Minnesota Legislature Passes Prevailing Wage and Worker Protection Policies With Support From North Star Policy Action

Posted by National Alliance for Fair Contracting on June 4, 2024

Jake Schwitzer
Sarah Hinde

May 22, 2024

Minnesota is now the first state in the nation to add prevailing wage requirements to LIHTC-funded affordable housing projects

Late Sunday, May 19, 2024, the Minnesota Legislature passed a large omnibus package that included prevailing wage requirements for affordable housing projects that receive funds from Low-Income Housing Tax Credits (LIHTC).

Wage theft and worker exploitation have been persistent problems in Minnesota’s construction industry. Since 2016, workers on 25 projects that received approximately $31 million in LIHTC funding were potentially at risk of exploitation by known problem contractors. North Star Policy Action (NSPA) played a critical role in passing the provisions that will prevent continued worker abuse and exploitation, including releasing a report in November of 2023 that detailed the flow of public funding to contractors with long histories of abusing workers. Jake Schwitzer, NSPA’s executive director, testified in numerous legislative committees during the 2024 Legislative Session about the issue, helping secure inclusion in the omnibus bill.

“The passage of these worker protection provisions is an historic step for worker’s rights, and displays national leadership coming out of Minnesota. Our research exposed disturbing facts about public funding supporting known bad actors in the construction industry, and we are so thankful that the legislature responded to our findings to protect Minnesota’s working people.” Executive Director of NSPA Jake Schwitzer said. “We hope that this bill serves as a roadmap for other states to ensure that taxpayer funded housing projects don’t continue to fuel wage theft, payroll fraud, and other forms of worker exploitation. Thank you to the members of the Minnesota Legislature, Minnesota Housing Finance Agency, Minnesota Department of Labor and Industry, and Governor Tim Walz for your commitment to making Minnesota the best state in the nation for working people.”

LIHTC is one of the most common sources of public financing for affordable housing projects, yet these programs rarely include robust labor standards such as prevailing wage requirements. This legislation makes Minnesota the first state in the nation to add prevailing wage requirements to LIHTC-funded affordable housing projects.

Prevailing wage laws establish minimum wage and benefit levels based on the wages paid for similar jobs in the county where the construction project is taking place. These laws ensure that work on government-funded projects does not undermine local wage standards. The legislation also extends new worker protections across all projects supported by Minnesota Housing Finance Agency, like transparency of who is working on these projects, a Responsible Contractor Standard, and accountability for developers that repeatedly allow wage theft to occur on their projects.

“I want to thank North Star Policy Action for shining a light on what is an egregious problem that we need to solve, said Representative Mike Howard, Chair of the Housing Finance and Policy Committee earlier this legislative session. “When I first read this report I viewed it as a call to action. There is no way, no how that public dollars should ever support the kind of worker exploitation that is detailed in that report. We absolutely can and must build more affordable housing across Minnesota and we absolutely can and must do so in a way that pays living wages and honors and respects the Minnesotans who are building these homes, and that’s what this bill will do.”

Worker protection policies have tangible impacts on Minnesotans and families, such as Arturo Hernandez, who faced labor abuses while working for Painting America, a drywall and painting contractor. In 2019, he testified before the Minnesota House of Representatives Labor Committee, stating that his foreman had insisted on paying him with drugs, claiming he could make more money by selling them. Arturo refused and reported the incident to both Painting America and an enforcement agency. However, no action was taken against the company or the contractor, and Arturo has not been compensated for his three weeks of work. Legislation such as this ensures workers will be protected from similar exploitation.

“I’ve personally been a victim of exploitation in the housing construction industry,” said Hernandez.. “I was very glad to see the legislature take action on this issue and hope that it will protect me and workers like me from these abuses in the future.”

Minnesota Session Laws – 2024, Regular Session

Attorney general Ellison forms task force on worker misclassification

Posted by National Alliance for Fair Contracting on July 11, 2023

The Office of Minnesota Attorney General Keith Ellison
July 6, 2023

Minnesota Attorney General Keith Ellison announced today that he is forming a new Advisory Task Force on Worker Misclassification. He is soliciting applications to serve on the Task Force through the State of Minnesota Open Appointments process. Applications are being accepted now through August 2, 2023.

“Misclassifying workers hurts not only those who are misclassified and their families, it hurts all Minnesotans, including businesses who do the right thing by their employees by playing by the rules, and every Minnesota taxpayer who has to make up the slack for law breaking employers,” Attorney General Ellison said. “I’ve created this task force to gather the best thinking about the problem and make practical, workable recommendations to the Legislature, State agencies, other levels of government, industry, nonprofit organizations, and advocates about how we can put an end to the problem. It’s another way we can help create a more level playing field and a fairer economy, which helps all Minnesotans better afford their lives and live with dignity, safety, and respect.”

(Read More)

Minneapolis Construction Workers Fight Chronic Wage Theft

Posted by National Alliance for Fair Contracting on August 15, 2022

BY CALEB BRENNAN | AUGUST 15, 2022

The Midwest building industry is notorious for cheating paychecks.

… Bravo, the executive director of the West Side Community Organization, alongside a coalition of workers’ rights advocates, union organizers, and general laborers, was there to protest poor working conditions within the construction industry. Their caravan would soon make its way into the heart of downtown Minneapolis to protest other build sites where blocky, five-on-one condominiums were under construction.

Bravo accused the firm, alongside a slew of other Minnesota real estate companies, of ignoring chronic concerns over safety, sexual harassment—and, most urgently, rampant wage theft.

“That was five decades ago,” Bravo continued. “And we have families today still facing wage theft while the construction industry is booming with millionaires and multimillionaires—all at the expense of exploiting the families that are working for them.”

Bravo was not exaggerating. The construction industry in the U.S. runs on wage theft. One study found that in Illinois, Wisconsin, and Minnesota, almost 1 out of every 5 workers suffer from payroll fraud. Another study focused specifically on Minnesota construction found a rate of 23 percent.

“One study found that in Illinois, Wisconsin, and Minnesota, almost 1 out of every 5 workers suffer from payroll fraud.

Minimum and overtime wage violations, specious deductions from paychecks, and misclassifying workers are all common tactics that Rust Belt construction firms and their subcontractors use to cut back on labor costs. Despite the brief impact of the COVID-19 lockdown, residential construction revenue in the U.S. is continuing on an upward trend—the size of the North American construction sector is set to reach $2.4 trillion by 2030.

In June of this year alone, domestic construction spending totaled $1.76 trillion.

This thievery, according to the Midwest Economic Policy Institute, costs taxpayers in these states $362 million each year. Similar levels are found on a national level, where everywhere from San Diego to Washington, D.C., sees a persistent flow of complaints and dollars extracted from workers.

The industry’s labor force is chronically unorganized, undocumented, and obstructed from legal recourse. As such, subcontractors can exploit atomized workers while their hiring firms can claim they had no knowledge of the conduct, leaving their precarious workforce economically and legally stranded.

Without political power or judicial leverage, atomized construction workers often have no means for resisting this subtle form of robbery.

That’s how Daniel Sanchez felt when he realized he had had over $100,000 worth of wages stolen from him over the course of two years. An immigrant laborer from Minnesota who has worked for both large national property development firms like R.J Ryan Construction and smaller, local ventures like Doran Companies, Sanchez has spent the past ten years cleaning and maintaining construction sites.

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Commerce Fraud Bureau to get new powers to investigate wage theft, other financial crimes

Posted by National Alliance for Fair Contracting on May 25, 2022

Max Nesterak
May 25, 2022

Labor leaders are calling a bill that passed the state House and Senate on Sunday the most significant piece of legislation for combating wage theft since it was made a felony in 2019.

The bill (HF 3255), which is awaiting Gov. Tim Walz’s signature, gives the Commerce Fraud Bureau new powers to criminally investigate financial crimes along with more than $800,000 a year to hire five more investigators.

“This is a very big deal,” said state Rep. Zack Stephenson, DFL-Coon Rapids, who authored the bill in the House. “All across the state, white collar crimes are in desperate need of more enforcement.”

Until now, the Commerce Fraud Bureau has been restricted by law to insurance fraud investigations — a function of the department being entirely funded by a tax on insurance companies.

The new law maintains that at least 70% of the department’s work must continue to focus on insurance fraud, but allows the department to investigate all financial crimes with money appropriated from the general fund.

That puts new power behind the state’s ability to criminally investigate labor violations that are rampant in construction and hospitality — yet seldom prosecuted. Payroll fraud in the construction industry alone costs the state upwards of $136 million a year in lost tax revenue, according to one estimate by the Midwest Economic Policy Institute.

“Wage theft and tax fraud are business models,” said Adam Duininck, director of governmental affairs for the North Central States Regional Council of Carpenters. “When we see it in such a concerted manner, the only way to patrol that is with aggressive enforcement.”

(Read More)

If construction firms need workers, they should turn to unions

Posted by National Alliance for Fair Contracting on March 30, 2022

Mark Ziegler
MARCH 30, 2022

Competition is the foundation of our free enterprise system.

Just as business success requires an ability to compete for customers, it also depends on attracting and retaining qualified workers.

As COVID 19 has disrupted just about every industry that relies on in-person or face-to-face work, there have been plenty of complaints about “labor shortages.” But not nearly enough discussion about what it takes to compete for labor.

Construction is the fastest growing sector of our state’s economy. For the past 40 years I have worked in the industry and am the former president of Amerect, Inc. We specialize in the erection of structural steel and precast concrete for commercial and industrial buildings. It is highly skilled and physically demanding work that must be done in person.

Our company’s success is largely driven by our partnership with union ironworkers, operating engineers and their hiring halls across the state and country. …

Often, I’ll ask if they are parties to a collective bargaining agreement with the trade unions who supply us with the craft workers we use on our projects.

Very often, the answer is no.

Yes, union construction workers earn higher wages, and most have health and retirement benefits.

They also complete years of apprenticeship training to learn their craft with the highest standards of safety and productivity. This training is funded exclusively by union members and signatory contractors through hourly contributions to the joint apprenticeship fund. These joint apprenticeship programs produce 10 times the skilled trade workers in Minnesota as non-union programs, despite having nowhere near that level of overall market share.

In the union construction model, pay rates, working conditions and apprenticeship funding is privately negotiated between unions and individual employers or groups of employers.

In exchange for a per-hour investment in workers — whose unions also take on the cost of administering health and pension programs — employers receive a steady labor supply. We get access to the specific skills and documented certifications we need, when we need them — whether it’s heavy equipment operators, truck drivers, structural and reinforcing ironworkers or carpenters.

The non-union side of the industry operates very differently. There’s no comparable financing mechanism for recruiting and training apprentices. A recent study revealed that workers earn as much as 32% less and are half as likely to have health insurance or retirement benefits. Nearly 13% rely on food stamps — effectively a government subsidy of low-wage construction employers.

Ultimately, lower wages attract workers with lower skill levels. And research has shown these factors can contribute to lower productivity, more safety problems on the jobsite, and costly problems with employee turnover and craftsmanship. This is a major reason why researchers have concluded there is no real difference in cost between projects built by union or non-union construction workers.

(Read More)

Hennepin County Attorney announces charges of insurance fraud and theft by swindle against former owners of Merit Drywall (MN)

Posted by National Alliance for Fair Contracting on February 28, 2020

January 21, 2020

Today, the Hennepin County Attorney announced charges of insurance fraud and theft by swindle against the former owners of Merit Drywall. According to the criminal complaint, the two defendants, Leroy and Joyce Mehr, misclassified workers as independent contractors to avoid paying more than $300,000 in workers compensation insurance premiums.

“Wage theft, insurance fraud and worker classification fraud have no place in Minnesota. It is critical that the legal system hold those who are accused of these crimes against construction workers accountable,” said Jessica Looman, Executive Director of the Minnesota Building and Construction Trades Council, an advocate for Minnesota’s union construction industry. “We want to thank the Hennepin County Attorneys office, the Minnesota Department of Commerce Fraud Bureau, and the Building Trades Unions in our state for protecting workers and our industry.”

“The case against the former owners of Merit Drywall shows the strength of the construction community when we stand together and demand action when workers complain of wage theft and worker misclassification,” said Dan McConnell, Business Manager of the Minneapolis Building and Construction Trades Council. “Our members have lost their patience with those developers and general contractors who have profited from schemes like the one alleged here. Together, the Building Trades Unions will do everything we can to continue to assist in ensuring that those who are complicit in the exploitation of workers are held accountable.”

Minnesota’s Building Trades Unions have launched an initiative to combat wage theft, exploitation, and labor trafficking which poses a growing threat to the welfare of immigrant workers and the health of the state’s construction industry. The “Not On My Watch” or “Ya No Mas” campaign enlists union members in efforts to identify cases of abuse, and to assist exploited construction workers on Minnesota jobsites.

The Minnesota and Minneapolis Building and Construction Trades Councils will continue to support efforts to protect all Minnesota construction workers. #notonmywatch.

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Hennepin County’s first labor-trafficking case ends in guilty plea (MN)

Posted by National Alliance for Fair Contracting on February 11, 2020

Prosecutors say they’re keeping tabs on other cases in the construction industry where contractors are exploiting immigrant workers

Riham Feshir
Minneapolis
November 18, 2019 7:40 p.m

A Twin Cities contractor accused of exploiting immigrant workers was supposed to face criminal charges in a first-of-its-kind trial in Hennepin County this week.

But Ricardo Batres instead pleaded guilty Monday to labor trafficking, and prosecutors say other cases in the construction industry are coming.

Batres, 47, admitted he took advantage of employees’ federal immigration status to force them to work for him. In one case, he bailed one of his workers out of immigration custody, but told him the man would need to pay off his debt. He also he lied on his workers compensation insurance papers to save money.

Batres took the deal, pleading guilty to labor trafficking and insurance fraud, after acknowledging that the evidence against him was strong.

“The insurance fraud and other things are not very good things,” said Hennepin County Attorney Mike Freeman after the hearing. “But what’s really bad is when you’re trafficking in human beings.”

Batres’ case marked the first time his office prosecuted someone under the state’s labor trafficking statute. But it won’t be the last, Freeman said.

“We are looking at other cases now,” he said. “We spent most of our time and energy, all of us, making sure this one worked. The industry is watching for a change, and they don’t like this. It makes the industry look bad.”

(Read More)

Study Finds Apprenticeships Are on the Rise in Minnesota (MN)

Posted by National Alliance for Fair Contracting on November 12, 2019

Overall participation in apprenticeships grew by 27 percent between 2014 and 2017. About 96 percent of those are in construction.

SEPTEMBER 16, 2019
AMANDA OSTUNI

Apprenticeships are becoming an increasingly popular way for Minnesotans to kickstart their careers.

A study by the Midwest Economic Policy Institute (MEPI) and Dr. Robert Bruno of the University of Illinois at Urbana-Champaign found that participation in apprenticeships in Minnesota grew by 27 percent between 2014 and 2017, with 11,500 individuals enrolled in a program in 2017.

Apprenticeships are largely utilized as an alternative to college. MEPI policy director Frank Manzo says they have grown in popularity alongside the rising costs of college.

“An apprenticeship program offers the ability to earn while you learn,” Manzo says. “You go through roughly the same amount of classroom and on-the-job hours as you would through a bachelor’s degree program… but you’re getting paid to do it instead of accumulating debt.”

Citing data from policy research organization Mathematica, Manzo says apprenticeships provide an average annual earnings boost of $4,700-greater than most boosts provided by a bachelor’s or associate’s degree.

In addition to helping the individual, the MEPI study finds that apprenticeships serve as a significant boost to Minnesota’s economy.

“The data shows that every dollar spent on apprenticeship programs increases Minnesota’s GDP by $21,” says study researcher Robert Bruno, in a press release. “That makes apprenticeships one of the most effective investments we can make-not just in workers, but in the economy.”

The construction industry is at the heart of Minnesota’s apprenticeship participation. Even though construction accounts for just 11 percent of national occupations suited to apprenticeships, about 96 percent of the total number of individuals actively enrolled in Minnesota apprenticeships between 2015 and 2017 were working in skilled construction trades. This amounts to an annual industry investment of $30 million.

Manzo says this disproportion comes from the fact that construction is the only industry in the state to fully embrace apprenticeships thus far. He adds that the industry has been motivated by the impacts of the widespread labor shortage.

“They’re having difficulty finding qualified craft workers, so the solution is either pay people more and attract more workers into the industry or invest in training more workers and build up their skill sets,” Manzo says.

With the training approach, Manzo says many construction companies readily got on board with apprenticeships, working together to establish programs where workers could bounce between companies as jobs were available since the industry is naturally volatile and different companies win different bids at different times.

Manzo says he’d like to see state initiatives broaden the breadth of apprenticeship opportunities, particularly into fields like healthcare, IT, agriculture, and manufacturing.

“[Construction apprenticeships] have produced skilled construction workers that build our infrastructure, ensure schools are built safely,” Manzo says. “These programs could be replicated in other industries.”

(Read More)

(PDF Copy of Study)

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

Posted by National Alliance for Fair Contracting on November 8, 2019

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.

(Read More)

Tag: Minnesota