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Cleaning company ordered to pay $1m in back wages

The Peabody cleaning contractor went to great lengths to avoid paying its janitors, housekeepers, and dishwashers for overtime — issuing them checks under false names, altering time cards, and compensating them with cash to keep it off the books, according to a US Department of Labor investigation.

Now, in one of the biggest wage settlements in New England, the company, Ward’s Cleaning Service Inc., has agreed to pay its workers more than $1 million in back wages and damages. The money will be spread among 149 people, with the largest payout set at $43,000 and the lowest at $40.

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Ward’s, which provides cleaning staff for many hotels and restaurants in the Boston area, must also pay nearly $164,000 in civil penalties and revamp its payroll system.

“It was a sophisticated scheme,” said Carlos Matos, district director for the department’s Wage and Hour Division.

In some cases, workers were given multiple photo IDs with different names for each hotel they cleaned, he said. A housekeeper might work 40 hours a week under one name, and additional hours at a separate property under a different name — possibly that of a relative or past Ward’s employee — in order for the company to avoid paying for overtime. The employee would get two checks that week, made out to two different people, and take them to check-cashing stores that didn’t scrutinize ID’s.

The Labor Department declined to reveal the names of the hotels and restaurants cleaned by Ward’s employees. The case covers cleaners employed by Ward’s between July 2009 and December 2012. Federal law requires overtime pay of at least one-and-half times an employee’s regular wage after 40 hours of work in a week.

In response to the investigation, Ward’s said it conducted its own audit and found its systems to track staff hours and assignments were “insufficient.”

“The members of our administrative team previously responsible for oversight and scheduling have been replaced,” Ward’s said in a statement.

“Going forward, we are confident that our current approach to tracking staff assignments and hours worked is secure and that this situation will not occur again.”

Wage violations, often exploiting low-wage workers, have become more common as companies increasingly turn to contract labor to cut costs, said Michael Felsen, the Labor Department’s regional solicitor of labor for New England.

Last year, a Chelsea plant that processes animal hides was ordered to pay workers $825,000. And 478 workers at dozens of Boston area restaurants were awarded $1.3 million in 2012 for minimum wage and overtime violations.

One of the largest wage settlements in recent years involved the Philadelphia sports bar chain Chickie & Pete’s, which agreed to pay about $6.8 million to 1,159 employees for violating minimum wage, overtime, and tips laws.

The Ward’s investigation is part of a national crackdown on wage violations in the hotel industry. Labor Department officials interviewed workers at 85 hotels and restaurants around Boston, and found that most violations stemmed from Ward’s, a 58-year-old company with about 200 employees.

In 1993, Ward’s was ordered to pay $172,000 in back wages for similar violations. Because Ward’s had broken the law in the past, the company was deemed a “willful” offender and assessed a $163,900 civil penalty on top of the back wages and damages.

Under the judgment, Ward’s is also required to hire a consultant to create a payroll system that complies with the Fair Labor Standards Act and submit quarterly reports for two years to the Labor Department, detailing corrective actions.

As with many other companies that pay low wages, Labor Department officials said, a large number of Ward’s workers are immigrants, some of whom might be here illegally and are afraid to speak out.

Regardless of their status, however, they must be paid in accordance with the law, Felsen said.

“Whether a worker is documented or not documented, if they perform work, they are entitled to the protections of the Fair Labor Standards Act.”

Katie Johnston can be reached at kjohnston@globe.com. Follow her on Twitter @ktkjohnston.
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