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What's Worse Than a Wage-Hour Class Action?

Maryland staffing firm and its owner find out the hard way

A class (or collective) action for overtime pay is certainly unpleasant for the employer, but a wage-hour investigation by the United States Department of Labor can be far worse for a non-compliant employer. This is because the Department of Labor has unlimited resources, subpoena power (see discussion below), and does not ordinarily give settlement discounts, as frequently happens in private party litigation. As I recently reported, lately the Department has turned its attention to the staffing industry.

The case against Maryland staffing firm First Impression Staffing, LLC and its owner, Geoffrey N. Kiragu, is an example of the full weight of the law being brought to bear on a wage-hour violator. On July 24, 2023, the Department simultaneously filed a lawsuit and a Consent Judgement against First Impression and Kiragu (copies attached below).

According to the Complaint, First Impression is a staffing company that provides concierge and receptionist staff services to residential and management companies throughout the country, including Washington, D.C., Maryland, Virginia, Georgia, Florida, California, Tennessee, New Jersey, Pennsylvania, and North Carolina. Kiragu is the sole owner, manager, and Director of Operations. Attached to the Complaint is a list of approximately 600 employees who were deprived of lawful pay through several techniques:

1.) Using bi-weekly lump sum payments for all hours worked, resulting in net pay lower that the minimum wage.

2.) Paying workers straight-time hourly rates for overtime work.

3.) Manipulating workweeks to avoid overtime by moving hours into other workweeks.

Filed along with the Complaint was a pre-negotiated Consent Judgement requiring the company and its owner to "pay gross back wages and liquidated damages in the total amount of $4,078,407.70, for violations of the overtime provisions of the Act by Defendants alleged to have occurred during the period beginning September 1, 2018, and ending September 6, 2022." This sum is made up of $2,039,203.85 in back wages due, $2,039,203.85 in double damages allowable under the Fair Labor Standards Act, and a civil penalty of $330,000.00. Were this a private plaintiff collective action under the FLSA, there would be no civil penalty and plenty of room to negotiate a lower payment amount.

Government subpoenas are a powerful weapon

Government subpoena power is no joke. The Department of Labor can and will use the federal courts to put business owners in jail if they fail to respond to demands for records and testimony during a wage-hour investigation, as illustrated by two recent DOL press releases, one from New York:

CENTRAL ISLIP, NY – The operator of two Long Island restaurants may have thought they only had to take orders from customers, but now has learned that ignoring the orders of federal investigators and a federal court will get you arrested.
On February 1, 2023, the U.S. Marshals Service arrested Louis “Luigi” Prudente, owner of Il Vizio Restorante Italiano Corp., operating as Il Vizio, for repeatedly failing to provide information to the U.S. Department of Labor’s Wage and Hour Division as part of a compliance investigation that began in May 2021. Acting at the direction of the U.S. District Court for the Eastern District of New York in Central Islip, the U.S. Marshalls Service arrest of Prudente follows legal action prompted by the owner’s refusal to supply documents required for the division’s investigation.
“The arrest of Il Vizio owner, Louis Prudente, shows that the U.S. Department of Labor will use every available instrument to gather the facts, enforce the law and ensure employers do not hold the law in contempt,” said Regional Solicitor Jeffrey S. Rogoff in New York. “An employer’s refusal to comply with federal investigators is illegal and unacceptable and, as this employer now knows, has significant consequences including arrest.”

and the other from New Jersey:

The operator of three northern New Jersey restaurants has learned that not cooperating with a federal investigation and ignoring several federal court orders can get you arrested.
Today, the U.S. Marshals Service arrested Samad Uddin – also known as Saman Khan – owner of Manhattan Halal Gyro King LLC, which has locations in Teaneck, Elmwood Park and Paterson, for their failure to provide the U.S. Department of Labor’s Wage and Hour Division with information requested as part of a compliance investigation begun in November 2020.
“The arrest of Manhattan Halal Gyro King’s owner Samad Uddin shows that the U.S. Department of Labor will not tolerate an employer’s unwillingness to comply with federal investigators,” said Regional Solicitor Jeffrey Rogoff in New York. “The use of U.S. Marshals by a federal court also proves that we will use every available instrument to show employers are not above the law.”

In the vast majority of cases, full cooperation is the only reasonable choice once the government unleashes its investigative powers. Of course, the best approach is to avoid the investigation in the first place by understanding your firm's legal obligations and using reasonable efforts to fulfill them. I started Staffing Legal News to help you do this.

Bill Josey      contact: wjosey@staffinglaw.com