Hennepin Co. Attorney Mike Freeman Announces Felony Charges Against Former Owners Of Merit Drywall

MINNEAPOLIS (WCCO) —  A Minnesota construction company faces felony charges after prosecutors say they misclassified their employees.

It allowed them to get away with pocketing hundreds of thousands of dollars.

The husband and wife that owned and operated Merit Drywall face charges of wage theft, insurance fraud and worker classification fraud.

WCCO's Kate Raddatz has more on how prosecutors say how they were able to get away with it.

Prosecutors say Leroy and Joyce Mehr of Merit Drywall in Clearwater intentionally misclassified their employees as general contractors.

The company, that did drywall installation throughout the Twin Cities, avoided paying for workman's compensation insurance, which is required by law.

"Without getting too technical, if you're an independent contractor it's up to you to get insurance for yourself, if you work for somebody as people did then your company should provide workers' compensation insurance," Hennepin County Attorney Mike Freeman said.

According to the criminal complaint, Merit reported they had only 11 employees working for them.

They claimed the dozens of other workers were independent subcontractors. At a press conference Tuesday, Freeman says the scheme allowed the owners to pocket around $300,000 between April 2016 and April 2017.

The company was also able to make cheaper bids.

"It cheats the company that bid with the corporation because they can bid cheaper or take more money home," Freeman added.

When WCCO spoke to one of the owners of Merit she told us this was the first time she was learning of the charges. She denied the claims.

The defendants are not in custody.

"We let too many contractors get away with this idea that if they just call somebody an independent contractor it makes it so. It does not," Jessica Looman, Minnesota State Building and Construction Trades Council said.

None of the employees were hurt on the job so they never tried making a claim for worker's compensation.

Only the premiums were not paid.