State fines Texas-based construction company $767K for misclassifying workers

From Pacific Business News:

by Duane Shimogawa

The state Department of Labor and Industrial Relations has fined Texas-based R&R Construction Services $767,095 for the misclassification of its workers as independent contractors that are part of the Maile Sky Court hotel-condominium redevelopment project in Waikiki.

The state said Monday that R&R has 20 days to appeal the citations.

“Law-abiding contractors who pay their fair share face unfair competition, and workers suffer when deprived of their rights and benefits,” Linda Chu Takayama, director of DLIR, said in a statement. “The visitor industry and a pleasant visitor experience is important to Hawaii, but Hawaii’s working people and law-abiding contractors need to benefit fairly.”

R&R allegedly misclassified 65 construction workers as independent contractors and, by doing so, it avoided requirements to provide unemployment, workers compensation, temporary disability and prepaid health care insurances, according to the state.

About a couple of weeks ago, the state said it was looking into this issue, with Labor Department personnel along with officials from the U.S. Department of Labor Wage and Hour Division and the Hawaii Department of Commerce and Consumer Affairs taking part in a site visit at the condo-hotel after receiving tips of the possible misclassification of workers.

The U.S. Department of Labor’s Wage and Hour Division, which enforces the wage and record-keeping provisions of the federal Fair Labor Standards Act, and the Hawaii Department of Commerce & Consumer Affairs, which enforces licensure, also have opened investigations regarding the employer.

“Legislators significantly increased the penalties for violations of workers’ compensation and temporary disability insurance laws by passing what became Act 187 just this year,” Chu Takayama said. “We believe that the increase in penalties from $1 per day to $100 for temporary disability insurance and worker’s compensation from $10 per day to $100 serves as a powerful incentive for employers to provide these coverages instead of just waiting till they are caught.”

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