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Attorney General Raoul Sues Construction Company over Complex Scheme to Avoid Paying Fair Wages and Taxes

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Office of the Attorney General – State of Illinois
Sept. 2, 2022

Raoul Also Issues 2022 Labor Day Report Highlighting Actions to Protect Illinois Workers

Chicago — Heading into the Labor Day holiday, Attorney General Kwame Raoul yesterday filed a lawsuit against a Bridgeview, Illinois-based construction company over an elaborate scheme to keep its employees off payroll and avoid paying tax withholdings required by law. The Attorney General’s office filed the lawsuit against Drive Construction Inc., its principal officers, and a complex web of entities and individuals for a years-long conspiracy to pay millions of dollars of wages in cash, and skirt laws intended to protect Illinois workers and ensure fair wages.

Drive Construction (Drive), which specializes in carpentry, plumbing and masonry, obtains public works projects worth several millions of dollars each year. Raoul’s lawsuit alleges Drive misclassified workers to avoid paying employees fair rates of pay for the hours they worked and to skirt its obligations to pay unemployment insurance contributions to the Illinois Department of Employment Security. Raoul alleges Drive violated Illinois’ Minimum Wage Law, the Illinois Prevailing Wage Act and the Illinois Employee Classification Act.

“Misclassifying employees as independent contractors deprives workers of their right to be paid fairly and to be covered by workers compensation insurance in the event of workplace injuries,” Raoul said. “Employers that gain a competitive advantage by paying workers off the books and in violation of Illinois law create an uneven and unfair playing field for law-abiding businesses. I am committed to holding businesses – large and small – accountable for violating laws that safeguard workers and support law-abiding businesses in Illinois.”

Raoul’s lawsuit follows an investigation based on information provided by the Mid-America Carpenters Regional Council, which has a collective bargaining agreement with Drive.

“The Mid-America Carpenters Regional Council worked closely with Attorney General Raoul’s office to shed light on this prime example of wage theft perpetrated against exploited workers,” said Gary Perinar, Executive Secretary-Treasurer of the Mid-America Carpenters Regional Council. “The Carpenters Union aggressively pursues wage theft cases because they hurt working families, they hurt Illinois taxpayers, and they hurt our signatory contractors who play by the rules and are at a major disadvantage against unscrupulous contractors who lowball bids by cheating the system. Earlier this year we were proud to introduce wage theft legislation that was signed into law which now holds cheating contractors accountable. We will continue our fight for working families across Illinois.”

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NY rail company to pay overtime violations on projects in Massachusetts

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By: Ashley Shook
May 16, 2022

BOSTON (WWLP) – A New York-based rail system company was issued a citation and will pay more than $220,000 for overtime and payroll violations on projects in Massachusetts.

According to the Massachusetts Attorney General’s Office, Railworks Track Systems, Inc. and its President Gene J. Cellini, will pay more than $220,000 in restitution and penalties to resolve allegations that it failed to pay the proper overtime rate to workers on public works projects in the Berkshires, on Cape Cod, and in Framingham, and failed to submit accurate certified payroll records, Attorney General Maura Healey announced.

Restitution will be provided for 84 employees that were not paid properly for five railroad improvement projects in Hyannis, Falmouth, Framingham, Great Barrington, Lee, Lenox, Pittsfield, Sheffield, and Stockbridge.

“Companies must pay their employees the wages they’ve earned and are legally entitled to,” said AG Healey. “We are pleased to have secured this relief for the more than 80 affected workers, and hope that this sends a message to employers that we hold them accountable if they do not properly compensate their workers.”

The Attorney General’s Office received a referral in 2020 from the Foundation for Fair Contracting of Massachusetts, alleging that Railworks Track Systems was improperly paying its employees. The investigation revealed the payroll records did not include employee addresses, and that the company claimed a type of fringe benefit that is not permitted under Massachusetts prevailing wage laws. The fringe amounts were paid, but the amounts did not include overtime.

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New York Appeals Court Confirms Construction Flaggers Must be Paid Prevailing Wages 

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NEW YORK, April 21, 2022 /PRNewswire/ — A New York appeals court ruled in favor of a class of flaggers who worked for Judlau Contracting Inc., a subsidiary of multi-billion dollar infrastructure contractor OHL Group. The court affirmed that Judlau flaggers who worked on New York public works projects since April 26, 2011 are entitled to recover prevailing wages. The flaggers are represented by Pelton Graham, an employment law firm with offices in New York and California.

This historic decision upholds the rights of not only the hundreds of flaggers who worked on Judlau public works projects but potentially thousands more New York flaggers who have been chronically underpaid. More information on this decision and its implications is available here: https://peltongraham.com/prevailing-wages-for-new-york-flaggers/.

Judlau flaggers worked on a variety of public works construction projects in New York City and upstate New York, including water main, sewer, and other utility repair and maintenance projects requiring street excavation. Even though they worked alongside union construction workers who received prevailing wages, flaggers were often paid just a few dollars over minimum wage rather than the union rate.

Pelton Graham has represented the flaggers since the case was first filed in New York Supreme court in 2017. Even though the flaggers were classified by Judlau as “pedestrian crossing guards,” the flaggers demonstrated that their main responsibility was protecting the safety of the public and construction crews near the job sites and, under the guidelines from the New York City Comptroller, they should be paid as construction laborers.

After years of litigation, the court ruled in favor of the flaggers, finding that the evidence clearly showed that Judlau flaggers worked as safety flaggers and for that reason were eligible for prevailing wages for all of their work performed on New York public works construction sites.

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LI firm pays $1.45M in prevailing wage settlement

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By: David Winzelberg
April 6, 2022

The New York State Department of Labor has reached a $1.45 million settlement with a Long Island contractor for failing to pay prevailing wage for a public works project.

The agreement with Calverton-based Miller Environmental Group stemmed from the company’s contract with PSEG Long Island to address oil spills and soil contamination, conduct clean-up, and perform other work supporting utility installation, according to a DOL statement.

Investigators confirmed that Miller Environmental failed to bid the contract at prevailing wage rates and that PSEG Long Island failed to inform Miller Environmental that this contract involved public work. After discussions on the matter, Miller Environmental agreed to pay 88 employees the full underpayment amount, making those payments in January and February.

Contractors and subcontractors must pay the prevailing rate of wage and supplements to all workers under a public works contract based on the locality where the work is performed, according to state law. Third parties contracted on behalf and for the benefit of a public entity are also subject to the prevailing wage requirements. Because PSEG Long Island operates Long Island Power Authority’s electrical transmission and distribution infrastructure, its contracts are subject to those requirements.

“In New York State, we believe workers deserve a fair wage for a fair day’s work,” DOL Commissioner Roberta Reardon said in the statement. “Protecting workers is a top priority to the New York State Department of Labor. We remain vigilant to ensure that employers are properly compensating employees for the work that they do. We will never stop protecting the paychecks of hard-working New Yorkers.”

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COVID-19 creates more competitive bidding for city construction projects (SD)

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Posted: May 11, 2020

SIOUX FALLS, S.D. (KELO) – It’s not business as usual for public construction projects but it isn’t poor business.
While the coronavirus pandemic is causing likely declines in local sales tax revenue, it’s also caused some lowering of prices for city street projects.

“The majority of our (bids) have come in at the estimates or below since COVID-19,” Mark Cotter, director of public works in Sioux Falls, said.

“With the bids coming in the last month, we’ve had more bidders and very competitive prices,” Cotter said. “It’s a great time for cities, states and counties for bidding on projects if they’ve got the resources (for projects).”

Increased competitive bidding has resulted in at least $1.6 million when approved bids are compared to original estimates in three major projects, which illustrates the benefits of more bidders.

Cotter said the construction project on 57th Street between Minnesota and Western was estimated to cost $2.07 million but the approved low bid was $1.7 million.

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Civil procedure – jurisdiction (IL)

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Where an employee is hired to perform labor for public works covered by the Prevailing Wage Act, they retain the right of action from the act even if their contract does not contain the provision guaranteeing them prevailing wage in contravention of the act.

Posted May 7, 2020 9:54 AM

The 1st District Appellate Court reversed and remanded the decision of Cook County Circuit Judge Margaret Ann Brennan.

The plaintiffs in this case are 12 landscape laborers employed by Moore Landscapes LLC (Moore) as tree planters. Moore had three contracts with the Chicago Parks District for landscaping and related work, each of which contained a standard “prevailing wage rates provision” which mandates that the contractor pay all their employees prevailing wages “if applicable.” It is not disputed that $41.20 is the prevailing wage for landscape related work and the plaintiffs were paid an hourly rate of $18 for their labor. Section 11 of the Prevailing Wage Act (Act) requires all public works to pay the prevailing wage for the labor, and provides a right of action for any laborer who was paid less than the prevailing wage for a contractor doing public works.

The plaintiffs filed suit against Moore in September 2018 seeking unpaid wages, punitive damages, prejudgment interest and reasonable attorney fees and costs. Moore moved to dismiss, arguing their work was exempt from the prevailing wage provisions of the act and citing interpretations by the Illinois Department of Labor. Moore also moved to dismiss under fail to allege facts sufficient to support a claim, asserting the laborers failed to allege facts that supported the inference that the type of labor they performed was covered by the Wage Act. The trial court granted the motion to dismiss. The plaintiffs appealed.

On appeal, Moore argued that, for section 11 of the act to apply, the contract with the laborers must specify that they would be paid prevailing wages, and their contracts had no such provision. The plaintiffs argued that section 11 of the act also mandated that Moore include such a provision, which Moore did not deny, but instead claimed that because there was no contractual stipulation, the plaintiffs had no right of action and must rely on the Department of Labor to enforce any provisions of the act on their behalf. The plaintiffs claimed that the trial court’s interpretation rewards those who issue contracts which violate the act by protecting them from the right of action the act guarantees their employees.

The appellate court agreed with the plaintiffs. The court found that an employer’s failure to adhere to section 4 of the act, which mandates that the contracts include the provision at issue, does not in any way limit an employee’s right of action granted under section 11 of the act for any work where they should have been covered under the act. The appellate court emphasized that to do otherwise would allow employers to avoid liability by failing to adhere to the mandates of the act. The appellate court acknowledged that there is an issue as to whether the labor performed by the plaintiffs was covered under the act, but found that this was a material question of fact suitable for an evidentiary hearing. For that reason, dismissal was inappropriate.

The appellate court therefore reversed and remanded the decision of the circuit court.

Samuel Valerio, et al. v. Moore Landscapes LLC
2020 IL App (1st) 190185
Writing for the court: Justice Bertina E. Lampkin
Concurring: Justices Robert E. Gordon and Eileen O’Neill Burke
Released: March 26, 2020

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OAG Brings Criminal Charges Against Company, Owner for Wage Violations (PA)

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By Christopher D. Carusone, Steven M. Williams and
Carl L. Engel | January 14, 2020 at 12:50 PM

Employers in Pennsylvania should stay on their toes as the Pennsylvania attorney general (AG) announced charges against a major mechanical contractor engaged in numerous public works projects for crimes arising from a prevailing wage dispute. This marks the first time that the attorney general has brought criminal charges for prevailing wage violations, which was previously enforced only through civil actions. …

Although the new crime called “prevailing wage theft” has not been created in Pennsylvania, the attorney general charges that Good and Goodco violated existing criminal statutes prohibiting deceptive or fraudulent business practices, theft by unlawful taking, theft by deception and other related crimes. While the Office of the Attorney General (OAG) historically has enforced prevailing wage laws through civil action, the charges against Goodco mark the first time that the OAG has sought to enforce them with criminal penalties. Cases of this nature are being prioritized by the OAG’s recently formed fair labor section. When Shapiro ran for AG in 2016, he pledged to create a unit that would “enforce Pennsylvania’s labor laws in partnership with the Department of Labor & Industry and the Pennsylvania Human Relations Commission,” among other pro-worker actions. Accordingly, the fair labor section has made a mission of fighting wage theft, tip stealing, worker misclassification and workplace discrimination.

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Pro-Labor Bill Becomes Law Without Mayor’s Signature (HI)

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Caldwell informed the council he wants to work on “legal concerns.”

By Chad Blair
Oct. 25, 2019

Legislation that requires union labor for all city public works projects of $2 million will become law at the end of May 2020.

In the interim, Honolulu Mayor Kirk Caldwell – who let Bill 37 become law without his signature – told the Honolulu City Council he wants to work with them to address “legal concerns.”

“I appreciate Councilmember Joey Manahan for introducing and working hard on Bill 37 along with other City Council members, as the goal of Community Workforce Agreements is to promote efficient and timely construction projects without disruptions and to do so using local labor,” the mayor said in a press release Friday.

He added: “I look forward to working with all of the stakeholders to resolve the legal concerns pertaining to this bill, including amending the bill where necessary and passing legislation at the state level, thus allowing all counties greater flexibility in implementing Community Workforce Agreements.”

Under the legislation, CWAs – also known as project labor agreements – will be used for all large public works contracts.

Bill 37 was widely supported by labor groups. But opponents – many nonunion contractors – said the bill will hurt their own businesses because it amounts to a sweetheart deal for unions.

In Caldwell’s letter to Council Chair Ikaika Anderson, the mayor wrote, “Unfortunately, the mandatory nature of Bill 37 goes beyond the enactment of enabling legislation and infringes upon the authority of the Executive branch to conduct procurements and negotiate an appropriate CWA to the benefit of the City.”

The mayor added, “It is my understanding that the proponents of Bill 37 will seek to address this concern during the upcoming 2020 State Legislative session by amending the State Procurement Code.”

Caldwell also expressed concern that federal funding “may be jeopardized” for projects “due to the inclusion of certain provisions that may not be appropriate for all contracts.”

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Granite Receives Two APWA 2019 Public Works Project of the Year Awards (CA)

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By: Business Wire
August 16th, 2019 , 08:30 AM

WATSONVILLE, Calif.–(BUSINESS WIRE)–Granite (NYSE:GVA) announced today that it was recently selected as the recipient of two American Public Works Association’s (APWA) 2019 Public Works Project of the Year Awards for infrastructure projects publicly developed, owned, and maintained, that promote excellence in construction management and administration. These awards recognize the alliance between the managing agency, the contractor, the consultant, and their cooperative achievements.

Granite received APWA’s 2019 Public Works Project of the Year Award for the SouthEast Connector, Phase 2 project in the transportation category, projects of more than $75 million division. As part of the SouthEast Connector, Phase 2 project, Granite built the newly dedicated Veterans Parkway to connect large residential and commercial areas via a 5-mile, 6-lane arterial highway featuring 10 bridges and 17 precast multicell box culverts. Granite also constructed a multiuse pathway for cyclists and pedestrians, as well as sound walls and new signalized intersections avoiding impact to the surrounding wetlands and tributaries of the Truckee River. The team created 150 acres of new wetlands, sequestered mercury-contaminated soils, removed hundreds of acres of noxious weeds, and disposed of 2000 tons of trash.

Tangerine Corridor Constructors (TCC), a joint venture between Granite and Borderland Construction, received APWA’s 2019 Public Works Project of the Year Award for the Tangerine Road: Dove Mountain Boulevard to La Cañada Drive project in the transportation category, projects of $25 million to $75 million division. TCC reconstructed approximately five miles of two-lane roadway to four lanes of divided roadway, along with widening and improvements to four major cross-streets. The project also included four signalized intersections, a new multi-use path, extensive drainage upgrades including 42 cross drainage structures to enable all-weather access, five underground wildlife crossings, significant native plant preservation, and native landscaping.

The APWA Public Works Projects of the Year Awards are given in four divisions and five categories. The divisions are: projects less than $5 million; projects of $5 million, but less than $25 million; projects of $25 million to $75 million; and projects of more than $75 million. The categories are: structures: transportation; environment; historical restoration/preservation; and disaster or emergency construction repair.

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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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