Calif. Construction Company Sued for Misclassifying, Underpaying Workers

March 4, 2010

California Attorney General Edmund G. Brown Jr. has filed a lawsuit against Livermore-based Country Builders Inc. after he said the company “cheated workers out of wages,” falsified the company’s payroll records to hide underpayments, deliberately misclassified workers to reduce the company’s workers’ compensation premiums and violated state prevailing wage laws.

The company has won several public works contracts that required it to pay the prevailing wage.

In late 2008, Brown’s office launched an investigation into Country Builders to determine why some workers reported receiving a lower rate of pay than what was shown on their paystubs. The investigation found that the company inflated the pay rate of some workers to lower its workers’ compensation premiums, while paying others below the $32 to $34 an hour, the rate required under the prevailing wage laws of California.

The state’s prevailing wage laws require workers on public work projects to be paid at rates equal to the wage and benefit rates established by the Department of Labor Standards Enforcement. The public works projects covered by law are construction projects performed by priviate contractors for state or local governments to further a public purpose.

Some of Country Builders’ public works contracts included:

  • The Fairways multi-family apartments in San Jose
  • Classics at Keystone in San Jose
  • Pioneer Heights student housing for California State University, East Bay
  • University Village student housing for University of California at Berkeley
  • Giant Road Family Apartments in San Pablo
  • Jubilee Senior Housing in Berkeley
  • Seven Directions Apartments in Oakland

Despite its collective bargaining agreement with workers that set the prevailing wage, the company hired workers to work on the public projects for significantly less per hour than the union rate. Between 2005 and 2008, timesheets reveal that 124 employees received less than the hourly rate on at least one occasion. Some employees were regularly paid less than the prevailing wage, the attorney general’s office said.

Brown’s investigation further revealed that Country Builders officers falsified company payroll records to various public entities to cover up the underpayments.

Brown’s office estimates that in 2007 and 2008, Country Builders was able to save approximately $1 million in wages by failing to pay workers the prevailing wage and the pay rate set forth in the collective bargaining agreement. In 2007, the company’s gross revenues were $21 million.

In addition, Country Builders intentionally misclassified lower-wage workers as higher-wage workers to its insurance carrier, the State Compensation Insurance Fund. the attorney general’s office said.

The hourly pay rate is used as a basis to calculate workers’ compensation insurance premiums for businesses. By falsifying payroll records and inflating the hourly rate of pay of its workers, Country Builders illegally lowered its insurance premiums, Brown said.

The investigation found that Country Builders underpaid its premiums to the State Compensation Insurance Fund by at least $136,000.

Brown’s office filed the civil lawsuit in Alameda Superior Court alleging violations of labor laws and citing unfair business practices. The lawsuit seeks a permanent injunction against the company, restitution for the workers and the State Compensation Insurance Fund, and civil penalties.

Source: AG

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