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🗞️ Escondido Drywall Contractor Ordered to Pay $790,000 for Systematic Wage Violations

A federal court ordered Innovative Wall Systems Inc. (Alta Drywall) to pay $790,000 in back wages, damages, and penalties after a U.S. Department of Labor investigation found the Escondido-based drywall contractor failed to pay minimum wage and overtime to 580 workers.

onthelaborfront

onthelaborfront

— 4 min read
🗞️ Escondido Drywall Contractor Ordered to Pay $790,000 for Systematic Wage Violations

A federal court ordered Innovative Wall Systems Inc. (Alta Drywall) to pay $790,000 in back wages, damages, and penalties after a U.S. Department of Labor investigation found the Escondido-based drywall contractor failed to pay minimum wage and overtime to 580 workers. The September 2025 consent judgment also found the company falsified payroll records to hide overtime violations affecting workers on construction projects in San Diego County.

The U.S. Department of Labor's Wage and Hour Division investigation into Innovative Wall Systems Inc., operating as Alta Drywall, uncovered systematic violations of the Fair Labor Standards Act affecting hundreds of construction workers. Federal investigators determined the employer failed to maintain accurate records of hours worked, including pre-shift and post-shift work, travel time between jobsites, and Saturday work performed by drywall installers and related construction workers.

The company utilized a piece-rate compensation system, paying workers based on the amount of drywall installed rather than hourly wages. However, under federal labor law, employers using piece-rate pay must still track actual hours worked and pay overtime at time-and-a-half for hours exceeding 40 per week. Alta Drywall failed to meet these requirements, resulting in workers earning below minimum wage when total pay was divided by actual hours worked.

The consent judgment, filed in the U.S. District Court for the Southern District of California, found that company president and CEO Jason Shane Bellamy and the corporation engaged in willful violations. Regional Solicitor of Labor Marc Pilotin stated the violations included falsifying payroll records to conceal overtime owed to workers. The company worked on multiple affordable housing projects in San Diego County, including developments in East Village and other areas.

The court ordered the following payments:

  • $385,000 in back wages to affected workers
  • $385,000 in liquidated damages (equal to back wages)
  • $20,000 in civil money penalties for willful violations
  • Permanent injunction against future Fair Labor Standards Act violations

The total judgment of $790,000 represents a substantial wage theft settlement in San Diego County's construction sector. Federal officials emphasized the settlement demonstrates the Department of Labor's commitment to pursuing full enforcement authority when employers systematically underpay workers and attempt to hide violations through fraudulent recordkeeping.

The Fair Labor Standards Act establishes clear requirements for employers who compensate workers on a piece-rate basis. Even when paying per unit of work completed, employers must:

  1. Track all hours actually worked by employees
  2. Ensure total compensation equals at least minimum wage when divided by hours worked
  3. Pay overtime premium (1.5x regular rate) for hours over 40 per week
  4. Maintain accurate records of both hours worked and units completed

Construction industry violations related to piece-rate pay have become increasingly common targets for Department of Labor enforcement. Federal investigators frequently discover contractors failing to track pre-shift activities, post-shift cleanup, travel between sites, and other compensable work time. Some workers in the Alta Drywall case reportedly worked 10-hour days, six days per week, while earning as little as $400 weekly—well below minimum wage requirements.

Employers have two methods to calculate overtime for piece-rate workers: dividing total weekly earnings by hours worked to find the regular rate, then paying half that rate for overtime hours; or paying 1.5 times the piece rate for units completed during overtime hours if agreed upon in advance. Alta Drywall appears to have used neither method, instead simply paying the standard piece rate regardless of hours worked.

The Department of Labor's Wage and Hour Division has intensified scrutiny of construction contractors in recent years, particularly those working on federally funded infrastructure projects. In fiscal year 2021, the division identified over $36 million in back wages owed to approximately 21,000 construction workers nationwide. Common violations include misclassifying employees as independent contractors, failing to pay for work-related travel time, and neglecting to pay required overtime.

Construction employment is projected to grow by 6% through 2030, adding approximately 400,000 jobs. Federal officials have emphasized that as the sector expands, employers who fail to pay legally owed wages may struggle to attract and retain qualified workers in an increasingly competitive labor market.

The Alta Drywall case reflects broader enforcement priorities under the Bipartisan Infrastructure Law, which has generated substantial federally funded construction activity requiring compliance with Davis-Bacon Act prevailing wage requirements and Fair Labor Standards Act protections. While this case involved FLSA violations rather than Davis-Bacon issues, it demonstrates heightened federal attention to wage practices across construction projects.

Company Response

In an October 2025 statement to media, Alta Drywall representatives indicated the company "made no admissions in connection with the settlement, denies the allegations in the complaint and has no further comment about the claims." The company, founded in 1976 and incorporated in 1999, operates multiple locations in Escondido and has maintained a presence in Southern California's construction market for nearly five decades.

California's Deputy Labor Commissioner Mabel Martinez noted that wage theft cases often surface after workers leave employment due to fears of retaliation during active employment. She emphasized that California's labor enforcement agencies assist all workers regardless of immigration status, and violations can be reported even after individuals have left the country.

Key Points

  • $790,000 Total Penalty: $385,000 back wages, $385,000 liquidated damages, $20,000 civil penalty
  • 580 Workers Affected: Drywall installers and related construction workers
  • Piece-Rate Violations: Company failed to track hours worked or pay overtime despite using per-unit compensation
  • Falsified Records: Federal investigation found employer deliberately concealed overtime violations through fraudulent payroll practices
  • Willful Violations: Court determined violations were knowing and intentional, justifying enhanced penalties
  • Permanent Injunction: Company and CEO prohibited from future Fair Labor Standards Act violations
  • Affordable Housing Projects: Violations occurred on affordable housing developments in San Diego County
  • Pre/Post-Shift Work: Company failed to compensate for setup, cleanup, and travel between jobsites
  • No Admissions: Company settled without admitting wrongdoing but agreed to payment and injunction
  • Industry Pattern: Case reflects broader DOL enforcement focus on construction sector wage violations

Primary Source Author: U.S. Department of Labor, Wage and Hour Division

Primary Source: Court orders California construction contractor to pay $770K in back wages, damages after federal investigation finds minimum wage, overtime violations (January 6, 2026)

Primary Source Link: https://www.dol.gov/newsroom/releases/whd/whd20260106

Note: The DOL press release headline states "$770K" but the detailed breakdown in the release body correctly totals $790,000 ($385,000 + $385,000 + $20,000).

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