $2.75 million wage theft settlement.
The Office of the Attorney General (OAG) alleges that Power Design and multiple “labor brokers” illegally failed to classify at least 200 of construction workers as employees—improperly classifying them as independent contractors instead—to cut labor costs and increase profits. As part of this scheme, Power Design and its labor brokers failed to pay workers required overtime wages and denied them benefits. John Moriarty & Associates of Virginia (Moriarty), a general contractor that subcontracted with Power Design and benefitted from its unlawfully suppressed labor costs, is also named as a defendant. With this suit, OAG is seeking to stop Power Design’s illegal conduct, provide restitution for harmed workers, and impose civil penalties for violations of District law.
“Again, our office is filing suit to stop Power Design from cheating District workers out of their hard-earned wages and breaking the law to gain an unfair edge over competitors,” said AG Racine. “Power Design already paid $2.75 million—our largest wage theft settlement to date, where it promised to abide by the law moving forward, yet it has not. It is unacceptable that this company, its labor brokers, and the general contractor in this case are continuing to profit from systematic payroll fraud.”
Power Design, Inc. is a national electrical contractor with an estimated annual revenue of over $200 million. Power Design has worked on more than 40 construction projects in the District, including large apartment complexes at the Wharf, in Navy Yard, and in Shaw. Moriarty is a general contracting and construction management company with dozens of projects across the DC area, including multiple major developments around Union Market, and has frequently subcontracted with Power Design. Power Design relies on hundreds of electrical workers supplied by labor brokers, including MBJ Electric, Inc., LAF General Contractors, LLC, K&K Electric & Construction, LLC, JLH General Services, LLC, and BI&R Services, LLC.
In the District, businesses are legally required to pay employees a minimum wage of $15.20 per hour (rising to $16.10 per hour in July 2022), contribute toward their state and federal taxes, and provide overtime pay and other benefits. Businesses do not have the same responsibilities to workers properly classified as independent contractors, who must pay all their own taxes, are not protected by most employment laws, and do not have access to workers’ compensation or unemployment insurance.
Worker misclassification is a form of payroll fraud where employers improperly categorize workers as independent contractors even though they should be considered employees. Unscrupulous companies do this to strip workers of legal protections, reduce costs, and evade paying their fair share of payroll taxes. Numerous studies have documented that employee misclassification schemes are pervasive in the construction industry, including a 2019 report issued by AG Racine. Under the District’s Workplace Fraud Act, construction companies are required to classify most workers as employees—and those that fail to do so can face significant penalties.
In 2018, OAG sued Power Design and its labor brokers for harming workers and violating District law. In 2020, OAG secured its largest wage theft settlement to date in this case, requiring Power Design to pay $2.75 million to hundreds of workers and the District to resolve wage theft and worker misclassification claims. However, OAG uncovered evidence that since the 2020 settlement, Power Design and its labor brokers have continued to violate the District’s Workplace Fraud Act and Minimum Wage Revision Act.
In a newly filed lawsuit, OAG alleges that Power Design and its labor brokers have continued violating the law by:
- Improperly classifying hundreds of workers as independent contractors: Power Design and its labor brokers have continued to rely upon a workforce of hundreds of workers who should be classified as employees but are instead classified as independent contractors—and who are routinely denied overtime pay and benefits. This misclassification scheme enabled Power Design to shirk legal obligations to its workers and illegally undercut law-abiding competitors when bidding for contracts.
- Failing to pay required overtime: District law requires businesses to pay employees overtime wages of at least 1.5 times their regular rate for any hours worked over 40 hours per week. Power Design and its labor brokers repeatedly failed to pay workers required overtime when they worked more than 40 hours a week.
- Failing to comply with the terms of a previous consent judgment: To resolve previous wage theft and worker misclassification allegations, Power Design agreed to pay $2.75 million and was ordered by the Court to implement numerous compliance policies. Power Design’s continued violations indicate that, contrary to the previous settlement’s requirements, the company failed to implement sufficient policies to ensure compliance with the law.
Additionally, general contractors may unlawfully benefit when companies they hire misclassify workers—the illegal cost savings are passed up to them through the contracting chain. Under District law, general contractors are accountable for worker misclassification committed by their subcontractors. As a result, OAG is seeking to hold Moriarty accountable for subcontracting with companies that systematically misclassified workers.
OAG is seeking relief for harmed workers, including damages for unpaid overtime and denied benefits. OAG is also seeking civil penalties and injunctive relief to ensure future compliance with the District’s employment laws.
A copy of the complaint is available here.
What is Wage Theft?
Wage theft is the illegal practice of denying workers the wages or benefits they’ve earned. This happens when employers withhold pay, pay less than the required minimum wage, force workers to work extra hours without pay, refuse to pay overtime, or misclassify employees as contractors. Wage theft affects millions of workers nationally and happens across job types and income levels. Workers in low-wage jobs and immigrants are especially vulnerable to this type of exploitation.
OAG’s Efforts to Protect Workers
In 2021, OAG established the Workers’ Rights & Antifraud Section, which is dedicated to fighting wage theft and protecting District workers. Since gaining wage theft enforcement authority in 2017, OAG has launched more than 75 investigations and recovered over $7 million for workers and the District by bringing investigations and lawsuits against employers who violate District law. 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. AG Racine also testified before Congress to highlight findings from an OAG report about how worker misclassification hurts workers, undercuts law-abiding businesses, and cheats taxpayers.