A Nassau County contractor hired to convert social services documents into an electronic format underpaid employees by more than $461,000 in violation of the county's living wage law, according to an audit by Nassau Comptroller George Maragos.

Maragos called the actions of microMEDIA Imaging Systems Inc. "disturbing." He said the firm should reimburse 38 employees a total of $461,466 from January 2012 through July 2014, and that Nassau should consider canceling the contract. Maragos referred the wage claims to the Nassau district attorney.

Maragos recommended the DA take "legal action against the vendor to ensure that the employees are paid." The DA's office did not immediately respond to a request for comment.

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MicroMEDIA president Joe Wise said the company only learned about the living wage law in December and is seeking a retroactive waiver to avoid paying the $461,466. "In eight years working on the contract, no one ever brought it up to us," he said of the law.

Maragos said the contract with the county repeatedly cited the need to comply with the law.

In a letter to Maragos, microMEDIA attorney Jeffrey Schlossberg said the company "would not have been able to offer this savings to the county had the requirements of the living wage law been applied."

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Schlossberg said the county should use the savings to pay employees any back wages that are owed. "Although the company did not pay monies directly to employees as required by the Living Wage Law, the company paid more than sufficient monies to the county in the form of savings," Schlossberg wrote.

Wise said microMEDIA now abides by the living wage law, which requires businesses to pay $13.58 to those with health insurance and $15.50 per hour to workers without benefits.

The audit also found that microMEDIA, of Lodi, New Jersey, may have breached its contract by turning over the work to another company without the county's approval.

Last year, microMEDIA closed its Lake Success office and sold its assets to Smooth Solutions, also of Lodi. Smooth Solutions took over work on the Nassau contract, but microMEDIA continues to hold the contract, Wise said.

Maragos said microMEDIA failed to get approval from DSS to subcontract the work.

Wise said DSS was aware of the change but concedes the company did not submit required documents to the county.

Nassau will allow Smooth Solutions to work on the contract until the end of 2015 and then put the work out for bid.

MicroMEDIA began working for the county Department of Social Services in 2008 and has been paid $5.8 million to date.

A DSS spokeswoman declined to comment on the audit.