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General contractor also found responsible for unpaid wages under contractor liability law that went into effect in 2018 (CA)

Posted by National Alliance for Fair Contracting on

LOS ANGELES, May 29, 2019 /PRNewswire/

The Labor Commissioner’s Office has issued citations totaling $597,933 in unpaid wages and penalties to Universal Structural Building Corp. of Chatsworth after 62 construction workers were never paid for weeks of work on two projects in Hollywood and Ventura. J.H McCormick Inc., a general contractor for one project, was named jointly and severally responsible for $68,657 of the citations pursuant to a section of the labor code added last year by Assembly Bill 1701 that holds general contractors liable for their subcontractor’s wage theft violations.

“Up-the-chain general contractors are now responsible for wage theft committed by their subcontractors on all construction projects in the state,” said California Labor Secretary Julie A. Su. “General contractors who choose subcontractors that do not pay wages owed will pay a hefty price. The Labor Commissioner’s Office will use all the tools at its disposal to return these stolen wages – including the placement of liens on these properties which will have a hold until the labor these workers poured into these projects is paid for in full.”

The Labor Commissioner’s Office has filed a civil action with the Los Angeles Superior Court against J.H McCormick to help secure funds to pay back wages.

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Contractor sentenced to 8 years in prison in forced labor case (CA)

Posted by National Alliance for Fair Contracting on

AUTHOR – Kim Slowey
PUBLISHED – July 3, 2019

A federal judge sentenced construction company owner Job Torres Hernandez to eight years and seven months in prison for harboring undocumented workers for commercial advantage or private financial gain and for forcing some of those individuals into providing labor on projects in the San Francisco Bay Area.

Torres, who was convicted in March, must also pay $919,738 in unpaid wages as restitution and must serve three years under supervised release after his prison term ends.

One of the most disturbing aspects of the Torres case is worker testimony that, since 2015, he recruited undocumented individuals from Mexico with the promise of construction jobs only to make some work as long as 24 consecutive hours without pay. He locked them up after hours in squalid living spaces with makeshift beds and limited access to toilets and showers. If they complained, witnesses told the court, Torres threatened deportation and physical harm to them and their families in Mexico.

Torres supplied some of this labor to the Silvery Towers condo project in San Jose, California, and, last year, developer Full Power Properties paid $250,000 in back wages to 22 of Torres’ employees. After the settlement, Full Power told Constructive Dive that it denied any wrongdoing and that it, as well as the general contractor on the project, has since altered its due diligence procedures for the selection of subcontractors to avoid future issues.

Protection for workers

Because of the Torres case, San Jose lawmakers passed a new law aimed at protecting workers late last month, the San Jose Spotlight reported. After negotiating with local trade unions and considering arguments from the business community about added costs for the development of new housing, San Jose now requires private construction companies to pay a prevailing wage on all projects that receive city subsidies.

On some construction projects, laborers get lost in the shuffle as the companies they work for try to save money. One of the ways some contractors try to reduce costs is by classifying their workers as independent contractors so that they don’t have to provide employee benefits like workers’ compensation insurance coverage or pay payroll taxes on their behalf. Some states like California, however, are considering new legislation to prevent that from happening.

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San Jose approves prevailing wages for private construction projects (CA)

Posted by National Alliance for Fair Contracting on

by Grace Hase
JUNE 25, 2019

While the unlicensed Silvery Towers subcontractor Job Torres Hernandez received his sentence in federal court for harboring undocumented workers in slave-like conditions, San Jose lawmakers on Tuesday passed a law to prevent construction companies from exploiting low-wage workers on private construction projects that receive tax breaks.

Spurring from negotiations with labor unions more than a year ago, private construction companies will now be required to pay a prevailing wage on projects that receive city subsidies. The now-renamed Silvery Towers, which is located at 188 W. St. James St., took center-stage during Tuesday’s discussion as union members urged the council to make sure history didn’t repeat itself.

“These protections strike reasonable balance to decrease the likelihood of workers being exploited by shady contractors,” said Will Smith, a union representative from IBEW Local 332.

But years before Hernandez’s conviction, Silvery Towers received a high-rise incentive from the city – reducing the amount of park fees the developer paid from $19,000 per unit to $7,650 per unit. At 643 units, the project received an estimated $4.9 million in fee breaks – which would have made it subject to the city’s new law.

Although many developers and business organizations didn’t support the new standards — as expressed during public testimony and through letters submitted to the city – not approving them could jeopardize extending the high-rise fee reduction program, business leaders said.

“While The SVO is firmly opposed to layering additional costly regulations onto private development projects, we also recognize that the standards are a significant piece of a complex puzzle in extending the Downtown High-Rise Fee Reduction program,” silicon valley organization President Matthew Mahood wrote in a letter to the council. “The program would address our current housing crisis, while also adding direly needed economic development to downtown San José.”

While councilors mainly agreed on supporting worker protections, they worried that additional regulations could stall the construction of new housing units – they ultimately voted to hire a consultant to study the impacts on projects already in the city’s pipeline.
“(We need to make) financially feasible on both the backs of the future residents and the workforce that builds the units,” Councilmember Raul Peralez said. “It’s an important balance to strike.”

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“The City Council’s decision today sends the right message to greedy developers and shady contractors,” Steve Flores, business manager for UA Local 393, told San José Spotlight. “It is our hope that the workforce protections adopted today will prevent another Silvery Towers from occurring and will provide construction workers a family sustainable wage.”

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Construction Company Operators Plead to Fraud, Labor Theft (CA)

Posted by National Alliance for Fair Contracting on

by Construction Citizen
May 27, 2019

A brother and sister who run a construction company in Paramount have admitted to their roles in a $6 million workers’ compensation fraud and labor theft scheme, the Los Angeles County District Attorney’s Office announced on April 24.

They both admitted an allegation of committing fraud and embezzlement that resulted in a loss of more than $500,000 to the State Compensation Insurance Fund (SCIF).

Sentencing is scheduled for Oct. 22, 2020, in Department 37 of the Foltz Criminal Justice Center.

Under the terms of a negotiated plea agreement, the defendants must pay restitution of $6.3 million and more than $5,000 in investigative costs to SCIF. They also are required to pay $30,000 in fines, have one year of electronic monitoring, complete 500 hours of community service, and comply with SCIF in future business dealings.

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More states should follow new Colorado policy on wage theft (CO)

Posted by National Alliance for Fair Contracting on

BY TERRI GERSTEIN
05/30/19 04:00 PM EDT

Something important for workplace justice quietly happened in Colorado this month, unheralded amidst the roar of our national politics. Governor Jared Polis signed a bill strengthening the penalties for employers who commit wage theft. In Minnesota, even stronger legislation was sent to Governor Tim Walz this week. Now other states should follow their lead.

Why does this matter? Because workers are cheated of pay every day. The incidence of workplace abuse is high. When people do not get paid, it has a huge impact on their lives, as we saw in the federal shutdown. Our laws too often treat employer crimes with a light touch, levying only minimal penalties amounting to little more than a slap on the wrist. The new law in Colorado appropriately treats wage theft with the seriousness it deserves.

Worker advocates started using the term “wage theft” awhile ago. The phrase began to take hold more broadly after activist Kim Bobo wrote a 2011 book by that name. Since then, “wage theft” entered the vernacular and eventually legal terminology, as worker exploitation and economic inequality have become high profile national issues. Of course, “wage theft” sounds more visceral and less wonky than “nonpayment of wages” or “violations of wage law,” but this term is not just better marketing or political framing, it is a more accurate description of what happens. I work 60 hours a week. You do not pay me or pay only a portion of what you owe or a fraction of what is required by law. You stole my work. That is theft.

It took awhile for people to wrap their minds around this, as we tend to think of theft as taking something that someone owns, something that you could actually touch and seek to recover, such as cars, cash, wallets, laptops, or other valuable objects. But work by people is also valuable. The legislation in Colorado perfectly demonstrates this conceptual leap. Seeking to combat both wage theft and human trafficking, the law notes the need “to recognize labor as a thing of value that can be subject to theft” and states that “to protect all workers, it is necessary to close loopholes that allow for the exploitation of human labor for profit.”

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Polis Signs Local Minimum Wage Control Into Law (CO)

Posted by National Alliance for Fair Contracting on

BY BENTE BIRKELAND
MAY 29, 2019

Cities and counties in Colorado will be able to set their local minimum wage higher than the statewide rate thanks to a new law Gov. Jared Polis signed Wednesday.

The statewide minimum wage will rise to $12 an hour in 2020. Supporters of the new law say Colorado’s minimum wage should serve as a floor, not a ceiling.

“When it comes to local wages, who better to know what people are actually struggling with and what the need is for the community than actually those that are on the front lines,” said Eva Henry, a county commissioner in Adams County.

Henry adds her county hasn’t yet discussed whether or not to increase the minimum wage.

The new law does limit the number of local governments that could increase their minimum wages, to no more than 10 percent of Colorado’s local jurisdictions. It also stipulates the wage floor can’t increase by more than 15 percent each year and allows local communities to work together to come up with regional minimum wages. Opponents worry about the patchwork of wages and its effect on businesses and overall administrative costs.

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Amendments To Colorado Wage Act Increase Employers’ Exposure To Criminal And Civil Personal Liability (CO)

Posted by National Alliance for Fair Contracting on

JD Supra
June 11, 2019

The Legislature was busy this year, passing a variety of bills that will affect Colorado employers. House Bill 19-1267, entitled Penalties for Failure to Pay Wages, amends the Colorado Wage Act in ways that could be significant for all employers with operations in the state. The amendment, which was signed into law this month by Gov. Jared Polis (D), will take effect on January 1, 2020, and will apply to any offenses committed on or after that date.

The Legislative declaration accompanying the amendment says that the Legislature’s purpose is to provide more protection for victims of human trafficking because “[p]ersons who commit the crime of human trafficking often commit other crimes such as wage theft, tax evasion, and workers’ compensation fraud.”

Wage theft

On the surface, the amendment seems to apply only to the criminal provisions of the Wage Act. The current version of the Wage Act provides that certain violations can be prosecuted as unclassified misdemeanors, including “willful refusal to pay wages, falsely denying the amount or validity of a wage claim with intent to underpay or to annoy, harass, oppress, hinder, delay, or defraud an employee, and intentional failure to pay minimum wage.” Intentional refusal to pay wages owed is currently punishable by a fine of up to $300, up to 30 days in prison, or both. Intentional failure to pay the minimum wage is punishable by a fine ranging from $100 to $500, or imprisonment ranging from 30 days to one year, or both.

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Individual liability for unpaid wages

The amendment also changes the definition of “employer,” which will affect all other components of the Wage Act, including the civil provisions.

In 2003, the Colorado Supreme Court ruled that officers and agents of a company were not personally liable for unpaid wages. In Leonard v. McMorris, the Court applied the definition of “employer” in Section 8-4-101(6) of the Wage Act and found that the Legislature did not intend to force officers and agents to act as sureties in the event that payroll was not met.

The new amendment specifically says that Leonard “does not provide sufficient protections for workers and their families.” Although it is not completely clear, it appears that the Legislature intends to overrule Leonardand that the case should no longer be relied upon as good law.

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ILLINOIS ATTORNEY GENERAL: Attorney General Raoul Opposes Rule Change That Endangers Rights of Millions of Workers (IL)

Posted by National Alliance for Fair Contracting on

By Press release submission | Jul 1, 2019

Illinois Attorney General issued the following announcement on June 26.

Attorney General Kwame Raoul, as part of a multistate group of 19 attorneys general, opposed the U.S. Department of Labor’s proposal to narrow the interpretation of joint employment, thereby complicating how states enforce labor laws and leaving millions of workers vulnerable to labor violations.

In a letter sent Tuesday to Department of Labor Secretary Alexander Acosta, Raoul and the attorneys general challenge the department’s proposed change to joint employer status under the Fair Labor Standards Act (FLSA). The joint employment rule determines employer liability for wage theft or other workplace violations when two or more entities jointly employ a worker. Raoul and the attorneys general contend that the department has failed to justify the proposed new interpretation and draws on outdated analysis that does not consider the changing nature of workplace relationships, including the fact that a growing number of businesses are changing organizational models by outsourcing integral functions but still maintaining control of workers.

“When businesses are increasingly using contractors, employments agencies or other third parties to meet staffing needs, workplace protections should be clear,” Raoul said. “I am committed to fighting any policy that could compromise the protections our workers deserve.”

Under the proposed rule, joint employment would be determined by whether an employer hires or fires the employee; supervises and controls the employee’s schedule and working conditions; determines the employee’s rate and method of payment; and maintains the employee’s records. But according to Raoul and the attorneys general, this proposal is inconsistent with the purpose of the FLSA – to protect workers – and ignores more than 30 years of private sector development during which the economy and the workplace have changed.

Further, the attorneys general write that the department’s proposed rule does not reflect workplace relationships, where businesses increasingly share employees using third-party management companies, independent contractors, staffing agencies, or other labor providers. By narrowing the scope of joint employment, the department’s change will leave millions of workers vulnerable to unchecked violations of federal and state labor laws.

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Standing up to tax fraud in the construction business (MA)

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May 29, 2019
By Steve Joyce
Special to the Reporter

Today, one in five contractors in the construction industry commits tax fraud, resulting in $2.6 billion is lost in federal and state income. That’s why it’s more urgent than ever to combat construction industry tax fraud, an unjust and immoral affront to the people of Massachusetts.

Construction tax fraud often manifests itself through dishonest bookkeeping and worker exploitation. Approximately 1.2 million workers are paid ‘off the books’ in the US annually. Without employment records to hold them accountable, contractors have been known to minimize or steal wages at the completion of a job.

And when a contractor does bother to go through the with paperwork, they frequently misclassify workers as “independent contractors.” The workers do the same job as a fulltime employee, but shoulder tax obligations that the employer should be paying. Nearly 300,000 construction workers are misclassified in this manner each year.

These practices allow contractors to sidestep jobsite safety, skirt around workers compensation premiums, and skip out on payroll taxes and critical benefits like Social Security, overtime, unemployment, and retirement.

In Massachusetts, denied payments and overtime to workers and minimum wage violations cost employees $700 millionannually. In a 2018 fair labor report, the Massachusetts attorney general reported restitution and penalties of $9.6 million as a result of wage theft, worker misclassification, and exploitation of young workers. Construction alone resulted in 61 citations, and generated $1.5 million in restitution and penalties.

Honest employers pay the price of these schemes, too. When shady contractors illegally skip taxes and shortchange workers, the prices they offer look like a 30% savings on labor costs. Businesses that do their work by the book, follow the rules, and pay their fair share of taxes can’t bid competitively with artificially low prices in the marketplace. Cheap, cheating contractors are just like a bag of chips that costs a dollar less but is twice as full of air.

In Massachusetts, recent estimates show that $16.5 million is recovered annually in lost payroll taxes and unemployment insurance. Funds like these contribute to tax pools that eventually help pay for things like public services, meaning when taxes go unpaid, the public is cheated. Workers, business owners, and the people of our state lose out when funding for schools, roads, bridges, first responders, veterans, and Medicaid and Social Security are harmed.

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Steve Joyce is the political director of NERCC and a member of Carpenters Local 327. For more information on the New England Council of Carpenters, visit nercc.org or stoptaxfraud.net.

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Personal Liability for Prevailing Wage Violations in Massachusetts (MA)

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JD Supra
June 18, 2019

Owners of a Massachusetts waste collection, recycling and removal company recently were held personally liable for their failure to pay their employees at prevailing wages. See Donis v. American Waste Services, LLC, 95 Mass.App.Ct. 317 (2019). Under Massachusetts law, wage violations are subject to triple damages and payment of attorney’s fees.

The waste services company entered into contracts with several Massachusetts towns that required compliance with prevailing wage laws at hourly rates of $20 — $24. However, the company paid workers $16 — $17 an hour, or at flat day rates. The company tried several unsuccessful defenses: (1) the towns did not always provide the company with current rate schedules (rejected because the company could obtain them elsewhere); (2) the flat day rates paid to employees properly compensated employees because employees did not always work eight hours (rejected because the company did not keep adequate time records); and (3) employees should not be able to recover for claims under both a prevailing wage claim and a Massachusetts Wage Act claim (rejected because employees can bring both claims).

This case stands as a reminder that companies and their officers must follow prevailing wage laws and failure to do so can result in personal liability for three times the amount of money a company fails to pay its employees.

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