Union: Construction tax fraud costs governments $450B annually (PA)

Posted by National Alliance for Fair Contracting on

Bob Bauder
Monday, April 15, 2019 3:37 p.m.

Several hundred carpenters’ union members and public officials rallied Monday in Downtown Pittsburgh to call for an end to construction industry fraud.

Union officials said unscrupulous contractors and labor brokers rob the public of federal and local tax revenue by paying workers cash “under the table,” misclassifying them as independent contractors and failing to pay such benefits as workman’s compensation and unemployment.

The fraud costs local governments across the United States an estimated $450 billion annually in lost tax revenue, officials said.

“When you talk about tax fraud, it’s about people that are cheating,” said Bill Waterkotte, eastern district vice president of the Keystone Mountain Lakes Regional Council of Carpenters. “They’re not paying taxes. They’re paying cash. Four hundred and fifty billion (dollars), in evading taxes. That could go to building our roads and bridges, our schools, our veterans, helping the people who need help, and they’re stealing it.”

The union estimates fraud costs Pennsylvania governments about $200 million each year, but offered no specifics for the Pittsburgh region.

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Pittsburgh City Council late last year approved a resolution proposed by Councilman Corey O’Connor that created a task force to investigate the issue. O’Connor said the members plan to offer future legislative remedies to council and the mayor.

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“We are going to go after those bad workers, those people that take our tax money, that take your jobs because subcontractors and contractors are undercutting city bids. We have to stop that,” O’Connor said.

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Milwaukee Building and Construction Trades Council Statement on Gov. Evers’ signing Executive Order to Protect Wisconsin Workers (WI)

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“Standing with working families, Governor Tony Evers’ took a huge step to protect Wisconsin from corrupt employers who cut costs by scamming workers and the state of Wisconsin.”

By Milwaukee Building and Construction Trades Council
Apr 15th, 2019 02:39 pm

MILWAUKEE – Milwaukee Building and Construction Trades Council Statement President Dan Bukiewicz released the following statement in response to Gov. Evers’ signing Executive Order #20 to Protect Wisconsin Workers:

“Standing with working families, Governor Tony Evers’ took a huge step to protect Wisconsin from corrupt employers who cut costs by scamming workers and the state of Wisconsin. It’s refreshing to have a governor not only focused on what is best for workers and Wisconsin’s future. I applaud Governor Evers for taking immediate action to protect the middle class,” said Milwaukee Building and Construction Trades Council Statement President Dan Bukiewicz.

“Contracted work is an often-overlooked driver of eroding labor standards, rising income and wealth inequality, persistent structural racism and occupational segregation, and the shifting of power away from workers and toward corporations.

Many industries in which people of color are over represented are characterized by the widespread use of independent contractors. These contracted jobs offer no unemployment insurance protections or even a minimum wage,”added Bukiewicz.

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(See PDF Copy of Executive Order)

Union construction workers protest tax fraud in their industry on Tax Day (WV)

Posted by National Alliance for Fair Contracting on

By Jake Flatley in News
April 15, 2019 at 3:26PM

CHARLESTON, W.Va. – Monday marked Tax Day in the United States so the United Brotherhood of Carpenters in Charleston wanted to make a stand against those who in the construction industry who participate in tax fraud.

Local 439 and Local 436 gathered dozens of construction workers and laborers from around the state to protest the “underground” economy that they say goes on with thousands of independent contractors nationwide.

“We are trying to point out the effect of the underground economy, the payroll fraud, paying in cash, illegal classification of independent contractors,” Scott Brewer with the Keystone Mountain Lake Regional Council of Carpenters (KML) in Charleston said.

“What it does to the communities, to the tax base of the communities, to the states and federal governments and how it harms legitimate companies that play by the rules.”

The protest occurred in front of the United States Post Office location on Lee Street in Charleston and Brewster said it joins in with other events in the Construction Industry Tax Fraud Day of Action.

According to Brewer, around 20-percent of construction work in the United States is done under the table which he says boils down to $66 billion a year is lost in the United States.

“That’s money that is lost to cities like Charleston,” he said. “They don’t get their user fee, their local B&O tax. The state of West Virginia gets no payroll taxes, the federal government gets no payroll taxes like Medicare and Social Security.”

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Fair Wages are Good for the Economy, Albany Should Pass an Expanded Prevailing Wage (NY)

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March 28, 2019 | by Kevin Duncan

As the next state budget is being debated in Albany, increasing attention is being paid to the state’s prevailing wage laws. With so much misinformation out there, let’s set the record straight. Paying construction workers a middle class wage is a net positive for New York’s economy.

Specifically, the issue is how construction workers are paid for projects that receive public funds. Since 1897, projects receiving taxpayer funds are required by New York State law to pay fair wages to their workers. The problem is that developers are increasingly exploiting loopholes created by the growth of public-private projects, which blur the lines of what’s considered “public work.”

One recent example is the Chelsea assisted living facility on Long Island. The project received $15 million in public funding, but because that money came through the Brookhaven Industrial Development Agency (IDA), there was no requirement to pay workers a middle-class wage.

Legislation currently making its way through the legislature would close that loophole.

The bill,S 1947(Ramos)/A1261(Bronson), would clearly define “public work” as any large-scale project that is paid for with public funds. By ensuring that projects subsidized with public funds support middle class wages, the law will strengthen the middle class and the state’s economy.

Chances are that you’ve seen folks in the business community argue the opposing viewpoint – but when you look under the surface, those arguments tend to rely on overly simplistic or just plain inaccurate information.

Take the industry-backed argument that paying workers a middle-class wage would force costs to skyrocket and immediately put an end to all development. When a wealthy developer complains that much about paying a fair wage, you have to wonder how little they’re actually paying their workers.

As an academic, I rely on data and evidence to form a judgment. The data show that labor costs for construction projects usually amount to about 23-24 percent of the total project cost. To keep the math simple, let’s say that a prevailing wage law results in a 10 percent raise for construction workers in a given region. At most, that would increase total cost by 2.5 percent. A 2.5 percent cost can be easily offset by the efficiencies gained from paying the highly-trained workers you attract with a prevailing wage. Trained, skilled workers mean higher productivity along with fewer accidents, errors and change orders.

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(See PDF of Full Study)

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Maryland SB 300 – Prevailing Wage Rates, Public Works Contracts and Suits by Employers (MD)

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March 28, 2019

This bill authorizes an employee under a public work contract who is paid less than the appropriate prevailing wage to sue to recover the difference in wages paid without first filing a complaint with the Commissioner of Labor and Industry. A determination by the commissioner that a contractor is required to make restitution does not preclude the employee from a private cause of action. A contractor and subcontractor are jointly and severally liable for any violation of the subcontractor’s obligations associated with civil actions (brought either by the commissioner or the employee).

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(See PDF of Bill)

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Frostman column: Rewarding Wisconsin workers (WI)

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By Caleb Frostman on Apr 2, 2019

Being a relative newcomer to politics and government, I’m astonished at how often the word “agenda” is thrown around. Listening to soundbites and reading headlines, apparently, everybody has one and they’re something to be afraid of.

From a professional communication standpoint, I just hope everyone’s agenda is neatly formatted with bulletpoints and is less than a page.

Having sifted and winnowed through what’s true from what’s false when it comes to bluster and hot air, I’ve come to interpret “agenda” as meaning a collection of values or a set of proposals that reflect, or when put into action would manifest, those values.

The values reflected by Gov. Evers’ 2019-21 budget proposals include equal opportunity, strategic investment and ensuring that all participants in Wisconsin’s workforce and economy have a fair shot at sustained economic well-being.

One of the specific proposals that most clearly articulates the values of investing wisely and providing opportunity for economic well-being is the restoration of prevailing wage in Wisconsin.

Wisconsinites have clearly stated that when their tax dollars are being used in public projects, they want the wages paid and benefits provided on those projects to stay in their community. And they want the wage to be a fair, living wage and the benefits to be family-supporting, representative of what is typical for that work in that area.

Too often, after the repeal of prevailing wage, out-of-state contractors are able to win bids on public projects by under-cutting local businesses. They pay their workers a low wage and provide inadequate benefits, while likely maintaining their top-line profi

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‘Put The Exploiters In Jail’: Wage Theft Bill Cracks Down On Employers

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By Shaun Boyd
April 2, 2019 at 6:40 pm

The Colorado Fiscal Institute says more than 500,000 Colorado workers are victims of wage theft each year, losing an estimated $750 million. And right now, there’s little prosecutors can do about it.

Under current state law, wage theft is a misdemeanor, no matter if it’s $100 or $100,000. Representatives Jonathan Singer and Meg Froelich plan to change that.

“When a hard day’s work is put in, an honest day’s pay is deserved,” said Singer.

He and Froelich have introduced a bill that would align wage theft with other thefts. If it’s over $2,000, it would be a felony.

“Wage theft is perpetrated against the most vulnerable workers,” said Froelich.

It is especially common in the construction and food service industries. Jim Gleason, a carpenter, says he was a victim.

“We were getting paid every week until about the 4th or 5th week and we were informed that there wasn’t enough money to make payroll so if we didn’t mind waiting a week, we’d pay for two weeks the next week,” he said. “Well, the next week came and there was no check. It’s time we put the exploiters in jail and got the penalties that they deserve and give the wages to the people who deserve them.”

The Colorado District Attorney’s Council agrees.

“Why is it that someone should face a greater penalty for stealing your cellphone then for having your wages stolen?” asked Boulder County District Attorney Michael Dougherty. “It is the exact same offense and should be treated the same under law and until we do so we’re going to allow immigrants and poor people in this state to be victimized.”

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Bi-State should opt out of swap program (IA)

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March 26, 2019
Tracy Kurowski

Quad City residents are now witnessing the creation of an architectural marvel with the construction of the new Interstate-74 bridge. Two of the world’s largest mobile cranes are employed in the project, along with hundreds of workers, and we are now seeing the concrete base of the center arch rise out from the river bottoms.

This remarkable project is made possible by a federal and state government funding partnership that guarantees a dignified wage to the men and women who have been working throughout this brutally cold winter. Called “Davis-Bacon” protections, they were named after two Depression-era Republican congressmen who wanted to make sure that federal investments in infrastructure projects stimulate local economies and create local jobs.

Federal rules require contracts be awarded to the “lowest responsible bidder.” Cities, schools, and counties also award contracts this way to protect taxpayers and prevent graft and other corruption. Before Davis-Bacon was passed in 1931, members of Congress noticed that many of the contracts they had secured for their home districts were not using local workers. Construction companies undervalued the labor costs in order to meet the lowest bidder standard and land the contract. When the work needed to be done, contractors brought in migrant workers from low-wage states to complete the local projects. This resulted in the opposite of congressional intent of using infrastructure projects to stimulate local economies.

No one then or now would argue that taxpayer funds for public infrastructure projects should be inadvertently used to drive down workers’ wages. Once the Davis-Bacon law was passed, it has since set a wage floor so that instead companies are competing on productivity, efficiency and the quality of work they provide, not on their ability to hire unethical subcontractors who exploit workers.

However, in 2017 the Iowa Legislature passed a law that would remove those protections. Known as the “Iowa DOT Federal Aid Swap Program,” it enables the Iowa Department of Transportation to swap federal money for state money.

It works essentially as a form of money laundering. Federally-funded local infrastructure projects (like Davenport’s $4 million 53rd Street reconstruction and expansion project) would be allowed to skirt the law, pay the lowest wages possible and not hire local workers. The swap also enables localities to avoid “Buy America” requirements attached to federal funds and instead use cheap imported steel rebar. What could possibly go wrong?

Fortunately, Iowa’s Road Swap law permits metropolitan planning organizations like the Bi-State Regional Commission to opt-out of the swap and continue to comply with the federal standards.

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Like the name of the commission that gets to vote to protect our local economy, this is indeed a bi-state issue. About $30 million is currently earmarked to be swapped. Failure to take action will affect contractors, workers and local economies on both sides of the river.

Laws like Davis-Bacon helped us recover from the nation’s worst economic disaster. If indeed the Bi-State Regional Commission is acting in the interests of community, workers and our tax dollars, it will opt-out of the Iowa Swap Program and maintain Davis-Bacon Act protections on local infrastructure projects.

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2-Minute Preview: Lawmakers to hear bills on prevailing wage for school construction, … (NV)

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Tuesday, March 19, 2019
David Calvert

Lawmakers on Wednesday will consider reversing a 2015 Republican-backed law limiting prevailing wage for school construction projects, …

Prevailing wage on school construction projects

Lawmakers on the Assembly Government Affairs Committee will review AB190, a bill that reverses some changes to prevailing wage rules that were passed under Republican control in 2015.

The measure would eliminate the requirement that public schools and colleges pay 90 percent of the prevailing wage – a sort of minimum wage for construction work – and revert it to 100 percent. It would also lower the threshold at which prevailing wage kicks in, from projects that cost $250,000 and up to $100,000 and up.

The measure is sponsored Democratic Assemblyman Skip Daly. The committee meets at 8:30 a.m.

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Contractors, Your Subcontractors’ Wage And Hour Practices Are Your Business

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J.D. Supra
March 20, 2019

A prime or general contractor may be held jointly and severally liable for any violations, including wage and hour violations, by its subcontractors if the contractor is found to be a joint employer with the subcontractor under applicable federal or state law. As most contractors who work on construction projects covered by the federal Davis-Bacon Act (DBA) (direct contracts) and DBA Related Acts (federal funding or loan guarantees) (together, DBRAs) know, a prime or higher tier contractor is jointly and severally liable for violations by its subcontractors without the requirement of a joint employer finding. Many state prevailing wage laws (which require that wages for construction workers on public works projects be paid according to published wage scales) mirror the DBRAs’ liability law. The consequences for violations of the DBRAs, which are enforced by the U.S. Department of Labor (DOL), include back pay, penalties under the Contract Work Hours Safety Standards Act (CWHSSA) for overtime violations, and debarment from holding or working on any government contracts (after a referral and hearing process) for a period of up to three years.

For these reasons, contractors on DBRAs-covered projects should include terms and language in their subcontracts to help ensure their subcontractors are complying with the DBRAs regarding proper classification of workers, accurate timekeeping, timely payment of the correct prevailing wages and benefits based on job classification and hours worked, proper payment of overtime under CWHSSA, and the submission of accurate certified payroll. While rare, in addition to holding the prime or higher tier contractor responsible for payment of back pay and CWHSSA penalties for subcontractor violations if the subcontractor cannot pay or will not pay, the DOL has debarred prime contractors that have failed to properly monitor their subcontractors with respect to the DBRAs’ requirements.

District of Columbia; Maryland

For construction contractors who work on projects in the District of Columbia (D.C.) or Maryland, there is even more reason to mind the pay practices of subcontractors. In the last few years, both of these jurisdictions have enacted laws that, like the DBA, hold higher tier contractors jointly and severally liable for their subcontractors’ violations of local wage and hour laws.

In D.C., the local wage and hour laws specify that prevailing wages are covered, and can be recovered, in addition to local minimum and overtime wages.

The potential damages that can be recovered are crushing. In D.C., in addition to back pay, a contractor can be liable for an additional three times the back pay in damages (or quadruple recovery) as well as attorneys’ fees and additional penalties. In Maryland, the liability is slightly less, back pay plus two times the back pay in damages (or triple recovery) as well as attorneys’ fees and penalties.

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