Federal court order aids Department of Labor recovery of $265K in back wages for 182 employees of Milford drywall contractor

Date of Action:          March 13, 2023

Type of Action:         Fair Labor Standards Act consent order and judgment

Company/Owners:    GEM Interiors Inc., Milford, Ohio

Background: On March 13, 2023, Judge Michael R. Barrett in the U.S. District Court for the Southern District of Ohio entered a consent order and judgment against the drywall contractor. Under terms of the settlement, the drywall contractor agreed to pay a total of $265,000 – representing $132,500 in back wages and an equal amount in liquidated damages ­– to 182 workers.

A U.S. Department of Labor Wage and Hour Division investigation found the Milford company denied its employees proper pay by devising the following schemes:

• Dividing the overtime hours worked by one-third making it appear on payroll records as proper overtime pay while in reality paying straight time at an employees’ regular rate of pay for all hours worked.
• Concealed the overtime straight time pay as ‘reimbursements’ pay.
• Misclassified the workers as independent contractors, which denied them proper overtime compensation.

In response to the order, GEM will repay the wages in 36 monthly installments beginning April 1, 2023. The Milford company will also pay $42,000 in civil money penalties assessed by the department for violations of the Fair Labor Standards Act.

Resolution: Under terms of the consent order and judgment GEM also agreed:

• Not to hire any individual as a purported independent contractor.
• Hire only subcontractors whose businesses are registered in the state where work is being performed. 
• Hire a third-party auditor to review company payroll and time records and those of its subcontractors to ensure FLSA compliance, and provide those reports to the Wage and Hour Division. 
• Require subcontractors to sign affidavits attesting to their FLSA compliance. 
• To allow the division to seize remaining assets in the company’s account receivable up to the amount of remaining payments due, if the employer defaults on its payments.
• To comply fully with the FLSA now and in the future.

In 2017, the Secretary of Labor filed a lawsuit after the company did not resolve the matter administratively and assessed civil money penalties for violations. The division cited the company for violations in 2011. The department’s Office of the Solicitor in Cleveland litigated the case.

Quote: “The court’s order ends a long struggle to recover wages earned and owed to more than 150 workers from GEM Interiors Inc.,” said Wage and Hour District Director Matthew Utley in Columbus, Ohio. “This employer wrongly believed that they could ignore the rule of law that protects workers’ rights to be paid their full and legally earned wages. Our dogged effort will make these workers whole and hold the employer accountable for their past misjudgments and future actions.”

Docket Number: Case No. 1:17-cv-203