Two Arizona-based drywall and painting companies have been ordered to pay $7.45 million in back wages and damages after the U.S. Department of Labor (DOL) determined they willfully denied overtime pay to over 1,400 employees. The U.S. District Court of Arizona issued the judgment on January 15, following an investigation by the DOL’s Wage and Hour Division into Apodaca Wall Systems and Empire Wall Systems, which are both involved in commercial drywall and painting work.

The investigation found that the companies, which were owned by Arnold Apodaca and his children Michael and Brittany Apodaca, tried to avoid paying overtime by using a practice of issuing multiple checks for employees’ hours worked at straight-time rates, regardless of the number of hours worked. The companies also used labor brokers to hire workers and paid them under separate arrangements, which bypassed overtime regulations. According to the DOL, these workers were denied legally owed overtime even if they worked over 40 hours in a workweek.

The companies allegedly took further steps to sidestep overtime laws by paying a piece-rate based on the square footage of work completed, rather than based on hourly work. This method also disregarded the actual hours worked by employees, and in some cases, crew leads were tasked with redistributing the wages to workers outside of the official payroll system. This structure made it easier for the companies to avoid paying the overtime required by law.

In Arizona, workers are entitled to 1.5 times their normal hourly rate for hours worked over 40 hours per week. According to the DOL, Apodaca Wall Systems and Empire Wall Systems violated these rights, denying overtime to their employees in favor of underpaying them.

“Piece-rate workers are entitled to premium pay for overtime hours,” Marc Pilotin, the DOL's western regional solicitor, emphasized. “These companies purposely cheated workers and hurt their communities by violating federal law deliberately and are now learning illegal actions like these have costly consequences.”

As a result of the ruling, the companies are required to pay approximately $3.7 million in unpaid overtime back wages, an equal amount of $3.7 million in liquidated damages, and a $125,000 penalty to the Department of Labor.

The companies involved have been responsible for several high-profile projects across the Southwest. Apodaca Wall Systems, for instance, has worked on projects such as banks, churches, entertainment venues, schools, offices, restaurants, and retail centers. Despite numerous attempts by the media to reach Apodaca Wall Systems for comment, the company has yet to respond to requests for comment. Similarly, Empire Wall Systems, which has no publicly available contact information, was unreachable at the time of publication.

The decision serves as a strong reminder of the DOL's commitment to enforcing fair labor practices and ensuring that employees are fairly compensated for their work. The ruling also underscores the need for companies to adhere to labor laws and treat workers equitably, particularly in industries like construction, where overtime regulations can often be overlooked.

Furthermore, the case highlights the role that contractors, project managers, and subcontractors have in ensuring compliance with labor laws, particularly when they are managing large teams of workers across multiple job sites. By implementing proper payroll systems and ensuring fair compensation practices, employers can avoid costly legal repercussions and foster a more productive and ethical workforce.

The ruling also adds a layer of pressure on industry employers to reassess their practices, especially as the Department of Labor intensifies its focus on enforcement. Companies should seek legal advice to ensure that their compensation structures comply with federal and state laws to avoid similar costly violations.

The implications of this case extend beyond these two companies, serving as a warning to other businesses in the construction industry and across sectors that failure to comply with labor laws can result in substantial financial penalties and reputational damage.