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DRYWALL CONTRACTOR FINED $2 MILLION; IS CALIFORNIA WAGE THEFT RAMPANT? (CA)

Posted by National Alliance for Fair Contracting on

By Jane Mundy
August 10, 2018

THE CALIFORNIA LABOR COMMISSIONER’S OFFICE FINED A DRYWALL COMPANY $2 MILLION FOR WAGE THEFT-SPECIFICALLY FAILING TO PROPERLY COMPENSATE WORKERS FOR REST PERIODS, OVERTIME AND SOME WORKERS FOR NOT PAYING MINIMUM WAGE.

Los Angeles – After workers at Fullerton Pacific Interiors Inc., complained about California labor law violations to the non-profit Carpenters Contractors Cooperation Committee, the California Labor Commissioner’s Office stepped in. Investigators found that the drywall company paid a daily rate that didn’t include overtime hours or rest breaks and 28 workers were not even paid minimum wage. Fullerton was fined nearly $2 million for wage theft violations.

The work included taping and drywall installation at hotels, recreation centers and casino projects in Los Angeles, Orange and San Bernardino counties between August 2014 and June 2016. According to the citation, Fullerton failed to properly compensate 472 workers for rest periods and 289 workers were not paid for overtime, along with other wage violations. California state Labor Commissioner Julie Su said in a statement that, “In construction, unscrupulous contractors attempt to obscure their wage theft by paying workers a flat rate rather than for all hours worked. But a daily or other flat rate system does not take the place of minimum wage and overtime obligations.”

THE $2 MILLION FINE

This is how the wage theft fine was calculated. $1,892,279 payable to the workers was broken down as follows:

* $798,664 for rest period violations. Most workers in California are entitled to a paid 10-minute break for every four hours worked, or paid for an extra hour at their regular rate. Fullerton’s workers were allowed a 30-minute lunch “hour” but did not receive rest breaks.

* $386,685 for unpaid overtime.

* $692,500 for wage statement violations.

* $14,431 for the unpaid wages, liquidated damages and waiting time penalties. Workers paid less than minimum wage are entitled to liquidated damages that equal the unpaid wage plus interest. There are also penalties for waiting times that are calculated based on taking the employees wages and multiplying it by the days they waited for compensation, at a maximum of 30 days.

* $72,400 civil penalty: The company would also be on the hook for civil penalties of $50 per work day for the initial violation, which increases to $100 for subsequent pay periods.

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DC Attorney General alleges electrical contractor misclassified 535 workers (DC)

Posted by National Alliance for Fair Contracting on

By Laurie Cowin
Date: Aug. 7, 2018

Dive Brief:

  • The attorney general for the District of Columbia sued Power Design on Monday, alleging that the Florida-based electrical contractor purposefully misclassified at least 535 construction workers as independent contractors so that it could cut costs, avoid legal responsibilities and evade taxes. The lawsuit also alleges various minimum wage, overtime and other labor violations and claims that senior management was involved in the scheme. In a request for comment, Power Design told Construction Dive that it had not yet been served and that Power Design believes it is in compliance with all applicable laws and regulations in the district.
  • In addition to Power Design, Attorney General Karl A. Racine’s suit also names JVA Services LLC and DDK Electric Inc., two labor brokers hired to staff Power Design work sites.
  • The lawsuit alleges the companies violated the District’s Workplace Fraud Act, which requires companies to classify workers as employees in in most circumstances, as well as the Minimum Wage Revision Act, Sick and Safe Leave Act and Unemployment Compensation Act from 2014 through 2017. It seeks monetary and injunctive relief for the affected employees and recovery of penalties to the District of Columbia, which could be $1,000 to $5,000 for each misclassified worker. Injunctive relief is a court order for a defendant to stop a specified act or behavior.

Dive Insight:

Misclassifying construction-industry employees is an offense many states are taking measures to combat. For example, Colorado’s governor, John Hickenlooper, issued an executive order in June that created a task force to investigate and find ways to address the misclassification of construction employees as independent contractors. Such misclassification not only hurts employees, but because the misclassification is an attempt to have a lower cost of doing business, it also hurts companies who correctly classify employees and therefore have higher bids.

Employee misclassification also leads to workers’ compensation insurance fraud. William Canak, workers’ comp and employment policy expert and professor at Middle Tennessee State University, estimated that up to 30% of construction workers are misclassified.

(Read More)

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Remove Power Design From D.C. Apprenticeship Program (DC)

Posted by National Alliance for Fair Contracting on

By: Editorial Board
09/14/2018

The D.C. attorney general’s office recently filed a lawsuit against Power Design, a Florida-based electrical contractor. The lawsuit alleges that Power Design, known for its work on D.C. buildings, is at the nexus of one of the largest wage-theft scandals in the city’s history.

Construction companies are required to employ a certain number of apprentices in order to bid on major contracts within the District. Construction companies need approval by the Apprenticeship Council to hire apprentices and comply with this requirement to bid on contracts in the District. This editorial board calls on the D.C. Apprenticeship Council to renounce apprenticeship eligibility status from Power Design due to the company’s egregious violations of workers’ rights.

The D.C. attorney general’s lawsuit alleges that Power Design misclassified electrical workers as independent contractors instead of employees, allowing Power Design to avoid payroll taxes and keeping the workers from receiving benefits such as sick leave. In addition, the lawsuit claims that some workers weren’t paid the appropriate overtime rate and others weren’t even paid the D.C. minimum wage. Over 500 Power Design workers were mischaracterized as independent contractors, 180 were not paid the required overtime rate, and 63 were not paid minimum wage, which demonstrates a codified company culture of mistreatment and abuse.

This isn’t the first time Power Design has been accused of shortchanging its workers. When the company first applied for the D.C. apprenticeship program last year, Attorney General Karl Racine and D.C. Councilmember Elissa Silverman urged the Apprenticeship Council to deny Power Design’s bid. Racine and Silverman referenced lawsuits filed against Power Design claiming that the company did not pay for overtime work and purposefully misclassified workers.

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Power Design is just one of many companies that have profited from the massive development and construction wave that the city has undergone in the last few years. By consistently failing to pay their workers their proper wages and benefits, the company has ensured that regular city residents don’t benefit from this development. Rather than allowing Power Design to continue their abuse of the city’s workers, the Apprenticeship Council should follow the lead of their colleagues in the attorney general’s office and demand real changes from Power Design. Doing so would ensure that all of the city’s residents get to benefit from its growth.

While Racine’s thorough investigation into Power Design is vitally important, other branches of the District government must form a united front in combating wage theft in the city. A so-called progressive city government should not be aligning itself with a company that mistreats its workers so egregiously. The government can begin by taking a stand against companies that have abused the rights of D.C. workers.

(Read More)

Many DC projects don’t comply with local hiring mandate (DC)

Posted by National Alliance for Fair Contracting on

Kim Slowey
PUBLISHED July 2, 2018

Dive Brief:

  • An April audit of Washington, D.C.’s First Source mandate, which requires local workers be given employment preference for construction projects receiving taxpayer assistance, revealed that contractors and developers are not meeting the program guidelines and that the Department of Employment Services (DOES) is doing relatively little to make sure companies are in compliance, according to The Washington Times. Companies building qualifying projects of $300,000 to $5 million must hire 51% local residents, and those in charge of projects valued at more than $5 million must meet a higher percentage in several categories.
  • Lawrence Perry, deputy auditor for the Office of the D.C. Auditor, testified before the District council’s Committee on Labor and Workforce Development on June 21 and told the committee members that the agency in charge of enforcing the First Source program was insufficiently monitoring qualifying companies to make sure they entered into a First Source agreement; lacked written policies and procedures necessary to monitor and judge the success of First Source and did not have written guidelines for enforcement and imposition of fines, with only one financial penalty being issued in the history of the program. The auditor’s report also called attention to the fact that companies are allowed to self-report project data with little or no verification by the DOES.
  • Construction industry groups have said the program paperwork is too burdensome. They also said there is a shortage of skilled workers and that the lack of affordable housing is forcing the First Source-qualified employees that once lived in the District to the suburbs, shrinking the pool of craft workers even more. One council member said developers and contractors consider the possibility of a low fine just another cost of doing business.

Dive Insight:

Other local governments have no problem enforcing local hiring mandates and levying large fines against contractors that miss the mark.

Detroit fined contractors working on the $868 million Little Caesars Arena, now home to the NHL’s Red Wings hockey team and the NBA’s Detroit Pistons, a total of $5.2 million for not meeting the city’s 51% local-hire goals. The Michigan city said that, of the project’s three million man-hours, Detroit residents worked only 25%.

(Read More)

GUEST COMMENTARY: Reviewing Indiana’s common construction wage law (IN)

Posted by National Alliance for Fair Contracting on

Dewey Pearman
Sept. 2, 2018

Interesting data is now becoming available to test the pro and con arguments made in 2015 in the debate on legislation in the Indiana General Assembly to repeal Indiana Common Construction Wage law. That law was repealed in reaction to arguments that repeal would accomplish two objectives. First, repeal would increase competition in bidding among building contractors seeking to do work for public agencies. And, the cost of construction projects paid for by taxpayers would decrease. Opponents of repealing the law asserted that not only would these results fail to be realized but that repeal would result in, among other outcomes lower wages for workers.

Indiana’s common construction wage law, like similar laws in other states and at the federal level are intended to insure that when government spends money in a given labor market it does not inadvertently impact wages normally, or commonly paid in that market for similar type of work. That is, if as an example a carpenter in a given area is typically paid $25.00 an hour in wages and received $10.00 an hour in fringe benefits workers on public projects should not be paid more or less than those amounts for the same work. Doing so would interfere in the private labor market by providing an upward or downward pressure on local wages. The law required all contractors bidding on a public project to pay the wages and benefits customarily paid in that area. The law provided for an objective process by which wage and benefit rates were determined and also provided for public input into the determination.

On the issue of lower costs to taxpayers a 2018 study released by the Midwest Economic Policy Institute, The Effects of Repealing Common Construction Wage In Indiana, Impacts on Ten Construction Market Outcomes, finds that the average cost of school construction projects did not decrease after repeal but actually increased. The study focused on school projects because they tend to be more homogeneous than other types of public construction projects. The study, written by Kevin Duncan, Ph.D. Colorado State University-Pueblo and Frank Manzo IV, MPP, Midwest Economic Policy Institute looked at 146 school projects awarded before and 189 projects awarded after repeal of the law. The average project cost before repeal was $1.42 million and $1.48 million after the repeal. Contrary to arguments for taxpayer savings the average cost of school projects went up $60,000 after repeal. These findings are consistent with similar studies in many other states.

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In the end, what Indiana got with the repeal of the common construction wage law is an increase in taxpayer costs and lower wages for blue collar construction workers. While, the Indiana Department of Labor is required to submit a report on the effects of repeal of the common construction wage before July 2021 the early evidence suggest it is already time for the Indiana General Assembly to put this law back on the book.

(Read More)

State targets misclassified workers (LA)

Posted by National Alliance for Fair Contracting on

By Mike Hill / Business Editor
Jul 29 2018

The state is cracking down on companies that are misclassifying workers to avoid paying federal government taxes, the Louisiana Workforce Commisson says.

Since July 1, 2017, state field auditors have completed nearly 1,000 audits of companies, uncovering more than 3,300 misclassified workers, the commission said in a news release.

“The 3,300 misclassified workers resulted in more than $11 million in unreported taxable wages and hundreds of thousands of dollars in unpaid unemployment taxes,” LWC Secretary Ava Dejoie said. “This practice creates a financial disadvantage to those companies that are complying with employment and payroll laws.”

The agency has conducted unannounced site inspections, particularly in the New Orleans area.

“Unannounced site inspections will continue until the unfair business practice of misclassifying workers stops,” Dejoie said. “Our message is clear – misclassifying workers will not be tolerated in our state.”

(Read More)

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Nearly $10 million in fines, penalties issued against Massachusetts employers accused of wage theft in 2018 (MA)

Posted by National Alliance for Fair Contracting on

Updated Sep 4; Posted Sep 4
By Kristin LaFratta

In Massachusetts, state officials found $9.6 million in restitution and penalties against businesses and employers who stole wages and exploited workers.

Attorney General Maura Healey released a 2018 Labor Day report this week that explores the findings of wage theft and other means of exploiting workers. Investigations were performed by the AG’s Fair Labor Division, or those who enforce wage laws and the fair bidding of construction projects.

The report revealed wage theft and labor violations occurred across industries, and many by contractors based outside of Massachusetts. In fiscal year 2018, Fair Labor conducted 247 “field visits” across Massachusetts to investigate unfair pay practices, which found both civil and criminal violations in various businesses.

Healey said her office chose to prioritize wage theft in the construction industry last fiscal year, which resulted in nearly $1.5 million in penalties and restitution, according to the report. In that time Fair Labor issued citations or other assessments against 61 different employers in the construction industry.

Methuen’s E.J. Paving Company, Florida-based contractor Southern Road and Bridge, LLC and J. Donlon & Sons Inc., which worked on a public works project in Medford, were among the “notable cases” listed in the report, all of which failed to pay workers properly in overtime pay or minimum wage.

(Read More)

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Winchester construction company failed to pay workers minimum wage (MA)

Posted by National Alliance for Fair Contracting on

Posted Aug 1, 2018 at 5:46 PM

A Winchester construction company J. Donlon and Sons Inc. has paid more than $121,000 in wages and penalties for violating the Massachusetts prevailing and minimum wage laws by failing to properly pay workers on a Medford public works project, Massachusetts Attorney General Maura Healey announced today. The company is located at 86 Cross St. in Winchester.

“This company and its owners gained an unfair advantage by cheating their workers out of the wages they earned,” said Attorney General Healey in a press release announcing the settlement. “With this settlement, we are sending a message that there are serious consequences to breaking our laws.”

J. Donlon and Sons Inc.’s owner Joseph M. Donlon Sr., and his two sons Joseph M. Donlon Jr. and Sean Donlon, were cited for intentionally failing to pay prevailing wage, failing to submit true and accurate certified payroll records, failing to pay the state minimum wage and failing to maintain true and accurate general payroll records from January 2012 through December 2016, according to the release. As part of the settlement, the company and all three corporate officers are prohibited from bidding or working on any public works construction project in Massachusetts for 10 years.

The attorney general’s Fair Labor Division began investigating J. Donlon and Sons after a former employee submitted a complaint alleging he was not paid the proper prevailing wage rate for work performed on a city of Medford utility trench patching public works project. According to the release, the attorney general’s office determined that employees on the project were paid far less than the established prevailing wage rate. During one three-year period, for example, employees were paid an hourly rate of between $8 and $20 when they should have been paid between $51.35 and $54.10 per hour.

The company also submitted certified payroll records to the city of Medford during certain years that listed only members of the Donlon family as having worked on the project and omitted other employees, the attorney general’s office stated. The investigation found that general payroll records were also inaccurate, and two employees were paid less than the applicable minimum wage.

(Read More)

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AG orders Methuen paving company pay restitution for wage theft (MA)

Posted by National Alliance for Fair Contracting on

By Zoe Mathews (zmathews@eagletribune.com)
Jul 20 2018

BOSTON – A Methuen paving contractor and its president have been cited $172,554 in restitution and penalties for violating the Massachusetts overtime law for work performed on various public works projects across the state, Attorney General Maura Healey announced Friday.

“State prevailing wage laws ensure that companies working on public works projects do not cut corners to gain an unfair competitive edge,” said Healey in a press release on Friday. “This company cheated its workers out of overtime pay and with this action by my office, will now pay them what they are owed.”

The AG’s Fair Labor Division began an investigation into EJ Paving and its president, Thomas Evangelista, after receiving a complaint from an employee alleging he was not paid overtime for all hours worked in excess of 40.

The investigation revealed the company paid overtime to its employees after they had worked in excess of 45 hours during a week, though the law requires employees be paid time and a half after working more than 40 hours a week.

The investigation also revealed that when employees worked on both private and public works projects during the same week, EJ Paving failed to account for the different hourly rates of pay when overtime was calculated.

The AG’s office issued one citation for failure to pay overtime, which EJ Paving has paid in full, according to the release.

(See Article)

Proposed Detroit ordinance could mandate 51% local hires for all city construction work (MI)

Posted by National Alliance for Fair Contracting on

By Kim Slowey
Sept. 20, 2018

Dive Brief:

  • At a Sept. 17 press conference, Detroit City Council President Pro Tem Mary Sheffield proposed a measure that would require all city-funded demolition and construction work to be performed by at least 51% city residents, the Detroit Free Press reported. The ordinance will be presented to the city council during the next few months as part of a package of “People’s Bills” aimed at helping Detroiters.
  • Sheffield told the Free Press that the push behind the construction-related measure was the revelation that local residents were not well represented in the city’s Land Bank demolition program, which funds the razing of blighted homes in Detroit. Of the $70 million spent on the initiative so far, more than 50% of the contracts have gone to suburban Detroit companies, 26% to minority firms and only 16% to African American-owned companies.
  • Detroit Mayor Mike Duggan instituted a similar program in 2014, but Sheffield’s proposal differs in that it would lower the current threshold of $3 million – at which hiring requirements kick in – to a lower, undetermined amount; include demolition projects; and impose expensive fines on companies that do not comply. The fines would go into a workforce training fund, though Sheffield maintains there are plenty of qualified Detroiters that simply have not been given work opportunities. Sheffield said her ordinance would pursue more rigorous enforcement and collection of fines, but Duggan’s office said they have been conscientious about going after violators.

Dive Insight:

Sheffield’s plan is similar to those instituted in other areas of the country, but at 51%, it’s higher than what is outlined in most other regulations, and many agencies forego fines and rely on contractors making their best efforts to comply.

The City of Sacramento is one of the latest municipalities to enact a local hiring law, the Local Hire and Community Workforce Training Program. The regulation, passed last month, requires that contractors use local workers when performing city-funded work valued at $1 million or more. The ordinance also requires that 20% of apprentices either live in an economically disadvantaged area or be a member of a special class – homeless, a woman, former offender, foster youth or recipient of public assistance.

(Read More)