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New RI law will make wage theft a felony

Posted by National Alliance for Fair Contracting on

Sarah Guernelli
June 27, 2023

Rhode Island is cracking down on wage theft.

Gov. Dan McKee recently signed a new law that will change wage theft from a misdemeanor crime to a felony starting next year.

Rep. David Morales helped champion the change.

“No longer will an unethical employer who withholds wages from their workers be met with a slap of a wrist of just a misdemeanor,” Morales said.

Under the new law, employers that knowingly and willfully fail to pay an employee more than $1,500 in wages could face up to three years in prison and pay fines.

“If you commit wage theft you are going to be held accountable,” he said.

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Department of Labor to hold online seminars to educate current, prospective federal contractors on prevailing wage requirements

Posted by National Alliance for Fair Contracting on

Edwin Nieves
June 14, 2023

The U.S. Department of Labor announced today that its Wage and Hour Division will offer online seminars for contracting agencies, contractors, unions, workers and other stakeholders on the requirements for paying prevailing wages on federally funded construction and service contracts.

Part of the division’s effort to increase awareness and improve compliance, the seminars will include recorded training videos on a variety of Davis-Bacon Act and Service Contract Act topics that participants can view on-demand. The division will then offer live Q&A sessions to provide additional information.

Q&A sessions on compliance issues will be offered as follows:

Davis-Bacon Act: June 27 and Sept. 13.
Service Contract Act: June 28 and Sept. 14.

“Prevailing wage laws are key to ensuring that construction and service jobs are good jobs and that workers on federally funded projects across the country are paid fair wages and benefits,” said Principal Deputy Wage and Hour Administrator Jessica Looman. “Recent investments in our nation’s infrastructure offer us a great opportunity to educate employers so they can compete for new federal contract opportunities and put skilled employees to work in their communities.”

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Inflation Reduction Act: Federal Incentives for Public Entities for Clean Energy Improvements

Posted by National Alliance for Fair Contracting on

Bricker Graydon LLP
June 15, 2023

By now, you are likely aware that the federal government is making the largest investment in climate and energy improvements in American history, known as the Inflation Reduction Act (IRA). The IRA allocates funding to provide incentives that reduce renewable energy costs for an expanded number of organizations including public educational institutions, school districts, states, counties, and local municipalities. Previously, renewable energy incentives were only available to private tax-paying entities. The IRA, however, now allows public entities to have access to these incentives.

Specifically, the federal government has made $369 billion available over the next decade for new and existing programs with the goal of a 40% reduction in the nation’s carbon emissions by 2030. The Act expressly allows these incentives to be used for installing energy facilities like solar arrays and wind turbines, installing certain water and sewage facilities, converting fleets of gas-powered vehicles to electric and hybrid vehicles (for example fleets of police cars, ambulances, fire trucks, school buses, garbage trucks, snow plows), and electric and other alternative fuels vehicle charging stations.

Investment Tax Credits (ITC) and Production Tax Credits (PTC)

One of the most innovative aspects of the IRA involves its creation of a direct-payment mechanism that is available to public entities. This new ability to receive direct cash payments is available for many of the different credits and programs funded by the IRA. Two of the most valuable types of tax credits that are eligible for direct payments under the IRA are the Investment Tax Credit (ITC) and Production Tax Credit (PTC).

Both types of credits were expanded to assist with financing renewable energy projects with the hope of spawning a new era of clean energy projects where ownership is retained by public and other tax-exempt entities. Among other categories of assets, the PTC was extended to include wind and solar projects that begin construction before January 1, 2025, and the ITC was expanded to include wind, solar, and energy storage projects that begin construction before January 1, 2025. The ITC and the PTC expire in their current form on December 31, 2024, and will be replaced by even more expansive technology-neutral and zero-emissions clean energy investment and production tax credits.

An ITC can be claimed after a clean energy project is completed and placed into service. The amount of an ITC that a project might be eligible for is calculated based off the upfront costs of installing and placing the project into service. The base rate for the ITC is 6% of the costs of a project. If prevailing wage and apprenticeship requirements are met, the base rate is automatically increased 5x to 30% of the project’s costs. On November 30, 2022, the IRS published its initial guidance for meeting these prevailing wage and apprenticeship requirements.

While an ITC is a one-time credit based on the upfront costs of a project, a PTC provides a yearly credit that can be claimed over a 10-year period. The amount of credit that an energy project is eligible to claim depends on the amount of energy it produces and sells to unrelated entities each year. The base rate of the PTC varies each year due to inflation. In 2022, for instance, the PTC had a base rate equal to $0.005/kWh. Like the ITC, if prevailing wage and apprenticeship requirements were met, the base rate for 2022 was increased 5x to $0.026/kWh.

Historically, for public entities, income and other types of tax credits are useless. Thanks to the IRA, public entities are now able to receive direct payments in lieu of credits by filing a tax return for the tax year that a project was placed into service that requests a refund equal to the amount of a project’s eligible tax credit. The ability to receive direct payments is available for many of the different credits created by the IRA and is not limited to only ITCs and PTCs. Entities can only elect to receive these new direct payments at such time and in such manner as the Secretary of the Treasury provides.

Public entities should consult experienced public finance counsel to further explore these financing options.

Clean commercial vehicle credits

The IRA provides resources to facilitate the purchase of clean energy commercial vehicles that replace traditional combustion-engine vehicles. The IRA expanded commercial vehicle tax credits to encompass any clean energy commercial vehicle. Each purchase of an eligible clean energy vehicle can receive a credit that equates to the lesser of 30% of the purchase price (15% if a hybrid vehicle) or the difference between the clean energy vehicle’s purchase price and a comparable combustion-engine vehicle’s purchase price, known as the incremental cost. Vehicles weighing under 14,000 pounds are eligible for a credit of up to $7,500. Vehicles weighing more than 14,000 pounds are eligible for a credit of up to $40,000. As alluded to above, this credit is also able to be received as a direct payment by tax-exempt entities.

The IRA carved out an additional amount of funding for an Environmental Protection Agency (EPA) program, consisting of $1 billion in competitive grants and rebates, that is aimed at offsetting up to 100% of a public entity’s replacement cost for heavy-duty Class 6 and 7 commercial vehicles. The grants and rebates under this EPA program can even be used to reimburse the costs of any charging or other associated infrastructure that is necessary to replace those types of vehicles, including workforce development.

Alternative fuel charging station credits

The Alternative Fuel Vehicle Refueling Property Credit is a general tax credit for an entity that installs alternative fuel vehicle refueling and recharging stations, including direct current fast charging stations. The base value of credit is 6% of the cost of the charging station with a maximum credit capped at $100,000. Like the ITC, the value of this credit increases from 6% to 30% of the cost of a qualified alternative fuel vehicle refueling station, but is still subject to the cap of $100,000 per station, if the requirements for prevailing wages and apprenticeship are met. Please note that public entities cannot use this credit to offset expenses related to the permitting and inspection of project sites. There are strict geographic limitations on the ability to qualify for this charging station tax credit. The station must be installed in rural or low-income areas. This credit is able to be transferred by certain tax-paying entities for cash and is eligible to be received by tax-exempt entities as direct payments in lieu of non-refundable tax credits.

Davis-Bacon Act

The Davis-Bacon Act applies to IRA-funded or assisted contracts in excess of $2,000 for the construction, alteration or repair (including painting and decorating) of public buildings or public works. This Act triggers an obligation on the contractors and subcontractors to pay federal prevailing wage.

Apprenticeship requirements

Lastly, the IRA sets forth apprenticeship requirements that must be complied with for IRA-funded or assisted contracts. These requirements include at least one apprentice for each subcontractor with four employees or more, ratio requirements as set by the Department of Labor or a state agency and required percentage of apprenticeship work hours (12.5% for 2023, and 15% for 2024 and beyond) for projects. The IRA does, however, include a good-faith exception for projects that do not receive a response in five business days from qualified apprentices from a registered apprenticeship program or for when no apprentices are available.

In sum, IRA has provided public entities with a unique opportunity to reduce energy costs while also reducing the amount of their carbon emissions.

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Former Missouri construction company owner sentenced to 18 months in prison, fined $100,000 for fraud scheme

Posted by National Alliance for Fair Contracting on

KTTN News
June 16, 2023

U.S. District Judge Henry E. Autrey on Thursday sentenced a former construction company owner to 18 months in prison and a $100,000 fine for committing fraud to qualify for tax abatements designed to encourage minority-owned businesses in St. Louis.

Brian Kowert Sr. “engaged in an elaborate ‘pass through’ fraud scheme where he used an elderly Black contractor solely to pass company checks through to the non-minority subcontractors who Kowert hired to do the actual work and supply the actual materials on the project,” Assistant U.S. Attorney Hal Goldsmith wrote in a sentencing memorandum. Kowert also knew what he was doing was wrong, as he committed a similar Minority Business Enterprise fraud 17 years ago, Goldsmith wrote.

Kowert was co-owner and chief operating officer of Clayton, Missouri-based HBD Construction Inc. at the time, and was acting as the project manager for the renovation and redevelopment of a building for Greater Goods LLC on Chouteau Avenue in St. Louis. Kowert and Charles Kirkwood, the owner of Midwestern Construction, a company that was a Minority Business Enterprise, agreed to falsely list Kirkwood’s company as providing materials and performing work on the project. Kirkwood’s participation allowed the project to satisfy St. Louis requirements for 25% participation by MBEs to qualify for a 10-year tax abatement.

The MBE participation requirements seek to address historical social and economic disadvantages experienced by minority group members and to reduce minority-based barriers to and foster participation by minority-owned businesses in city contract opportunities.

Kowert issued duplicate subcontracts to Kirkwood’s company for work that was performed and materials that were supplied by two other non-MBE companies. Kowert also issued a duplicate HBD purchase order to Kirkwood’s company for materials provided by a third non-MBE company. Kowert submitted a false chart of projected costs for the redevelopment project to the St. Louis Development Corporation, the city agency charged with reviewing, approving and recommending tax abatements. The chart falsely listed Kirkwood’s MBE company as providing labor and materials valued at approximately $198,000 on the Greater Goods redevelopment project and concealed the involvement of the three non-MBE companies.

Beginning on August 4, 2020, Kowert caused 14 HBD checks worth a total of about $220,000 to be issued to Kirkwood’s company for the work performed and materials provided by the three non-MBE companies. Kirkwood deposited those checks into his company bank account and then issued checks to the three non-MBE companies, at Kowert’s direction.

Kirkwood was paid approximately $2,000 by Kowert for his role in the criminal scheme.

Kowert and HBD then caused a false application for tax abatement on behalf of the Greater Goods redevelopment project to be submitted to the St. Louis Development Corporation. The application falsely represented that Kirkwood’s MBE company had performed about $224,361 in project costs, comprising about 6 ½ % of the required 25% MBE participation in the project.

Greater Goods and its employees had no knowledge of Kowert’s scheme. His actions cost the company, which donates a significant share of its sales revenues to charities, a tax abatement of approximately $400,000 over ten years. As a result, the company was not able to carry out various projects and meet certain charitable goals, Goldsmith wrote in the memo.

The scheme also had consequences for the MBE program.

“Mr. Kowert’s actions have harmed SLDC, undermined the City of St. Louis’ MBE Program, and caused substantial injury to the duly certified and struggling minority-owned firms in the St. Louis region,” Neal Richardson, president, and CEO of SLDC wrote in a letter to Judge Autrey.

Kowert pleaded guilty in January to two counts of wire fraud.

The case was investigated by the FBI. Assistant U.S. Attorney Hal Goldsmith is prosecuting the case.

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Teamsters applaud NLRB ruling on worker misclassification

Posted by National Alliance for Fair Contracting on

Matt McQuaid
June 15, 2023

Teamsters General President Sean M. O’Brien issued the following statement regarding the ruling from the National Labor Relations Board (NLRB) on The Atlanta Opera, Inc., which revives an Obama-era rule that makes it easier for workers to organize and join unions:

“The Teamsters Union is pleased that the NLRB has taken a critical step in putting power back into the hands of workers and reversing an egregious rule that made it easier for corporations to misclassify hardworking men and women.

“When workers are misclassified as ‘independent contractors,’ they are deprived of the opportunity to secure the higher wages, better benefits, strong workplace protections, and job security that comes with a union contract.

“While most only associate misclassification with so-called ‘gig’ workers who work for ridesharing apps like Uber and Lyft, workers in nearly every industry have been under attack by corrupt employers and politicians that want to strip them of their employee status and the legal protections that follow.

“While we are glad to see the NLRB return power to workers, let us not forget that this should have never been the law of the land. Misclassification of employment status is the latest tool that employers have deployed in their fight against workers.

“The new ruling from the NLRB makes it more difficult for employers to deceptively misclassify workers and avoid paying employee-related expenses, like unemployment insurance, workers’ compensation, and Social Security.

“The Teamsters remain committed to helping workers across the country raise their voices and get their fair share. We look forward to continuing to fight alongside pro-worker officials at the NLRB, Department of Labor, in Congress, and in state legislatures to protect workers’ rights.”

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R.I. lawmakers pass bills to increase penalties for wage theft and employment fraud

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The bills will make it a felony to “knowingly and willfully” commit wage theft of more than $1,500, instead of a misdemeanor. House Speaker K. Joseph Shekarchi called the bills “historic.”

By Amanda Milkovits Globe Staff, June 14, 2023

PROVIDENCE — The House overwhelmingly voted for legislation Wednesday that will increase the penalties for wage theft and employment fraud — a tool that supporters say will punish employers who take advantage of workers.

House Speaker K. Joseph Shekarchi called the bills “historic.”

The companion bills, sponsored by Democratic Representative Robert E. Craven Sr., of North Kingstown, and Senator Meghan Kallman, representing Pawtucket and Providence, give more power to the state Department of Labor and Training and the attorney general’s office the ability to bring felony charges to serious offenders.

The bills will make it a felony to “knowingly and willfully” commit wage theft of more than $1,500. (Currently, it’s a misdemeanor.)

The legislation also lays out how the Department of Labor and Training will audit companies and investigate complaints of employee misclassification, following the federal regulations in the Fair Labor Standards Act. A specialized investigatory team at the DLT will have the authority to determine whether the issues are good faith errors, or violations that require civil penalties or referral to the attorney general’s office for criminal charges.

Some company owners and chambers of commerce had voiced concerns about being prosecuted by the attorney general’s office for mistakes, said Representative Jason Knight, Democrat of Barrington and Warren. So, the legislation was amended to allow investigators to filter out the innocent mistakes from incidents where employers are willfully stealing from workers, he said.

The legislation will require the attorney general’s office and the DLT to produce annual reports about wage theft and misclassified employees in Rhode Island. It also calls for more public education for workers and an assessment about the industries and areas in Rhode Island where workers are more likely to be victims of wage theft and employment fraud.

The bills also hone in on the construction industry, with enhanced criminal penalties, including felony charges, for misclassification of employees. The worst offenders, as the Rhode Island underground economy and employee misclassification task force found, were often construction companies and subcontractors, according to the task force’s annual report.

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Power At Work Blogcast #16: A State Labor Secretaries Roundtable

Posted by National Alliance for Fair Contracting on

June 13, 2023
Alexandra Anderson

Watch Burnes Center for Social Change senior fellow Seth Harris in conversation with Portia Wu, Secretary of Labor for the state of Maryland, Laura Fortman, Commissioner of the Maine Department of Labor, and Robert Asaro-Angelo, Commissioner at New Jersey Department of Labor and Workforce Development, as they discuss the the role and responsibilities of a labor secretary, the big successes and challenges in each state, and much more.

Secretary Wu has been serving as the Secretary of Labor for the state of Maryland since early 2023. Previously, she was Managing Director of of U.S. Public Policy at Microsoft. Before joining Microsoft, Wu served as Assistant Secretary for Employment and Training at the United States Department of Labor, overseeing federal programs that provided job training and employment services. From 2011 to 2014, she served at the White House Domestic Policy Council as Special Assistant and Senior Policy Advisor to President Barack Obama for Labor and Workforce.

Commissioner Fortman has over 20 years of experience in public policy and advocacy for the Department of Labor. Prior to being confirmed to serve as Commissioner of the Maine Department of Labor in 2019, Fortman was Deputy Administrator of the Wage and Hour Division at the United States Department of Labor from 2013 to 2017, and held her same role as Commissioner of the Maine Department of Labor under Governor John Baldacci from 2003 through 2010.

Commissioner Asaro-Angelo was appointed as Commissioner at New Jersey Department of Labor and Workforce Development in 2018. Before serving in this role, Asaro-Angelo worked for the Laborers International Union of North America (LiUNA), AFSCME and 1199SEIU. He also served as executive director of the New Jersey Democratic State Committee in 2008 during the Bush Obama transition.

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Project Labor Agreements are key to our clean energy transition

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Project Labor Agreements, or PLAs, enable contractors to know, definitively, what their costs will be, and typically include language that eliminates the risk of strikes, lockouts, or other labor disruptions.

By Marc Poulos Jun 8, 2023, 2:15pm EDT

A large-scale American energy transition is upon us. The Inflation Reduction Act, signed into law in 2022 by President Joe Biden, allocates nearly $400 billion for new energy projects, including solar, wind, carbon capture and sequestration, hydrogen, nuclear and more.

It represents what politicians in both parties have long suggested was the key to American energy independence: an “all of the above” strategy.

That is, if we can deploy the sufficiently skilled workforce to build, maintain and operate these facilities.

So how do we do it?

First, we need to acknowledge that for all of their environmental risks, America’s legacy fossil fuel sector has produced a largely sustainable workforce model. The industry long ago recognized the importance of partnership with skilled trade unions to attract, train and retain the skilled workforce it needed. Not surprisingly, U.S. government data has found that legacy energy projects typically feature two to three times the level of union density as renewable projects.

Another study, analyzing the energy industry in Minnesota, North Dakota and South Dakota, found that clean energy projects were simply not competitive in the labor market relative to their legacy industry peers, and increasingly reliant on lower-skilled workers from out-of-state to build projects.

To its credit, the Inflation Reduction Act has recognized the importance of job quality and local workforce development as central tenets of America’s clean energy transition. Most of the tax incentives linked to new project development require minimum labor standards, including prevailing wages and apprenticeship utilization.

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