Governor Signs AB 5 to Stop Misclassification and Protect Millions of Workers (CA)

Posted by National Alliance for Fair Contracting on

By East County Today
Sep 18, 2019

SACRAMENTO – Today Governor Gavin Newsom signed into law legislation authored by California State Assemblywoman Lorena Gonzalez (D-San Diego) to restore employment status for millions of workers who have been misclassified as contractors.

Assembly Bill 5 provides clarity for businesses, workers and taxpayers in the wake of the Dynamex ruling by the California Supreme Court in 2018.

“Today, we are disrupting the status quo and taking a bold step forward to rebuild our middle class and reshape the future of workers as we know it. As one of the strongest economies in the world, California is now setting the global standard for worker protections for other states and countries to follow,” Assemblywoman Gonzalez said.

More than a million Californians have been misclassified by employers looking to cut costs at the expense of workers. Companies relying on this illegal business model decimate the state’s worker safety-net programs, undermine fair competition, and subject law-abiding businesses to unfair competition.

Ultimately, when workers without protections are laid off or cannot find work, get sick or injured on the job, or they retire, taxpayers end up bearing the costs of supporting them. The state’s Division of Labor estimates that the misclassification of workers results in an estimated annual payroll tax revenue loss of $7 billion per year.

By applying a strict test to determine who is an independent contractor and making employment status a default under the law, working Californians who have been kept off payroll as employees will gain access to basic labor rights for the first time, including rights to minimum wage, overtime, unemployment insurance, workers’ compensation, paid sick days, paid family leave, workplace protections against harassment and retaliation, and the right to form or join a union. Some of the many workers who will benefit include janitorial workers, construction workers, port truck drivers, home health aides, hotel and hospitality workers, delivery and ride-hail drivers.

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(See Copy of Bill)

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$15B California school construction bond to go before voters (CA)

Posted by National Alliance for Fair Contracting on

AUTHOR – Kim Slowey
PUBLISHED – Sept. 16, 2019

Dive Brief:

  • California lawmakers have agreed on the terms of a $15 billion construction bond program that will now go before state voters in March. The money would go toward public preschool, K-12 and higher education construction and modernization projects.
  • If approved by voters, the lion’s share of the funding – $9 billion – will be used for preschool and K-12 projects: $2.8 billion for new construction; $5.2 billion for modernization; $500 million for charter schools; and $500 million for career technical schools. The University of California and the system’s Hastings College of the Law in San Francisco will be able to tap into $2 billion, as will California State University facilities and the California Community Colleges system.
  • The state’s General Services Department will prioritize projects for facilities that have posed health or life safety hazards, followed by those proposed by school districts with financial hardships; school facilities that have concerns with lead in water; projects that have been waiting for approval for two quarters; and new construction or modernization projects that will ease overcrowding.

Dive Insight:

If voters approve the legislation next year, that’s good news for the California contractors that specialize in school construction, but it has also raised questions from some about the role that project labor agreements (PLAs) play in the measure.

In Section 17070.56(a)(2) of the bill, within each priority category, those projects that use a PLA will be given first consideration. So, for example, if there are 10 projects that are meant to deal with some health or safety hazard, the projects that use a PLA will be given priority over the others.

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AG Racine Releases Report on Payroll Fraud in District Construction Industry (DC)

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Report Details How Companies Evade Taxes and Reduce Workers’ Take-Home Pay by Illegally Misclassifying Workers as Independent Contractors

by Construction Citizen | September 20, 2019

Attorney General Karl A. Racine released a report last week demonstrating how District of Columbia construction companies hurt workers, cheat taxpayers, and undercut law-abiding competitors when they illegally misclassify workers as independent contractors. Worker misclassification is a form of payroll fraud where employers categorize workers who should be considered direct employees as independent contractors. This practice is used by unscrupulous employers to get around labor laws and reduce costs, and it is especially common in the construction industry. The Office of the Attorney General (OAG) commissioned this report as part of a broader effort to crack down on wage theft in the District.

“Companies that illegally misclassify employees as independent contractors are stealing from workers, evading taxes, and gaining an unlawful edge over competitors,” said AG Racine. “The Office of the Attorney General commissioned this study to better understand the dynamics of worker misclassification and how we can fight it – and the economic analysis shows just how much this illegal practice costs workers and the community. Indeed, my office has already taken several companies to court to stop this kind of payroll fraud, and we will continue to act to protect workers when businesses violate the District’s labor laws.”

In the District, businesses are legally required to pay employees a minimum wage, contribute toward their state and federal taxes, and provide overtime pay and other benefits. Businesses do not have the same responsibilities to independent contractors, who must pay all their own taxes, are not protected by most labor laws, and do not have access to workers’ compensation or unemployment insurance. Numerous studies have documented that employee misclassification schemes are pervasive in the construction industry.

The District’s Workplace Fraud Act, which applies to the construction industry, requires companies to classify workers as employees in most circumstances. To classify a worker as an independent contractor, construction companies must prove that an individual is free from the employer’s direction and control, is economically independent, and that their work falls outside of the core business of that company.

OAG’s new report, which includes analysis by labor economists Dr. Dale Belman and Dr. Aaron Sojourner, reveals that District construction companies that misclassify workers unlawfully avoid at least 16.7 percent in labor costs compared to companies that operate legally. They do this by failing to pay overtime, shifting tax burdens to workers, and evading other taxes and required payments entirely. When employers who misclassify workers evade taxes, the District loses out on funding for critical social safety net programs. If these companies are engaged in other forms of wage theft, their savings at the expense of workers can exceed 40 percent.

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OAG’s Increased Efforts to Protect Workers

OAG’s efforts to fight worker misclassification are just one part of a broader push to protect District workers. Last year, OAG stepped up wage theft enforcement after working with the D.C. Council on legislation granting the agency independent authority to investigate and bring these cases and increased penalties on employers who violate the District’s wage and hour laws. Wage theft is the illegal practice of denying workers’ wages or benefits they have earned. This happens when employers withhold pay, pay less than the required minimum wage, force workers to work extra hours without pay, refuse to pay overtime, or misclassify employees as contractors. Wage theft affects millions of workers nationally and happens across job types and income levels. Workers in low-wage jobs and immigrants are especially vulnerable to this type of exploitation.

Since it gained new enforcement authority, OAG can now seek to recover stolen wages, restitution of up to three times the amount of unpaid wages, and penalties from employers, and can also bring criminal charges. So far, OAG has launched more than 30 investigations into wage theft and payroll fraud, and has taken action against a home health care service provider, a national electrical contracting firm, KFC franchises, a cell phone store, a cafe chain, and other businesses that harmed District workers. To date, OAG has obtained over $400,000.00 in judgments and settlements against businesses that have stolen wages from District workers.

How to Report Wage Theft Violations

Workers who believe that they have experienced wage theft or other wage and hour violations can submit a complaint to OAG by phone at (202) 442-9854. Workers can learn about their rights under District law and how they can get help if their rights are being violated on the OAG website.

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“Unfair competition for law-abiding companies: The increase in the proportion of construction workers who are misclassified as independent contractors impacts how business is done in the construction industry. Companies that fraudulently misclassify gain the advantage of reduced labor costs. They are in a position to submit lower bids than competitors who follow the law. As the number of companies that misclassify increases, law-abiding companies win fewer bids, and have less work. Over time, misclassification progresses from a method used by unscrupulous companies to earn additional profits to the price of survival in the industry. Reducing the use of misclassified workers provides a level playing field for law-abiding companies.” – According to Dr. Dale Belman and Dr. Aaron Sojourner whose economic analysis is cited in the report.

(PDF Copy of OAG Report on – Illegal Worker Misclassification: Payroll Fraud in the District’s Construction Industry)

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Racine slated to testify in Congress in wake of AG’s report on illegal worker misclassification in DC’s construction industry (DC)

Posted by National Alliance for Fair Contracting on

By Kevin Fasic and Anthony N. Delcollo
August 15, 2019 at 11:10 AM

DC Attorney General Karl Racine is set to testify Thursday at a U.S. House hearing on misclassification of employees as a form of payroll fraud, the subject of a report released earlier this month by Racine’s office on how the practice affects the District’s construction industry.

Racine is one of six witnesses called by the Education & Labor Committee’s Workforce Protections Subcommittee for a 10:15 a.m. hearing on “Misclassification of Employees: Examining the Costs to Workers, Businesses, and the Economy.”

The report commissioned by Racine’s office – “Illegal Worker Misclassification: Payroll Fraud in the District’s Construction Industry” – found that by illegally misclassifying employees as independent contractors, construction companies in the District can evade at least 16.7% of the cost of doing business. The report is the latest step in the attorney general’s broad effort in recent years to curb wage theft in DC.

“Here in the District we believe it is incredibly important to protect workers’ rights, including workers’ rights to fair wages, overtime pay, sick and safe leave, and to help create economic opportunity for all of our residents,” Racine said at a Sept. 10 panel event at Georgetown University. Safe leave enables workers to take job-protected time off to cover their needs if they or an immediate family member are the victim of domestic violence, stalking or human trafficking.

Racine delivered the report’s findings at a forum hosted by the Kalmanovitz Initiative for Labor and the Working Poor, within Georgetown’s School of Continuing Studies. The initiative works to develop innovative strategies and public policies to improve workers’ lives in a changing economy, according to its website.

“Our local economy clearly is growing in DC,” Racine said. “But what we don’t see often enough is the very fact that workers, oftentimes immigrant workers, are being treated poorly and are having their wages taken from them.”

By treating employees as contractors, companies are able to skirt paying payroll taxes and Social Security, overtime, sick leave and other benefits that would otherwise be due. About two-thirds of the savings from misclassification is taken from workers and the remaining third from society at large in the form of unpaid taxes, according to the report. The authors of the study are Dale Belman, a professor at Michigan State University’s School of Human Resources and Labor Relations, and Aaron Sojourner, an associate professor at the University of Minnesota’s Carlson School of Management.

Within DC’s construction industry, “we have things such as a lot of undocumented workers,” Sojourner said at the Georgetown event. “They are not in a good position to go to their boss and go, ‘You know, you owe me an extra $4 an hour. I’ve done the calculations – if you classified me properly, this is what I should be getting.'”

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Businesses: Get Familiar With Recent Changes to Del. Construction Law (DE)

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Significant changes to the law were passed by Delaware’s 150th General Assembly that all construction firms doing business in the First State should be aware of.

By Kevin Fasic and Anthony N. Delcollo
August 15, 2019 at 11:10 AM

Significant changes to the law were passed by Delaware’s 150th General Assembly that all construction firms doing business in the First State should be aware of. Generally, these changes amend the Workplace Fraud Act (19 Del.C. Sections 3501-3515), create the Delaware Contractor Registration Act (19 Del.C. Sections 3601-3611), and establish an apprenticeship training requirement under the Large Public Works Contract Procedures statute (29 Del.C. Section 6962).

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It’s really this simple: To rebuild the middle class, strengthen unions (IL)

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It’s not only good policy. It’s what people want.

By: Edward Smith
August 27, 2019 at 12:41 PM

In downtown Chicago, you’ll find a J.W. Marriott on Adams Street built by union workers and run by union workers. Their wages allow them to own homes, their health care allows them to see a doctor and their pensions promise a secure retirement.

Go only a short distance away to any of a number of other hotels, built by workers who didn’t have a union and run by workers without a union, and you’ll likely find that employees struggle to cover the rent, are more likely to use emergency rooms than visits to the doctor, and have no retirement security.

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Today, more than a third of all workers in the U.S. make less than $15 an hour, according to a National Employment Law Project study based on the Current Population Survey. Nearly 1 in 5 children are living in poverty, about half of older workers have no retirement savings at all, and almost a third of Americans have no health care coverage.

With a union, workers earn on average $9,000 more a year, are a third more likely to have health care coverage and significantly more likely to have a pension. But our nation has gone from a country in which 1 in 3 workers belonged to a union a generation ago to one in which only 1 in 16 private-sector workers belong to a union.

To be sure, global forces have had an impact on America’s working and middle class, but that is too often a generalization and used as an excuse. Global competition and the race to the bottom isn’t the reason that millions of fast-food workers, hotel workers, child care workers, health care workers, and too often construction workers and even teachers live in poverty or are falling behind. The reason isn’t global competition; it’s because they don’t have a union.

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It’s not only good policy-it’s what people want. According to National Opinion Research Corp.’s survey for MIT, nearly half of all workers would join a union if they could-that’s 58 million workers, nearly four times the number who are actually in unions.

People are starting to understand that if you want good wages to raise a family on, if you want good health care, if you want a safe place to work and a pension after a lifetime of work, you need to join a union. It really is that simple, and it’s the economic policy our nation, our businesses and each of us should pursue.

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Worker protection unit formed in attorney general’s office (IL)

Posted by National Alliance for Fair Contracting on

Journal-Courier
Published 12:48 pm CDT
Monday, August 26, 2019

A new unit in the Illinois Attorney General’s Office will be charged with protecting Illinois workers from unlawful employment practices such as wage theft.

Gov. J.B. Pritzker signed legislation on Friday that created a Worker Protection Unit.

The law gives the attorney general’s office express authority to investigate and file suit against employers who violate the Prevailing Wage Act, the Employee Classification Act, the Minimum Wage Law, the Day and Temporary Labor Services Act and the Wage Payment and Collection Act.

The new unit will collaborate with the Illinois Department of Labor to detect unlawful conduct. The unit can also take direct legal action against widespread wage payment violations and unfair labor practices.

A Worker Protection Unit Task Force will be created to facilitate information sharing and collaboration between state and local prosecutors and regulators. The task force will also promote a statewide outreach and enforcement effort to target businesses that violate state worker protection laws. The task force will report on its work to the governor and the General Assembly by December 2020.

The bill takes effect Jan. 1.

(See Article)

Workers on Digi-Key project paid back wages after violation (MN)

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By: Brian Johnson
October 1, 2019

At least three concrete workers on the $300 million Digi-Key expansion project in Thief River Falls have received thousands of dollars in back pay after a state agency found that a project subcontractor violated state wage laws.

In a Sept. 24 letter to concrete worker Franklin Flores, an investigator with the Minnesota Department of Labor and Industry said Flores’ employer, Millennium Concrete, was “in violation of state labor standards and prevailing wage laws.”

Millennium owed back wages for work performed between April 1 and Dec. 1 of last year, according to the letter.

A laborers’ union official who assisted the employees confirmed to Finance & Commerce that three affected workers each received checks “in the $8,000 to $9,000 range” along with the letter from the department.

Illinois-based McShane Construction is the general contractor on the Digi-Key project.

“While McShane is not aware of the number of workers involved or amounts due them, we are pleased the wage issue is being resolved,” McShane President Jeff Raday said in an email. “We mandate that all of our subcontractors comply with all federal and state minimum wage requirements, including compliance with prevailing wage requirements on projects subject to the Davis-Bacon Act. We are committed to fair compensation for each and every worker on our job sites.”

The Minnesota and North Dakota chapter of the Laborers Union International of North America and others raised concerns about potential prevailing wage violations on the state-subsidized Digi-Key project last June.

“We were happy to finally see it in writing that there were prevailing wage violations. This isn’t just us speculating on it,” Kevin Pranis, the union’s marketing director, said in an interview Tuesday.

Flores and the two other workers, Jairo Cruz and Walter Torres, filed a complaint with the Minnesota Department of Human Rights last week. The complaint alleged the workers suffered discrimination and mistreatment while working on the Digi-Key project.

Cummins & Cummins, a Minneapolis-based law firm, is representing the workers in the human rights claim.

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Labor Training Program Aims To Bring Younger People Into Illinois Construction Trades (IL)

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By ERIC SCHMID
9-12-19

EDWARDSVILLE – A new program that gives high school students hands-on experience with the construction trades kicked off this year.

Over two years, juniors and seniors from local high schools will learn to pour concrete, install pipes, construct scaffolding and other aspects of the trades from certified labor instructors through the Illinois Laborers’ and Contractors Joint Apprenticeship and Training Program.

The program started in Marion, Illinois, last year and expanded to Edwardsville after labor leaders saw its success. It’s part of a larger push from local labor organizations to attract younger people to unions.

The average age of construction labor apprentices in downstate Illinois is 37, said Vicky McElroy, the apprenticeship coordinator at the Edwardsville training facility.

“We thought this was a way to get some good students and young people into the trades,” she said.

Sixteen juniors from Edwardsville High School make up this year’s inaugural class. The students go to the training facility for two hours every morning for a mix of classroom training and hands-on courses.

It’s new territory for the training center’s instructors, who are used to older apprentices.
“In some ways it’s a very big advantage,” said Jason Jackson, one of the course instructors. “If I’m teaching them math or labor history or anything like that, I can actually send them home with homework.”

He acknowledges there are challenges, too. One of those is managing a room full of teenagers, he said, and another is fitting hands-on activities, like pouring concrete, into the two-hour course blocks.

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Gov. J.B. Pritzker announces $23.5 billion in road projects, bridge repairs (IL)

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By Greg Bishop
10-21-19

Gov. J.B. Pritzker unveiled Monday a multi-year plan to spend $23.5 billion on road and bridge projects that were included in Illinois’ $45 billion capital plan, which will be funded through tax and fee hikes.

The Rebuild Illinois plan enacted this summer doubled the state’s gas tax from 19 cents to 38 cents a gallon. Taxpayers have already paid more than $414 million in just two months, $200 million more than the year before. The plan also increased other driving fees. Such funds are going to roads and bridges in the plan.

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Pritzker detailed $23.5 billion in road and bridge spending specifics on Monday in Springfield. The multi-year plan’s detailed projects can be found at IDOT.Illinois.gov.
The plan covers more than 2,000 miles of roadway and 847 bridges.

Illinois Department of Transportation Secretary Omer Osman said state funding would be supplemented with about $9 billion from the federal government.

“And of course that’s going to give us the flexibility of matching any federal funding,” Osman said. “And even if we have another transportation bill coming out of [Washington] D.C., even if that goes up, we still have the ability to match that increased funding.”
Pritzker said the state is also using a federal Transportation Asset Management Plan standard.

“Many other states have been working toward that standard, we are for the first time working toward that standard,” Pritzker said. “What does that mean? It means we’re saving a lot of money for taxpayers as we’re focusing on our roads and bridges.”
The U.S. Department of Transportation said TAMP is “a strategic and systematic process of operating, maintaining, and improving physical assets, with a focus on engineering and economic analysis based upon quality information, to identify a structured sequence of maintenance, preservation, repair, rehabilitation, and replacement actions that will achieve and sustain a desired state of good repair over the lifecycle of the assets at minimum practicable cost.”

Illinois’ TAMP was accepted by the federal government in August.

“We look forward to working with IDOT as you implement the TAMP to achieve and sustain a state of good repair over the life cycle of both pavement and bridge assets and to improve or preserve the overall condition of the National Highway System,” U.S. Department of Transportation Division Administrator Arlene Kocher said.

No money has gone out from Illinois’ plan yet, but Pritzker’s administration said it will use pay-go funds for roads and bridges and borrowing through taxpayer-backed bonds for larger highway projects such as interchanges.

Laborers Local 477 representative George Alexander said the statewide infrastructure plan would put unions back to work.

(Read More)