An employer and its staffing company will pay $1.1 million in back wages and another $1.1 million in damages to resolve U.S. Department of Labor (DOL) findings that they intentionally misclassified workers as independent contractors.

Force Corp., a construction company, created AB Construction to provide it with much of its labor. Force Corp., however, prepared and controlled the payroll and payment procedures for both companies, DOL said in a press release.

During an investigation, the department determined that Force Corp. intentionally misclassified most of its employees to avoid paying them overtime and other benefits. In addition, it used a combination of payroll checks and cash to pay the workers straight time when they should have received overtime pay, DOL said. The department also determined that the employer kept inadequate and inaccurate time and payroll records.

To resolve the allegations, the companies agreed to pay $1,179,842 in back wages and an equal amount in liquidated damages to 478 employees. They also will pay $262,900 in civil money penalties for the willful nature of the violations, DOL said. The consent decree requires the company to hire at least one independent consultant that will create an FLSA-compliant payroll system and submit quarterly reports to DOL.

“The misclassification of employees as independent contractors is a serious problem that hurts workers, taxpayers, and the entire economy in multiple ways,” said Michael Felsen, a regional solicitor for DOL’s Wage and Hour Division, in a statement. “It robs employees of their rights to proper wages, safe workplaces, social security payments, and unemployment and workers [sic] compensation insurance. It deprives federal and state governments of needed tax revenues. And, it undercuts law-abiding employers who pay their workers legally and play by the rules.”