Federal Forestry Contractors to Pay More Than $541,000 for Underpaying Employees

Thursday, September 25, 2014

As a result of a three-year multiagency investigation, five South Dakota forestry contractors have been ordered by the U.S. District Court for the District of South Dakota to pay more than $541,000 to 66 workers as a result of significant violations of the Service Contract Act, Contract Work Hours and Safety Standards Act, Migrant and Seasonal Agricultural Worker Protection Act and the Fair Labor Standards Act. The owners of the Black Hills logging companies Munoz Logging and Construction, Black Hills Thinning, Escalante Logging & Thinning, Escalante Thinning and SM Logging & Services also accepted plea bargains for convictions on violations of several statutes.

The five logging companies worked on contracts awarded by the U.S. Forest Service for projects in the Black Hills National Forest. The companies had been awarded at least $22.67 million in federal contracts since 1986, according to federal procurement data. The department, Forest Service, U.S. Department of Homeland Security, and several other federal and South Dakota state and local agencies collaborated on the investigations.

The charges brought by the investigating agencies include conspiracy to defraud the U.S. government by underpaying workers employed on federal contracts with the Forest Service for work in the Black Hills National Forest. A federal grand jury indictment stated that, since January 2008, the nine owners of the logging companies devised a scheme to violate immigration law and defraud the Forest Service by underpaying workers and conducting other unlawful activities. This process allowed the companies to underbid their competitors for the contract work. The indictment stated that these five companies often bid on the same federal contracts, and once the contract was awarded, all the firms ultimately performed or assisted in the performance of various contracts. The defendants accepted plea bargains in April and May 2014, which included fines, imprisonment and restitution. The companies face debarment from competing for future government contracts.

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 wage rates and fringe benefits found prevailing in the locality.

The CWHSSA applies to federal service contracts and federal and federally assisted construction contracts over $100,000. These require contractors and subcontractors on covered contracts to pay laborers and mechanics employed in the performance of the contracts one and one-half times their basic rate of pay for all hours worked over 40 in a workweek.

The MSPA protects migrant and seasonal agricultural workers by establishing employment standards related to wages, housing, transportation, disclosures and record keeping. It also requires farm labor contractors to register with the department.

The FLSA requires that covered employees be paid at least the federal minimum wage of $7.25 for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Additionally, employers must maintain accurate time and payroll records.

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