Labor Department Investigating Wage Theft in Home Construction Industry

The U.S. Department of Labor is investigating some of the largest home builders in the country over possible wage law violations. Home builders targeted by the <"">wage theft probe include PulteGroup Inc., Lennar Corp., D.R. Horton Inc. and KB Home.

According to a report in The New York Times, the Labor Department is trying to determine if these and other residential home builders failed to pay workers minimum wage or overtime pay. Nancy J. Leppink, the acting director of the department’s wage and hour division, told the Times that the investigation was focusing on the residential construction industry because of its heavy use of vulnerable immigrant workers. She also said some construction contractors had been misclassifying workers as independent contractors to get around federal wage laws.

According to a Wall Street Journal report, builders received letters dated August 1 informing them of the Labor Department’s probe, which is being conducted under the Fair Labor Standards Act. One letter reviewed by the Journal instructed the builder to immediately turn over the names, addresses, Social Security numbers, pay rates and hours worked for all employees over the past two years. The letter, which does not mention specific wage and hour violations, also asks for names of all contractors hired in the past year.

According to the Associated Press, the trade group Leading Builders of America has confirmed that several of its members received such a letter. The same group complained that the Labor Department’s request was “overbroad.”

But in her interview with The New York Times, Leppink defended the Labor Department’s actions, saying it was needed to ensure the home building industry was complying with wage and hour laws.

“This is not regulation in the sense of it’s not promulgating new rules,” she said. “This is enforcement, with the objective of achieving compliance with the law. There’s a strong commitment by this administration and the Secretary of Labor to protecting workers’ rights, and this is what we’re doing here.”

She also said that the Labor Department’s wage and hour investigations would no longer be “complaint driven,” but would focus on industries that use “vulnerable workers,” contractors and subcontractors to keep wage costs low, the Times said. Leppink also pointed out that investigations of individual complaints in the residential construction industry last year resulted in $7 million in fines involving 4,000 workers.

According to The Wall Street Journal, unions have long complained about labor practices in the home building industry, and some unions have filed lawsuits and taken other action to pressure for reforms in the industry. The Laborers International Union of North America in 2008 issued a study that called employees at home builders the “newest victims” of the housing market crisis because of “underpayment,” according to the Journal.

Some unions have been pushing to have subcontractors considered employees of the general contractor on a building project, thereby making the general contractor responsible for any wage and hour violations, the Journal said. Some states, such as Nevada, already have laws to this effect, but in most instances the law separates the liability of the two parties.

According to the Associated Press, the Labor Department has also been investigating the hotel, restaurant, janitorial, health care and day care industries over similar issues.

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