U.S. Department of Labor Investigation Results in USPS Contractor Paying Employees $649,996 to Resolve Federal Contract Violations

WEST COVINA, CA – United States Auto Club Inc. (USAC), a Texas-based emergency roadside assistance provider for the U.S. Postal Service (USPS), will pay $649,996 to 29 employees for violations of federal contract provisions of the McNamara-O’Hara Service Contract Act (SCA) and the Contract Work Hours and Safety Standards Act (CWHSSA) following an investigation by the U.S. Department of Labor’s Wage and Hour Division (WHD). WHD determined that USAC owes the employees $377,512 in unpaid prevailing wages and $165,116 in required health and welfare benefits. The contractor will also pay $107,367 in overtime. In addition to the $649,996 found due, the contractor was also assessed $16,480 in liquidated damages.

Investigators found that USAC contracted with subcontractor Norbert’s Towing to service USPS vehicles in the city of Los Angeles and Orange County but failed to pay all employees the required prevailing wages, overtime, and health and welfare benefits. WHD found the prime contractor responsible for $649,996 due to 29 employees as a result of paying employees only half of the $20.84 per hour prevailing wage required by the contract.

“No contractor should gain an economic advantage by paying workers below the wages and fringe benefits required on a prevailing wage project,” said Skarleth Kozlo, Wage and Hour Division Assistant District Director in West Covina. “Not only does this practice undercut what the workers involved are legally owed for their work, it results in unfair competition for contractors who play by the rules.”

In 2008, the WHD found USAC and another subcontractor, Direct Towing, owed workers in Dallas $85,000 in back wages due as a result of similar SCA violations.

The SCA requires contractors and subcontractors performing services on prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates (including prospective increases) contained in a predecessor contractor's collective bargaining agreement. For prime contracts in excess of $100,000, contractors and subcontractors must also, under the provisions of the CWHSSA, pay laborers and mechanics, including guards and watchmen, at least one and one-half times their regular rate of pay for all hours worked over 40 in a workweek.

For more information about the SCA and other laws enforced by the Division, contact its toll-free helpline at 866-4US-WAGE (487-9243). Information is also available at https://www.dol.gov/whd including a search tool to use if you think you may be owed back wages collected by WHD.