D.C. Attorney General Karl Racine (D). (Michael Robinson Chavez/The Washington Post)

An electrical contractor that has worked on many high-profile projects in the District allegedly engaged in a payroll scheme that deprived hundreds of workers of sick leave, overtime pay or minimum wage, according to a lawsuit filed this week by Attorney General Karl A. Racine.

The complaint, filed Monday in D.C. Superior Court, claims that Power Design Inc., based in Florida, misclassified 535 electrical workers as independent contractors, which kept them off the payroll and allowed the company to avoid paying some D.C. taxes.

Although the workers have many of the same roles and responsibilities as Power Design employees and report to the company’s managers, the lawsuit alleges, they do not receive the paid sick leave that D.C. employers are required to give. The lawsuit says that at least 180 workers weren’t paid the required overtime rate, and that at least 64 weren’t paid minimum wage.

“Power Design cheated hundreds of District workers out of their hard-earned wages and stripped them of their legal rights,” Racine (D) said in a statement. “When companies misclassify employees as independent contractors, they steal from their workers and gain an unfair advantage over competitors that follow the law.”

A spokesman for Power Design said the company — which has won D.C. contracts for high-end developments such as the Yards on the Anacostia Riverfront and publicly subsidized projects such as the Line Hotel in Adams Morgan — takes seriously its compliance with local laws and regulations and has begun an internal investigation of the allegations.

The Line Hotel under construction in Adams Morgan in 2017. (Marvin Joseph/The Washington Post)

The complaint says the company hires workers from third-party “labor brokers” and then lists those workers as independent contractors, rather than its own employees.

Racine’s office is seeking tens of thousands of dollars in damages, along with unpaid taxes and fines for every worker misclassified.

“This maneuver allows Power Design to slash costs, evading taxes and costs associated with payroll that are concomitant with a typical employer-employee relationship,” the complaint says. “As business in the construction industry is often awarded through a bidding process, these suppressed costs are instrumental to Power Design’s success in the District.”

D.C. Council member Elissa Silverman (I-At Large), who has raised concerns about Power Design’s business practices before, called the lawsuit a “first, important step” that shows the city takes the enforcement of its labor laws seriously.

“We’re sending a message to contractors,” she said. “You need to pay your workers fairly, or there will be consequences.”

In 2017, when Power Design applied for certification to offer apprenticeships in the city, Silverman pointed out that the company had been sued elsewhere for misclassifying workers and not paying overtime.

“I have concerns about Power Design’s labor practices, and urge you to deny their application until they can demonstrate that their business practices are in line with local and federal law,” Silverman wrote in a letter to the D.C. apprenticeship council, which oversees apprenticeship programs for the Department of Employment Services.

A spokeswoman for the department declined to answer questions about the lawsuit or the council’s approval of Power Design’s application.

Silverman, who chairs a committee that oversees the department, said she has pushed officials there to be more proactive in enforcing D.C. labor laws, rather than mainly responding to complaints.

“It’s about really taking a muscular approach,” she said.

Labor and community activists, who also have long criticized the company, applauded Racine’s lawsuit. “For too long, the city has passed paper tiger laws that sound wonderful, but the enforcement of them has been lacking,” said Bryan Weaver, a community leader in Adams Morgan who protested the Line Hotel project.

“I hope this hearkens a new day in the District of Columbia, where developers and contractors are going to be held to the letter of the law,” he said.