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California Labor Commissioner’s Office fined general contractor and sub-contractor for wage theft violations

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General contractor TB Penick and sub-contractor Champion Construction held jointly liable for wage theft violations, and fined over $1.1 million by the California Labor Commissioner’s Office

Long Beach, CAAfter a lengthy investigation into wage theft of Champion Construction Inc., a contractor hired by San Diego general contractor TB Penick, the California Labor Commissioner’s Office found that Champion cheated 103 workers by maintaining false payroll records over a six-month period. Both TB Penick and Champion were held responsible under California labor law and state labor regulators secured over $1.1 million in back wages for the workers.

California Labor Commissioner’s Office Investigation

The Labor Commissioner’s Office was tipped off about Newport Beach-based Champion Construction Inc., a drywall and framing contractor, in March 2016 by the Carpenters/ Contractors Cooperation Committee, which reported public works violations. After interviewing more than 30 workers, site visits and an audit of pay records for dozens of workers involved in the Browning High School construction project, the investigation led to civil wage and penalty assessments of $1,735,784.

According to a statement from the Carpenters/Contractors Cooperation Committee, Jose Lopez, one of the workers who received a restitution check, said he had to move in with his brother because he couldn’t pay the bills. The group of 103 workers received an average of $7,228 upon the employer’s final payment. The settlement also included $8,080 for required apprenticeship training funds and $434,465 in civil penalties.

Contractor and Sub-Contractor Held Jointly Liable

California’s wage laws hold general contractor TB Penick jointly liable for the violations of its subcontractor Champion, state Labor Commissioner Julie Su said.
“This case clearly demonstrates that general contractors who select contractors that don’t play by the rules will pay a heavy price. Under the law, they are responsible for the wage theft of their subcontractors.”

However, didn’t all general contractors get the memo?

Incredibly, this is not the first time that Champion has been hit with wage theft violations. The company was also found at fault for wage theft violations affecting 47 workers on a project in 2017.

Several of Champion’s workers walked off the job in June 2016, and they filed wage claims at the Labor Commissioner’s Office in Long Beach for nonpayment of wages. (Champion had been hired by a general contractor --Deacon Corporation --for a hotel construction project in El Segundo.)

The Labor Commissioner’s investigation revealed that Champion paid the workers from an account with insufficient funds and then skipped several pay periods for the majority of the workers. Investigators also learned that the Champion employees worked an average of 10 hours a day, five days a week and were unpaid for four weeks.

The Labor Commissioner held Deacon responsible for wage theft—the first time a general contractor was liable for wage theft violations by its subcontractor. And the Labor Commissioner’s Office issued citations against both Deacon and Champion totaling $279,151. Champion didn’t challenge the citations but Deacon filed an appeal, arguing that it should not be held liable, even though it knew that the subcontractor failed to pay their workers.

California Labor Law Workplace Violations

But the California Law prevailed. The labor code AB 1897 holds business entities (known under the law as “client employers”) that obtain labor from a subcontractor responsible for the workplace violations of the subcontractor. A client employer may be liable for the subcontractor’s owed wages, damages and penalties, as well as workers’ compensation violations.

According to the San Diego Times--City News Service, Champion’s state contractor license expired in July 2016 and its public works contractor registration expired last year.

Wage Theft Violation of California Labor Law

The Wage Theft is a Crime multi-lingual campaign was launched by Labor Commissioner Julie Su in 2014. Its mandate is to increase public awareness by defining wage theft and informing workers of their rights and resources available to them to recover unpaid wages or report other labor law violations.

According to the California Labor Commissioner's Office, wage theft occurs when employers do not pay workers according to the law. Examples of wage theft include paying less than minimum wage, not paying workers overtime, not allowing workers to take meal and rest breaks, requiring off the clock work, or taking workers' tips. As well, Labor Commissioner's Office can partner with other law enforcement agencies to criminally prosecute employers that engage in wage theft.


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