RICHMOND, Va. (WRIC) — A subcontractor on the new General Assembly office building pleaded guilty to five counts of felony embezzlement for misclassifying workers they hired for the project as independent contractors to avoid paying state income taxes.

Virginia Attorney General Mark Herring announced in October that a multi-jurisdictional grand jury had indicted two drywall companies working on the major construction project, GTO Drywall and Richmond Drywall Installers Constructors, on 10 counts of embezzlement.

On Wednesday, the president of Richmond Drywall Installers Constructors appeared in Richmond Circuit Court and agreed to plead guilty to five counts of felony embezzlement. The other five counts against the company were dropped.

As part of the plea, RDIC’s president will pay $8,500 in restitution to the Virginia Department of Taxation and $2,500 for each count. RDIC’s president will also have to cooperate with the attorney general’s office if he has any knowledge of other companies in Virginia using similar practices.

Lawyers from the AG’s office declined to comment after the hearing, but Herring said in an interview that “workers deserve to be treated fairly and this type of worker exploitation will not be tolerated in Virginia.”

“When businesses take advantage of their workers in this way, they are stealing from both the workers and the state,” Herring said, adding that the guilty plea from RDIC is “just the beginning.”

The charges brought against GTO Drywall and RDIC came after an investigation from the Office of the State Inspector General and the attorney general’s new Worker Protection Unit. The indictments claimed the companies improperly classified their employees on the project during a six-month period in 2020 in an effort to avoid paying taxes.

According to Herring’s office, the indictments were the first worker misclassification charges brought by the AG’s new unit. A hearing for GTO Drywall was also scheduled for Wednesday, but a spokesperson for the AG’s office said the case was continued until February.

Last year, 8News reported on a federal class-action lawsuit filed against Capital Interior Contractors, a Richmond-based drywall subcontractor, GTO Drywall and RDIC on behalf of laborers accusing the subcontractors of wage theft. 

GTO Drywall and RDIC were selected by Capital Interior Contractors to hire workers for construction projects across the commonwealth, including for the new General Assembly building, the lawsuit claims.

“Capital Interior Contractors recently learned that one of its subcontractors, RDIC, pled guilty to charges related to its failure to remit Virginia state income tax withholding funds for ten workers for a period of July through December 2020,” Nathaniel L. Story, counsel for Capital Interior Contractors, wrote in an email to 8News. “Capital does not condone such practices. Capital continues to investigate this issue and is committed to legal compliance and fair wage practices.”

In the civil lawsuit, filed in the U.S. District Court for the Eastern District of Virginia, the workers allege they were not paid overtime after being intentionally misclassified as independent contractors instead of employees.

Public records show a notice of a settlement was filed in October, but Story declined to comment on the lawsuit. The attorney for the plaintiffs in the suit told 8News he could not comment “other than what is on the public record.”

While noting that the General Assembly has recently strengthen Virginia’s labor laws to protect against worker exploitation, Herring said “they could be even stronger.”

“Because our laws were so weak and our ability to enforce it was very difficult, the practice became more widespread,” Herring said. The attorney general added he’s heard from multiple contractors who said they would prefer to follow the rules but they don’t because of concerns that other contractors will have an unfair advantage when bidding for projects.

The Virginia Employment Commission conducted an investigation that found several workers on the General Assembly building had been misclassified as independent contractors, Virginia Secretary of Labor Megan Healy confirmed to 8News in July.

A VEC spokesperson said the report is being handled by the attorney general’s office and Herring told 8News investigations into worker misclassification claims are ongoing.