Financial Fraud and Wage Theft Continue to Plague Construction Industry

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Cases of fraud and wage violations continue to soil the image of the construction industry during this labor shortage

FEBRUARY 28, 2019

Every week there seems to be yet another item in the news about contractors being charged with fraud, wage theft and more. This week is no different, unfortunately.

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Meanwhile in Massachusetts, a state that has been under scrutiny for construction wage theft, Attorney General Maura Healy issued 165 civil citations against 66 construction companies in 2018. According to a press release from the Attorney General, restitution in 2018 exceeded $1.47 million for more than 1,030 employees, and the companies were fined more than $1.23 million.

Wage Theft Big Problem in Massachusetts Construction Industry

Violations included:

  • Failure to page proper wages
  • Failure to pay overtime
  • Retaliation
  • Failure to furnish records for inspection
  • Failure to pay prevailing wage
  • failure to submit true and accurate certified payroll records
  • Failure to register and pay apprentices appropriately

“Workers in the construction industry are particularly vulnerable to wage theft from dishonest contractors who cheat their workers,” said AG Healey. “As Massachusetts undergoes a historic construction boom, my office will continue to fight for exploited workers and ensure they are paid the wages they earn.”

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Department of Labor begins new pre-apprenticeship program (DE)

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By Submitted News
Posted Feb 26, 2019 at 5:30 PM

Delaware Department of Labor, Division of Employment and Training, Office of Apprenticeship and Training developed a new registered pre-apprenticeship program to complement its existing registered apprenticeship programs.

The office will approve the program providers and will post a list of qualified pre-apprenticeship programs on its website.

Pre-apprenticeship programs are ideal for individuals who lack experience or education but want to build a solid foundation to start a successful career. As Delaware’s unemployment rate drops, disadvantaged and underrepresented populations will be at a greater risk of being left behind. Pre-apprenticeship opportunities will allow these populations to gain the needed hard and soft skills for a successful career.

Pre-apprenticeship programs refer to a program or set of strategies designed to prepare individuals to enter and succeed in a registered apprenticeship program. Pre-apprenticeship programs are designed to create a qualified pipeline of individuals ready to become registered apprentices; expand registered apprentices to include underrepresented participants such as nontraditional gender or race/ethnicity, disadvantaged populations or low-skilled workers; and recognize credit for related education or training.

Registered apprenticeship is an effective “earn while you learn” model with a long history of providing career ladders and pathways to the middle class, particularly for the building and construction industry but increasingly in other industries as well. In calendar year 2018, the average starting wage for an apprentice was $14.70 per hour, or $29,400 per year, with wages upon completion averaging at $24 per hour, or $48,000 per year. These results demonstrate the advantages a registered apprenticeship offers in providing a significant wage gain and a clear career path for entry-level workers.

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Developers Would Provide Construction Workers with Prevailing Wage and Benefits on Government Subsidized Projects under Legislation Proposed by Council Member Ben Kallos (NY)

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Wednesday, January 9, 2019

New York, NY – Affordable housing and economic development projects receiving city subsidies would be required to pay workers a prevailing wage and provide training in the classroom and on the job through apprenticeship coupled with transparency, under legislation introduced by Council Member Ben Kallos.

Construction-related injuries and deaths continued to rise for the fifth straight year to 744 injuries and 16 deaths in fiscal year 2018, approximately triple the 212 injuries and 6 deaths in fiscal year 2014 according to the Mayor’s Management Report, as reported by City and State. Over the past fiscal year, when incidents further increased by 20%, Local Law 78 of 2017 authored by Council Member Ben Kallos was implemented forcing developers to report of construction-related injuries and fatalities with new minimum fines of $2,500 for failure to report. The Local Law 78 reports have been available on a monthly basis since June 2018 from the DOB.

In 2018, a construction worker earning the minimum wage of $11.10 an hour, working full time for 35 hours a week for 52 weeks, could only bring home $20,202 a year. This year’s increase to $15 an hour in New York City would increase this to $27,300 a year. Construction workers earning the minimum wage while building affordable housing would need access to units set at 30% of Area Median Income (AMI) deemed as extremely Low-Income, the lowest band possible. While construction workers on many affordable projects earn the minimum wage, many affordable housing projects do not even offer affordable housing at such extremely low-income, only making the crisis worse.

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Funding stream sought for workforce training (OR)

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By: Josh Kulla
January 22, 2019 1:50 pm

There’s no end in sight to the shortage of skilled tradespeople in the construction industry. That, in short, is motivating supporters of Senate Bill 82 in the Oregon Legislature’s 2019 session. It would direct the Oregon Bureau of Labor and Industries to establish a new program that would provide supportive services for pre-apprenticeship and apprenticeship programs throughout the state. The program would be funded by a pass-through fee attached to certain public works projects subject to prevailing wage rates.

Kelly Kupcak, executive director of Oregon Tradeswomen Inc., worked with representatives of other pre-apprentice groups to help craft the bill. While with the Chicago Women in Trades, Kupcak in 2006 helped push for the passage of similar legislation supporting pre-apprenticeships for women and other disadvantaged groups by linking funding for training in a larger infrastructure bill.

“In Illinois they were able to get enough support from the state Legislature and governor’s office to institute a set-aside from capital improvement projects for pre-apprenticeships,” Kupcak said. “There is this ongoing demand for skilled labor, and report after report that says we can’t meet that demand.”

In some ways, SB 82 is quite similar to the Illinois model. But SB 82 also offers a wide range of support for people receiving training. This includes assistance with the cost of transportation, lodging, child care, job supplies and equipment, and even housing stabilization services.

“We had suggested this is an opportunity to have an assurance of a pool of dollars that would ebb and flow based on demand,” Kupcak said. “If the state has a lot of capital projects on the books, there is an obvious need and a funding stream to get them in. In a lot of ways the model is simple, but it makes sense.”

Money from the pass-through fee would go into a new State Apprenticeship and Training Supportive Services Fund. From there, money would be disbursed to qualifying pre-apprenticeship and apprenticeship programs.

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Wage Gaps and Outcomes in Apprenticeship Programs

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The Effects of Gender, Race, and Region

By Daniella Zessoules and Olugbenga Ajilore
Posted on December 12, 2018, 12:01 am

Policymakers frequently approach the question of developing the workforce to meet the needs of the 21st century. Despite today’s historically low unemployment rates, wages for typical workers have barely budged for decades. While productivity has increased, gains have largely trickled to the richest Americans, exasperating persisting income inequality and painting an ominous picture of middle-class living standards. Furthermore, gaps in both wealth and income by race and gender have caused disproportionate labor market penalties for certain groups. Wage gaps and growing income inequality along racial lines have persisted despite higher educational attainment. For example, earning a bachelor’s degree or higher has not proven to reduce either the black-white or the Latinx-white wage gap. Meanwhile, employers are spending less on worker training than they used to. And too often, the training that they do provide is firm-specific, meaning that those skills do not translate well to other firms.

Registered Apprenticeship programs, which have bipartisan support, aim to address this issue by connecting Americans to decent-paying jobs as electricians, carpenters, and dental assistants, among others. The program, which the U.S. Department of Labor (DOL) administers through the Workforce Innovation and Opportunity Act, aims to help businesses develop highly skilled employees through hands-on customized training for a variety of occupations. The DOL asserts that the average hourly wage for a journeyperson who completes an apprenticeship is $23.94, equivalent to an annual salary of $49,795.

Investments in the workforce of tomorrow are necessary both to ensure pathways to relevant economic opportunities as well as to bridge economic disparities along racial and gender lines-including racial wealth and pay gaps-that continue to plague families across the country. Unfortunately, data on Registered Apprenticeship programs identify prominent economic disparities among women and people of color-many of whom face low enrollment rates within such programs and are concentrated in lower-paying occupations.

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

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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.

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NABTU STATEMENT ON ADMINISTRATION’S EFFORTS TO EXPAND APPRENTICESHIP TRAINING

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NABTU Statement on Administration’s Efforts to Expand Apprenticeship Training

Published: Monday, 21 May 2018 15:32
May 10, 2018

WASHINGTON, DC – North America’s Building Trades Unions (NABTU) today issued the following statement in response to the Administration’s efforts to expand apprenticeship into new industries:

“NABTU supports the Administration’s efforts to expand apprenticeship into industries that currently lack this important form of workforce training. As an industry with over 100 years of experience in establishing a world-class apprenticeship and training infrastructure, we know first-hand that high quality, registered apprenticeship programs provide reliable pathways to middle class careers and long-term economic security. The hundreds of thousands of hardworking American men and women in the building and construction industry can attest to this.

“NABTU appreciates and welcomes the continued opportunity to impart our experience and expertise on successful apprenticeship models. We will remain fully engaged in the establishment of “Industry Regulated Apprenticeship Programs” to ensure rigor and quality while mitigating any potential negative impacts to the apprenticeship brand – especially to NABTU and our contractor partners’ $1 billion collectively bargained investment in construction apprenticeship training.

“In 2017, the U.S. Department of Labor reported that there were 190,000 new apprentices nationwide – across all sectors of the economy. Of that total, NABTU is proud that one-third of these new apprentices began their training in our joint labor-management training programs in the construction industry – a longstanding partnership between our unions and our contractor partners.”

ABOUT NORTH AMERICA’S BUILDING TRADES UNIONS

North America’s Building Trades Unions is an alliance of 14 national and international unions in the building and construction industry that collectively represent over 3 million skilled craft professionals in the United States and Canada. Each year, our unions and our signatory contractor partners invest over $1 billion in private sector money to fund and operate over 1,900 apprenticeship training and education facilities across North America that produce the safest, most highly trained, and productive skilled craft workers found anywhere in the world.

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Hiring women can ease the construction labor shortage

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Vicki O’Leary
March 23, 2018

Editor’s Note: This piece was written by Vicki O’Leary, who was appointed chair of the North American Building Trades Union (NABTU) Tradeswomen’s Committee after joining the International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers Union in 2016. She is a 32-year ironworker member from Local 1 in Chicago, and has bachelor’s and master’s degrees in labor and leadership. The opinions represented in this piece are independent of Construction Dive’s views.

It’s a time to celebrate the progress we have made in women’s rights but also time for reflection. We ought to stop and look back at the progress we have made or the lack there of. In many areas we have made progress but in many others, progress is rather illusive. Women are viewed as equal bread winners and they hold key positions in many industries. Does it mean that we have achieved gender equality?

Let’s turn to the construction industry. Despite the progress we have seen in the societal acceptance of women as equal breadwinners, capable leaders and successful entrepreneurs, in many industries such progress is less prevalent than others. Construction industry has a long history of sexism and discrimination against tradeswomen. In some cases, such treatment ended in tragedy such the fate of carpenter apprentice Outi Hicks, who was killed on the jobsite by a coworker.

An uphill battle

In the 21st century, it is shocking that women in the construction industry still face an uphill battle when it comes to advancement. But when you consider the root causes and statistics, it’s not such a shock.

Almost a third of women working in construction fear sexism will hold them back from the industry’s top jobs, a recent study by Royal Institute of Chartered Surveyors (RICS) found last year. The construction trades have long been among the industries with the lowest percentage of gender diversity in the workforce. Women represent only 9% of the overall construction workforce and 3% of the building trades.

Why does it matter? The construction industry is experiencing a dire skilled labor shortage and women make up half of the population and workforce. It’s intuitive to conclude that a large part of the solution to the skilled labor shortage is in the hands of the untapped talent – we need more tradeswomen! It’s that simple. If the construction industry doesn’t act promptly to address and mitigate sexism and breakdown gender bias, it wouldn’t just be hindering progress in closing the gender gap but also the skilled labor gap.

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Feds reach settlement with Santee contractor to pay stiffed workers

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By Carl Prine
March 28, 2018

The U.S. Department of Labor announced Wednesday that investigators had reached a settlement with a Santee builder to repay back wages owed to the workers by a defunct subcontractor.

A & D General Contracting, Inc.. the prime contractor on a pair of federally funded projects for the Marine Corps, will compensate 16 workers $52,969 after El Cajon-based Amigos Design Build Landscapes failed to pay prevailing wages before declaring bankruptcy.

“The prime contractor in this case is stepping up to the plate and doing the right thing,” said Department of Labor spokesman Leo Kay during a telephone interview.

The case spun out of a probe by the agency’s Wage and Hour Division into Amigos Design’s work on two projects – a control gate at Marine Corps Recruit Depot in San Diego and Camp Pendleton’s Combat Training Tank and Instruction Facility, according to a Department of Labor press release.

Amigos Design filed for federal bankruptcy protection in late 2016, four years after the company was founded. In his Chapter 7 paperwork, company president Douglas Leal estimated $579,562 in debt to 113 creditors and only $482,182 in property to pay them.

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Wage and Hour Division investigators determined that Amigos Design violated the Davis-Bacon and Related Acts by failing to pay required health and welfare rates to its employees.

The firm also incorrectly categorized some workers in jobs so that they would receive lower compensation rates than they deserved. Others were slotted as apprentices to pay them below the prevailing wage rates but they weren’t enrolled in any apprenticeship programs.

And on top of that, the company falsified its certified payroll reports, according to the Department of Labor.

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Columbus, OH, tests plan to increase apprenticeships, local hires

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By Kim Slowey
Nov. 2, 2017

Dive Brief:

  • The city of Columbus, OH, is testing a new construction apprenticeship and local hiring plan for public projects that it hopes will boost the local construction workforce, according to The Columbus Dispatch.
  • The agreement between the city and the Columbus Building & Construction Trades Council, AFL-CIO, requires the organization to host apprenticeship fairs, use 20% Columbus and 25% regional residents on the project, and collect five cents for every hour each member works to help fund an apprentice scholarship fund. City officials said non-union contractors will also be able to bid the project.
  • The first project to operate under the program is the construction of an $8 million firehouse. The local chapter of the Associated General Contractors of America expressed concern that the new workforce requirements would make it more difficult for contractors to bid on projects competitively.

Dive Insight:

It’s not uncommon for state and local governments to specify hiring requirements for publicly funded projects. Local activists often see it as a way to get a return on invested taxpayer money. However, while the goal of using as many locals as possible is not one with which many would disagree, the details of these initiatives are up for debate.

First, in some markets, contractors have difficulty finding enough workers to meet local mandates. For example, contractors working on the new Little Caesars Arena in Detroit were fined almost $3 million through March of this year for failing to meet the local hiring requirements laid out by the city. By all accounts, the contractors did their best to recruit local workers, but the skilled talent pool was just too thin.

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