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Plastics Manufacturer Which Used Shell Companies To Avoid Paying Overtime To Pay $1.4m In Back Wages, Damages To 566 Employees

Plastics Manufacturer Which Used Shell Companies To Avoid Paying Overtime To Pay $1.4m In Back Wages, Damages To 566 Employees

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Employees at United Plastics manufacturing plants in Massachusetts and Mississippi will receive a total of $1,433,618 in back wages and liquidated damages as part of a consent judgment and order obtained in federal court by the U.S. Department of Labor. An investigation by the department’s Wage and Hour Division found that the Leominster-based plastic products manufacturer and ASI Staffing Group Corp., which supplied contract labor to United Plastics jointly employed and systematically underpaid employees at both plants over approximately a three year period by denying them the overtime pay they were entitled to under the Fair Labor Standards Act. The investigation found that to avoid paying proper overtime, ASI Group developed a scheme under which they created additional company names. When employees worked more than 40 hours in a week, the overtime hours were recorded under a separate company name, and some or all of their overtime hours were paid at straight time rates. These contract employees worked as machine operators, maintenance workers, molding technicians, color mixers and quality control workers, often in excess of 48 hours per week. The investigation disclosed that United Plastics and its principals were aware that ASI Group workers at the Massachusetts and Mississippi United Plastics plants were not being paid proper overtime. United Plastics and ASI Staffing also failed to maintain legally required records of the number of hours worked by the employees and the rates at which they were paid. “Employers who use staffing agencies as a cover for short-changing workers of their hard-earned wages are breaking the law, plain and simple,” said Mark Watson, Jr. the Wage and Hour Division’s regional administrator. “Violations like this not only deprive workers of money they need to meet their living expenses, they also undercut law-abiding employers who pay their workers legally and play by the rules. The resolution of this case should send a strong message that employers can’t hide behind staffing agencies to avoid their responsibilities to their workers.” Despite United Plastics’ use of a contractor to provide this labor, the Wage and Hour Division determined that it bears responsibility as a joint employer under the FLSA, and is liable along with ASI Group for the back wages, liquidated damages and penalties. “This is an example of the changing nature of work in what can be described as a ‘fissured workplace’ – one where the employment relationship between the workers and the business receiving the benefit of their labor has fractured – it is no longer direct because the company has contracted out various activities to be performed by staffing agencies to cut costs,” said Michael Felsen, the Labor Department’s New England regional solicitor.  “In such arrangements, workers are frequently deprived of the full wages to which they’re entitled. And, as was true in this case, the company using the contract labor is often jointly responsible for compliance with the law as an employer, along with the staffing agency that provides the workers.” The judgment, filed in the U.S. District Court for the District of Massachusetts, orders the defendants to:

  • Pay 566 employees a total of $1,433,618 – $716,809 in back wages and an equal amount in liquidated damages – by December 2016.
  • Pay $100,000 in civil money penalties to the U.S. Labor Department due to the willful and repeated nature of their violations.
  • Hire expert consultants to create pay and recordkeeping systems to help ensure compliance with the FLSA. The consultants will provide quarterly progress reports to the Wage and Hour Division.

The wages and damages cover violations committed at the Massachusetts and Mississippi locations between November, 2011 and October, 2014. No violations were identified at the United Plastics Gilbert, Arizona location. The complaint and consent judgment can be viewed here and here. The FLSA requires that covered, nonexempt workers be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus one and one-half times their regular wages for hours worked beyond 40 per week. Employers also must maintain accurate time and payroll records.

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