At an upscale Pearl District apartment project, a union blows the whistle on wage theft

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By DON McINTOSH, Associate Editor

The U.S. Labor Department is investigating prevailing wage violations at four Portland-area construction projects that received loan guarantees from the U.S. Department of Housing and Urban Development (HUD). That government help came with conditions: The apartments must be affordable for moderate-income families or the elderly or handicapped, and construction workers must be paid local prevailing wage rates as determined by government surveys.

But an investigation by Painters District Council 5 found that a painting subcontractor at the Parker Apartments construction project paid workers as little as half the amount they were entitled to. Workers who complained about the violation were let go.

Undercover probe
The story begins in March, when Painters union organizer Roman Ramos asked out-of-work union member Marcos Jimenez to go undercover as a painter at the Parker Apartments – a six-story 177-unit apartment building under construction in the Pearl District – and report back any illegal practices he found.

The Parker is named after the toddler son of Bob Ball, a prominent developer who ran for Portland mayor in 2008. To build it, Ball teamed up with Eugene developers Don Woolley and Tom Connor, and with a HUD loan guarantee, they obtained a $35.7 million loan from CBRE, the world’s largest commercial real estate services firm.

Painters District Council 5 has been investigating HUD-sponsored construction projects in the Pacific Northwest, starting in Seattle, says organizing director Jeff Kelley. The goal is to clean up the industry, making it harder for companies to win contracts by cheating workers out of wages.

“Every project we’ve looked at in Washington and Oregon has had issues,” Kelley said. And the biggest issue has been violations of the prevailing wage law, known as Davis-Bacon.

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New Misclassification Study Shows Impact in California

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By Jim Kollaer on Wed, 10/15/2014 – 10:30am 

In a September 2014 study entitled Sinking Underground: The Growing Informal Economy in California Construction, misclassification of more than 39,800 construction workers is a key reason that the underground economy in construction is contributing to the low wages, difficulty in recruiting qualified craft workers and loss of wages and taxes in the State of California.

According to the study, released by the Economic Roundtable, a non profit research organization based in Los Angeles, in 2011 more than 143,900 construction jobs in the state were “informal” – code for off the books, misclassified as independent contractors or unreported by employers.

The study looked at wages and construction jobs from 1972 to 2012 and found that the number of construction workers that were unreported or misclassified increased by 400% during that period.

The study cites that, “Specialty trades, such as drywall, have the highest level of informality with over 25% employed informally in 2012.  Building Construction was next, with 20% estimated to be informal.”

The major impact on the industry is that those construction companies in California who are “doing it right” have costs that are 30% higher that the “off the books and misclass” contractors.  Imagine what that disparity does to the bidding process.  The report cites several personal stories to illustrate its points.

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(link to Economic Roundtable)

(link to pdf of Economic Roundtable study)

Jerry Brown signs subcontractor bill

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BY DAVID SIDERS

dsiders@sacbee.com     September 28, 2014

In a major victory for California labor unions, Gov. Jerry Brown announced Sunday that he has signed legislation that will hold businesses liable when subcontractors violate wage, workplace safety or workers’ compensation rules.

The legislation was a priority of organized labor, and it was one of only two bills given the California Chamber of Commerce’s “job killer” label to make it to Brown’s desk this year.

“California workers received a much-needed measure of protection tonight with Gov. Brown’s signature on a landmark bill to curtail abuses of subcontracted workers,” Art Pulaski, executive secretary-treasurer of the California Labor Federation, said in a prepared statement.

He said the legislation “is a historic new law that holds corporations accountable when workers hired using labor contractors are cheated out of wages or forced to work in unsafe conditions. By holding corporations jointly liable with subcontractors and staffing agencies, the governor closed a loophole in the law that many big companies were using to violate the basic rights of workers with impunity.”

2 swindled workers of Minnesota prevailing wage, charges say

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By Marino Eccher
meccher@pioneerpress.com

Hennepin County prosecutors say two owners of an electrical contracting company cheated their employees out of agreed-upon wages. Thomas Robert Clifton, 50, of Lake Elmo, and Earl Keith Standafter, 57, of Burnsville, each face one count of felony theft by swindle. Hennepin County Attorney Mike Freeman announced the charges Monday.

Prosecutors say the two men, owners of C&S Electric, won a 2010 bid for renovation work at Normandale College in which they agreed to pay their employees the prevailing wage — the pay rate required for state-funded construction projects.

The rate at the time for the 16 company electricians on the project was $58.50 per hour.

During the project, the two defendants signed documents showing they were in compliance with that requirement, according to the criminal charges. But afterward, a complaint was filed with the Minnesota Department of Labor and Industry.

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US Labor Department signs agreement with Alabama Labor Department to reduce misclassification of employees

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WASHINGTON – Officials of the U.S. Department of Labor’s Wage and Hour Division and the Alabama Department of Labor today signed a memorandum of understanding to protect the rights of employees by preventing their misclassification as something other than employees, such as independent contractors. The memorandum of understanding represents a new effort on the part of the agencies to work together to protect the rights of employees and level the playing field for responsible employers by reducing the practice of misclassification. The Alabama Department of Labor is the latest state agency to partner with the U.S. Labor Department.

In Fiscal Year 2013, WHD investigations resulted in more than $83,051,159 in back wages for more than 108,050 workers in industries, such as janitorial, food, construction, day care, hospitality and garment. WHD regularly finds large concentrations of misclassified workers in low-wage industries.

“Misclassification deprives workers of rightfully-earned wages and undercuts law-abiding businesses,” said Dr. David Weil, administrator of the Wage and Hour Division. “This memorandum of understanding sends a clear message that we are standing together with the state of Alabama to protect workers and responsible employers and ensure everyone has the opportunity to succeed.”

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De Blasio’s Executive Order Will Expand Living Wage Law to Thousands More

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By MATT FLEGENHEIMER   SEPT. 29, 2014

Mayor Bill de Blasio plans to sign an executive order on Tuesday significantly expanding New York City’s living wage law, covering thousands of previously exempt workers and raising the hourly wage itself, to $13.13 from $11.90, for workers who do not receive benefits.

The change is also intended to frame a looming debate in Albany, where Mr. de Blasio hopes to win the authority to set the citywide minimum wage at the same amount. If Mr. de Blasio succeeds in matching the minimum wage to the living wage, all hourly workers in the city would earn more than $15 by 2019, according to the city’s projections.

The executive order will immediately cover employees of commercial tenants on projects that receive more than $1 million in city subsidies going forward. Workers who receive benefits such as health insurance will earn $11.50 an hour, compared with $10.30 before.

While cautioning that it was “notoriously difficult to develop projections related to economic development,” the administration estimated that about 18,000 workers would be covered over the next five years, roughly 70 percent of all the jobs at businesses that will receive new financial assistance from the city’s Economic Development Corporation.

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Hillsboro businessman convicted of tax evasion

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By Brent Weisberg
Published: September 30, 2014, 8:05 am

PORTLAND, Ore. (KOIN 6) – A 53-year-old man was ordered by a federal judge to pay the Internal Revenue Service (IRS) close to $500,000 and spend a year and a half in federal prison after pleading guilty to federal tax evasion.

Stephen Gregory Nagy was the former president of Hillsboro-based S&S Drywall Assemblies. According to the United States Attorney’s Office, Nagy’s company produced drywall services from January 2005 through September 2011.

The IRS assessed the company $481,519 in federal employment taxes, penalties and interest for between June 2009 and September 2010. Nagy met with the IRS and committed to a plan to pay the past due payroll taxes for his company, but investigators said he decided not to comply with the payment play and engaged “in a variety of interrelated fraudulent schemes to evade the payment of the delinquent payroll taxes.”

Investigators learned that he started conducting extensive business transactions in order to hide funds from the IRS. He obtained cash by illegally hiring undocumented workers to work on prevailing wage jobs, paying them a small portion of the prevailing hourly rate and demanding that they kick back the largest part of their wages to him in cash, court documents state. Nagy failed to report the case to the IRS.

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City dinged on state audit for work with federal grant

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By Cecilia Garza,  Bainbridge Island Review Staff Writer 

Oct 9, 2014 at 1:23PM

According to a recent review by the Washington State Auditor’s Office, the city of Bainbridge Island is not meeting wage requirements set by one of its federal grant programs.

For the most part, the city complied with state laws and its own policies, the report said.

The audit, however, found that Bainbridge did not quite meet the requirements set by a federal grant for highway planning and construction.

The city’s practices “were inadequate to ensure compliance with federal Davis-Bacon Act (prevailing wage) requirements,” the report said.

The Davis-Bacon Act relates to contractors and subcontractors performing federally-funded projects. It requires that laborers employed under the contract be paid no less than the local prevailing wage and fringe benefits that is paid for similar projects in the area.

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Ordinance sets higher wages for city projects: San Mateo officials adopt rules for public works while encouraging private developers to adopt similar policies

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October 13, 2014, 05:00 AM – By Samantha Weigel – Daily Journal

As the cost of living rises along the Peninsula, those who work on San Mateo city public works projects will be guaranteed prevailing wages after the City Council approved an ordinance codifying existing policy and to adhere to state regulations.

To receive state funding, California’s newly enacted Labor Code section 1782 requires charter cites, such as San Mateo, to pay workers at least the state’s prevailing wage on public works projects, City Attorney Shawn Mason said.

The ordinance was approved last week but Councilman David Lim said the City Council has long strived to pay its employees prevailing wages and encourage private developers to do so as well.

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$10.2M awarded to fund worker misclassification detection, enforcement activities in 19 state unemployment insurance programs

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WASHINGTON – The U.S. Department of Labor today awarded $10,225,183 to 19 states to implement or improve worker misclassification detection and enforcement initiatives in unemployment insurance programs.

“This is one of many actions the department is taking to help level the playing field for employers while ensuring workers receive appropriate rights and protections,” said U.S. Secretary of Labor Thomas E. Perez. “Today’s federal grant awards will enhance states’ ability to detect incidents of worker misclassification and protect the integrity of state unemployment insurance trust funds.

 

2014 Worker Misclassification Grants

State Regular High Performance Bonus  Total
California $499,792 $499,792
Delaware $27,672 $27,672
Florida $31,792 $31,792
Hawaii $500,000 $500,000
Idaho $500,000 $500,000
Indiana $500,000 $500,000
Maryland $494,600 $400,099 $894,699
Massachusetts $499,800 $499,800
New Hampshire $330,468 $330,468
New Jersey $342,222 $496,399 $838,621
New Mexico $499,970 $499,970
New York $500,000 $500,000
Oregon $500,000 $500,000
South Dakota $500,000 $500,000
Tennessee $499,260 $499,260
Texas $500,000 $775,529 $1,275,529
Utah $500,000 $327,973 $827,973
Vermont $500,000 $500,000
Wisconsin $499,607 $499,607
Totals $8,225,183 $2,000,000 $10,225,183

 

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