California
Labor Commissioner Citation of General Contractor for Subcontractor’s Wage
Theft Affirmed
Los
Angeles—California Labor Commissioner Julie A. Su issued
citations of $249,879 against Irvine-based general contractor Deacon
Corporation, along with its subcontractor, Lafayette-based Champion
Constructions, Inc.
This
is the first time that the Labor Commissioner has held a general contractor
responsible for wage theft by its subcontractor by issuing citations under AB
1897
(section 2810.3 of the Labor Code), signed by Governor Brown in 2014, which
took effect on January 1, 2015.
Champion,
a drywall and framing contractor hired by Deacon for the Cambria Hotel
construction project in El Segundo, shorted 47 workers. The Champion employees
worked an average of 10 hours a day, five days a week and were unpaid for four
weeks.
“This
case addresses the pervasive problem of wage theft in subcontracted
industries,” said Labor Commissioner Julie A. Su. “Businesses at the top of the
contracting chain that profit from workplace violations can no longer escape
legal liability by hiding behind their subcontractors, even if they did not
control the work performed or know about the violations.”
The
wage theft came to light after several of Champion’s workers walked off the job
on June 16, 2016, and filed wage claims at the Labor Commissioner’s Office in
Long Beach for nonpayment of wages.
The
Labor Commissioner’s investigation revealed that Champion paid the workers from
an account with insufficient funds and then skipped several pay periods for the
majority of the workers. Investigators also learned that Champion failed to pay
overtime wages to many of the workers, who worked up to 2 hours overtime a day.
The
Labor Commissioner’s Office last August issued citations against both Deacon
and Champion totaling $279,151 in unpaid overtime and minimum wages, waiting
time penalties, rest period premiums and civil penalties for work performed from May 8, 2016 to June 16,
2016. A demand letter was also issued in August for $50,466 to request payment of
the contract wages, which is the difference between minimum wage and the wages
promised to the workers when contracted for the job.
Champion
did not challenge the citations. However, Deacon filed an appeal on February
27, contesting their liability for the subcontractor’s wage theft. During the
appeal hearing, a Deacon superintendent admitted the company was aware of the
subcontractor’s failure to pay their workers. The general contractor argued
that it should not be held liable as defined under Labor Code Section 2810.3.
On
May 16, the hearing officer affirmed that Deacon is responsible as a “client
employer,” with stipulated citations and penalties owed totaling $249,879 for
overtime and minimum wages, liquidated damages, waiting time penalties and civil
penalties.
AB
1897
holds business entities (known under the law as “client employers”) that obtain
labor from a subcontractor responsible for the workplace violations of the
subcontractor. A client employer may be liable for the subcontractor’s owed
wages, damages and penalties, as well as workers’ compensation violations.
When
workers are paid less than minimum wage, they are entitled to liquidated damages
that equal the amount of underpaid wages plus interest. Waiting time penalties
are imposed when the employer fails to provide workers their final paycheck
after separation. This penalty is calculated by taking the employee’s daily
rate of pay and multiplying it by the number of days the employee was not paid,
up to a maximum of 30 days.
The Labor Commissioner’s Office,
officially known as the Department of Industrial Relations’ Division of Labor
Standards Enforcement, inspects workplaces for wage and hour violations,
adjudicates wage claims, investigates retaliation complaints, issues licenses
and registrations for businesses, enforces prevailing wage rates and
apprenticeship standards in public works projects, and educates the public on
labor laws.
Its Wage Theft is a Crime multilingual
public awareness campaign was launched in 2014 to help inform workers of their
rights and employers of their responsibilities. Employees with work-related
questions or complaints may contact DIR’s Call Center in English or Spanish at
844-LABOR-DIR (844-522-6734).