New Misclassification Study Shows Impact in California

By Jim Kollaer on Wed, 10/15/2014 – 10:30am 

In a September 2014 study entitled Sinking Underground: The Growing Informal Economy in California Construction, misclassification of more than 39,800 construction workers is a key reason that the underground economy in construction is contributing to the low wages, difficulty in recruiting qualified craft workers and loss of wages and taxes in the State of California.

According to the study, released by the Economic Roundtable, a non profit research organization based in Los Angeles, in 2011 more than 143,900 construction jobs in the state were “informal” – code for off the books, misclassified as independent contractors or unreported by employers.

The study looked at wages and construction jobs from 1972 to 2012 and found that the number of construction workers that were unreported or misclassified increased by 400% during that period.

The study cites that, “Specialty trades, such as drywall, have the highest level of informality with over 25% employed informally in 2012.  Building Construction was next, with 20% estimated to be informal.”The major impact on the industry is that those construction companies in California who are “doing it right” have costs that are 30% higher that the “off the books and misclass” contractors.  Imagine what that disparity does to the bidding process.  The report cites several personal stories to illustrate its points.

ICR seeks $3.62 million from VVWRA

Posted Nov. 13, 2014 @ 6:42 pm 

VICTORVILLE – The staffing agency co-owned by San Bernardino County 1st District Supervisor Robert Lovingood sought $3.62 million in damages from Victor Valley Wastewater Reclamation Authority this year, according to a claim obtained Thursday by the Daily Press.

In the claim dated Aug. 22, ICR Staffing Services alleged that VVWRA failed to pay prevailing wage to ICR’s contract workers between 2011 and 2013 and solicited ICR’s temporary employees to jump ship to a competing staffing agency. The claim was served Sept. 11.

“We obviously had a discussion with the claimants prior to the filing of the claim and responded,” VVWRA General Manager Logan Olds said Thursday. “The board took a look at it and the direction was to deny the claim.”

In a numbered format, the claim lists a series of alleged wrong-doings by VVWRA, which had utilized ICR workers between 2011 and 2013 for the Upper Narrows Pipeline project, but in May chose lower-bidding Hesperia-based iLink Business Management for future contract services.

In 2011, a two-year contract services agreement provided ICR employees a gross figure of roughly $260,000 per year. But since the project was subject to reimbursement from the Federal Emergency Management Agency, the contract should have been let as prevailing wage and “generated a gross annual billing in excess of $1.5 million,” the claim states.

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L.A. City Attorney sues city contractors over alleged wage theft

NOVEMBER 13, 2014 

City Attorney Mike Feuer filed a lawsuit Thursday accusing city contractors involved in building a South Los Angeles animal care facility of shorting about 50 employees out of a quarter-million dollars in wages and attempting to hide their tracks.

The $9.6 million construction contract for the 68,000-square-foot South Los Angeles Animal Care Center project near Western Avenue and 60th Street was awarded in 2009 to Mackone Development Inc., which then delegated some of the work to five subcontractors.

The lawsuit seeks to have Mackone and its subcontractors pay their employees what they are allegedly owed, and also pursues penalties of $2,500 for each violation. City attorneys also want to bar the companies from seeking future city contracts.

“Stealing wages from hardworking men and women is reprehensible and it must end,” Feuer said. “No one – especially city contractors paid with taxpayer dollars – should fail to pay workers what they are rightly owed.”

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Wage Theft – How companies steal from our employees and communities



Ben Basom of the Pacific Northwest Regional Council of Carpenters gives the example of a worker who came forward and started talking to the union about the Portland company that he was working for and the scams he was seeing. Basom says the employee’s boss found out “and the next time we saw him, his arm was in a cast and he was all bruised up.”

The worker said, “This guy knows where my family is in Mexico.”

From July 2012 to June 2013, Oregon workers filed claims for more than $3 million in unpaid wages with the Oregon Bureau of Labor and Industries. Juan Carlos Ordonez of the Oregon Center for Public Policy (OCPP), which analyzed BOLI’s data on the claims, says that’s “just the tip of the iceberg” because workers fear retaliation if they complain about their missing wages, or they simply don’t know how or where to file a complaint. BOLI is the agency that investigates and enforces Oregon’s labor laws.

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US Labor Department signs agreement with New Hampshire Department of Labor to reduce misclassification of employees

WHD News Release: [11/12/2014]

WASHINGTON – Officials from the U.S. Department of Labor and the New Hampshire Department of Labor  has signed a memorandum of understanding with the goal of protecting the rights of employees by preventing their misclassification as something other than employees, such as independent contractors or other nonemployee statuses.

Under this agreement, both agencies will share information and coordinate law enforcement. The memorandum of understanding represents a new effort on the part of the agencies to work together to protect the rights of employees and level the playing field for responsible employers by reducing the practice of misclassification. The New Hampshire Department of Labor is the latest state agency to partner with the Labor Department.

“Misclassification of employees deprives workers of rightfully-earned wages and workplace protections and undercuts law-abiding businesses,” said U.S. Secretary of Labor Thomas E. Perez. “Which is why combating misclassification is one of several important strategies to promote shared prosperity to help ensure that our economy works for everyone.”

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Metro Brief: Norton hopes to reward fair labor practices with new bill

On November 10, 2014


When Congress reconvenes, Congresswoman Eleanor Holmes Norton (D-DC) said that she will introduce a bill that directs federal agencies to give preferential points to federal government vendors and contractors based on their labor practices.

Points would be given to vendors and contractors that pay their employees a living wage with benefits without passing on additional costs to the federal government, as well as for permitting workers to unionize. According to Norton, these points will help level the playing field and encourage private contractors and concessionaires to treat their workforce with the dignity they deserve.

“The federal government, through contracts, funds approximately two million jobs that pay less than a livable wage,” said Norton. “The federal contracting system should not be contributing to growing income inequality. My bill will not only afford federal government contract workers a decent wage, but the federal government would see significant savings in benefits, such as food stamps it now offers to supplement the income of these low-wage workers.”

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This KY Contractor Has Spent 10 Years Fighting $50,000 in Back Wage Claims. They Finally Lost.

November 5, 2014

A case brought forward by the Kentucky Building Trades was recently upheld in the Kentucky Court of Appeals providing a victory for both the involved unions and their signatory contractors.  The case will mean Teco Mechanical, a non-union contractor from Lexington, will pay $54,164 in back wages to its workers along with a $5,250 penalty (plus eight percent compound interest from December of 2004).  The nearly decade-long case has gone through all levels of the Kentucky legal system and tested both the patience and perseverance of the Kentucky Labor Cabinet.

The incidents themselves date back to 2000 when Teco worked several prevailing wage projects and failed to correctly pay its employees.  The Kentucky Labor Cabinet then performed an investigation, according to the Court of Appeals opinion:

TECO is a mechanical contractor that provided contractor and subcontractor services on a number of public works projects. Pursuant to statute, contracts for these projects required TECO to pay its employees no less than the prevailing wage.1 KRS 337.510(1). In 2001, several TECO employees contacted the Kentucky Labor Cabinet and alleged that TECO had failed to pay them the prevailing wages for the work that they had performed. The employees asserted that TECO had paid them according to a formula under which it classified them as lower paid, general laborers for a fixed number of hours and as higher paid, skilled laborers for a fixed number of hours-regardless of the actual time spent working in each classification.

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Walsh issues order protecting against wage theft in Commonwealth

Written by Remi Duhé· October 29, 2014 1:15 am


Boston Mayor Martin Walsh issued an executive order Thursday requiring city-contracted vendors to certify their compliance with both federal and state wage laws.

Vendors will be required to disclose previous violations of these laws to the City. Wage theft in the city of Boston affects workers and their families, particularly low-income and immigrant families, according to Friday press release from the mayor’s office.

“It’s illegal to deny fairly earned wages,” Walsh said in the release. “This executive order empowers workers to demand what they have worked for. I’m committed to stopping violations and holding employers to the letter of the law.”

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Local Company Pockets Worker’s Wages, Tax Dollars, Whistleblowers say

Monday, October 27, 2014
Cornelius Swart, GoLocal PDX Director of Content


A local janitorial company that has worked on publicly-funded projects has been shortchanging its workers and pocketing their wages, according to the claims of whistleblowers.

Wage theft complaints against Cornerstone Janitorial Service of Hillsboro have been filed in Oregon and Washington and whistleblowers allege that the company hires undocumented immigrants and takes taxpayer-funded wages that rightfully belong to workers.

In response, Cornerstone tells GoLocalPDX it only hires legal residents and pays the proper wages.

But an investigation by GoLocalPDX has found that in some cases workers are only paid $12 an hour on jobs that should have been compensated at an hourly rate of $36.

(Read More)

California cracks down on wage theft by employers

OCTOBER 23, 2014, 5:11 PM

State regulators are wielding a new tool to combat the intractable problem of employer wage theft, which costs workers an estimated $390 million a year.

The California controller, working with the state labor commissioner, is demanding restitution from suspected violators – and filing lawsuits, if necessary – under California’s Unclaimed Property Law.

“We’re using a 55-year-old statute to compel immediate payment from unscrupulous businesses that have fleeced their employees of earned wages for years,” state Controller John Chiang said at a news conference in Fresno on Thursday.

Chiang has ordered a pair of firms, identified in a pilot project, to transfer any wages that have gone unpaid for more than a year to the state treasury. Then, the controller’s office can look for the recipients and pay them their overdue money.

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