Worker Misclassification Costs D.C. Employer $243K

A D.C. hospitality business will pay more than $243,000 after an investigation found worker misclassification and other wage and hour violations affecting more than 270 workers. 

The case shows that compliance risk doesn’t stop at the federal level – local investigations can be just as costly. Here’s what happened.

Worker Misclassification, Retaliation and More

In Washington, D.C., Park Place Inc., doing business as The Park at 14th, has agreed to pay $243,350 to resolve allegations that it violated D.C. wage and hour laws, following an investigation by the District’s Office of the Attorney General (OAG).

The investigation determined the company:

• Misclassified some workers as independent contractors (ICs)
• Failed to provide workers with sick leave
• Retaliated against workers who raised concerns about wages or tips by removing them from the schedule or cutting their pay, and
• Failed to provide required written wage notices under D.C. law. 

Alleged Wage Violations Violate District Law

Regarding employee classifications, the OAG’s office noted that misclassifying workers as ICs can deprive workers of wages and benefits they are entitled to as employees, including overtime wages when they work more than 40 hours in a single workweek as well as protections such as unemployment insurance and workers’ compensation. In this case, the OAG determined The Park at 14th misclassified several workers as ICs rather than employees, as far back as 2021.

As to the sick leave, covered employers in the District are required to provide employees with accrued sick leave, and employees may start using paid sick leave they earn after 90 days of employment. Here, according to the OAG, The Park at 14th failed to provide more than 200 workers any paid sick leave from 2021 to 2024.

Under D.C. law, it is illegal for employers to retaliate against employees who raise concerns about potential labor law violations. The OAG’s investigation determined that the employer removed several workers from the schedule. It also found the employer reduced the pay of one hourly worker who raised such concerns.

Regarding wage notices, employers in the District must provide employees with written notice of their pay rates and key terms of employment. Failure to do so may constitute a violation of wage notice requirements. In this case, the OAG alleged the employer failed to provide workers with written notice of their rate of pay, tip-sharing policy and pay dates.

“Today, we’re putting money back in the pockets of hundreds of workers who were denied the compensation and benefits they were legally entitled to,” said the District’s AG Brian Schwalb. “Wage theft and illegal worker misclassification does not only harm hard-working employees – it also interferes with honest businesses’ ability to compete on a level playing field.”

The Cost of Noncompliance

Under the settlement, The Park at 14th has agreed to:

• Pay $127,321 to the affected workers
• Provide retroactive sick leave to current employees
• Pay $116,029 to the District in civil penalties
• Update policies and procedures as needed to ensure compliance with D.C. wage and hour laws, and
• Submit annual compliance reports to the OAG for three years.

Practical Takeaways

The enforcement action highlights several areas payroll and finance leaders can review to help reduce compliance and financial risk.

• Treat worker misclassification as a financial risk, not just an HR decision. Misclassification can trigger back wages, penalties, payroll tax issues and legal costs.
• Review payroll controls for leave accruals, pay notices and recordkeeping. Small compliance gaps can affect large groups of employees and increase settlement costs.
• Coordinate compliance reviews across payroll, HR and finance. Wage and hour investigations often involve payroll records, employment practices and financial reporting.
• Monitor state and local enforcement trends. Wage and hour investigations are not limited to federal agencies, and local enforcement actions can create significant financial exposure.

More info: Park Place Inc. Settlement Agreement.