Service Contract Violation Costs Employer $107K

The Labor Department announced today that 10 workers at a Minnesota title company will receive $107,893 in back wages and unpaid fringe benefits after the title insurance company that employed them was found in violation of the Service Contract Act during an investigation by the DOL’s Wage and Hour Division. The employees worked on real estate closings on a contract with the U.S. Department of Housing and Urban Development.

The Labor Department’s Office of Administrative Law Judges issued a decision and order effectively resolving a lawsuit filed by the department in July 2014 against Northwest Title Agency Inc., Chief Executive Officer Wayne Holstad and Chief Operating Officer Joel Holstad. As a result, the company has been debarred from bidding on federal contracts for three years.

“Contractors that do business with the federal government have an obligation to pay their employees the required contractual rates and benefits,” said David King, the Wage and Hour Division’s district director in Minneapolis. “When employers fail to do so, they undercut employers who play by the rules, in addition to shorting their workers. The department will not hesitate to pursue legal action, including debarment, to ensure employees working on federally funded projects are properly paid and to level the playing field for contractors.”

An investigation by the department’s Wage and Hour Division determined that the White Bear Lake-based company failed, among other things, to:

  • Pay legally required prevailing wage rates and fringe benefits to the workers on this contract.
  • Maintain required records of hours worked and to segregate hours for contract work from non-contract work.
  • Notify the employees that work performed on the HUD contract was subject to SCA requirements.

The decision and order found Northwest Title and Wayne Holstad jointly liable for $67,893 of underpayments and barred each from bidding on federal contracts for a period of three years.

Joel Holstad and the department filed a separate settlement agreement in July 2016 in which he agreed to pay $40,000 in back wages.

The company held the HUD contract from April 2010 through April 2011, with an additional option year through April 2012.

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 prevailing wage rates and fringe benefits found in the locality, or the rates, including prospective increases, contained in a predecessor contractor’s collective bargaining agreement. The department issues wage determinations on a contract-by-contract basis in response to specific requests from contracting agencies. These determinations are incorporated into the contract. Additional information on labor provisions and enforcement of government contracts is available at http://www.dol.gov/whd/govcontracts/.

For more information about federal wage laws, call the Wage and Hour Division’s toll-free helpline at 866-4US-WAGE (487-9243). Information is also available at http://www.dol.gov/whd.

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