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The Boston Globe

Business

A bigger bill for labor abuses

State collects $11m in fines, taxes for 2011; Enforcement efforts increased, report says

Massachusetts investigators nearly doubled the amount of money collected last year from employers caught violating the state’s minimum wage and tax laws, reflecting exploitation of workers in a range of industries, according to a new report.

The state’s task force on the so-called underground economy recovered nearly $11 million in fines, back taxes, and unpaid wages from employers in 2011, up from $6.5 million in 2010 and $1.4 million in 2009.

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The sharp increase, recorded in the task force’s annual report to be released Thursday, offers a window into widespread efforts to subvert wage and tax laws in the difficult economy. It also highlights stronger enforcement by the task force, which was created by Governor Deval Patrick in 2008 to investigate complaints of worker exploitation.

Officials in charge of the task force said its enforcement focused on a variety of industries including construction, auto sales, food service, and hospitality. Employers were found to be paying substandard wages, failing to maintain workers’ compensation insurance, and failing to pay income and unemployment taxes.

“There seems a strong appeal among some employers to taking advantage of their workers,’’ said Joanne Goldstein, the state’s secretary of Labor and Workforce Development. “But I think there’s been a shift in how employers perceive the seriousness of the enforcement action we can take against them.’’

The task force, which consists of 15 state agencies that regulate employment, conducted thousands of inspections and audits last year following complaints of abuses by employers. In its annual report, to be posted online at www.mass.gov/lwd/jtf, the task force said the money it collected included more than $3.6 million in overdue taxes and issued more than $2.1 million in fines against companies without workers’ compensation insurance. The attorney general’s office, working alongside the task force, recovered another $3 million in penalties and fines for wage violations.

Even with the stepped-up enforcement, officials acknowledged that such violations are pervasive in the economy, with some employers continually taking advantage of low-wage workers and deliberately ducking tax obligations. The cases last year involved victims from a range of backgrounds; some were undocumented immigrants, many others were citizens.

One of the largest enforcement actions last year focused on construction sites managed by Pulte Homes, a national builder. Contractors working on several of its properties were hit with $540,000 in fines for allegedly failing to pay wages to dozens of employees, many of them Brazilian immigrants. Pulte Homes itself was not held liable for the alleged violations because it did not directly employ the workers involved.

Another large case resulted in $500,000 in fines against Labor Solutions Inc., a temporary employment company in Worcester that provides workers for manufacturing plants. The company and its owner, Tam Vuong, pleaded guilty to 65 counts of violating state wage and hours laws, including failure to pay minimum wage and failing to pay overtime.

In addition to exploiting workers, such abuses have far-reaching effects in the state’s economy. In many industries, legitimate businesses struggle to compete against companies that provide services at lower costs by avoiding taxes and refusing to pay fair wages and other costs.

“There’s just no way that a company playing by the rules can compete with someone who is carrying no overhead or any other expenses related to taxes or proper protections for their employees,’’ said Greg Beeman, president of the Massachusetts chapter of Associated Builders and Contractors Inc., which represents nonunion contractors. He said contractors are increasingly facing competition from out-of-state firms that are importing people into the state for use as cheap labor.

Earlier this year, a new state human trafficking law took effect that increases penalties on such practices. People found guilty of importing workers into the state for illegal purposes could now face up to 20 years in prison.

Officials with the task force said the state is launching a new study this year to measure the effect of illegal employment on the state’s economy. The state’s Department of Revenue will be leading the effort, using information from previous cases and other data to estimate the impact within specific industries.

Drew Cahill, director of the task force, said the study will help guide enforcement efforts and provide a clearer picture of where the abuses are happening and how they are affecting other companies and ordinary citizens.

“The average taxpayer is being taken advantage of, too,’’ he said. “It’s an issue of basic fairness: Most people are going to work every day and paying their share in taxes, and they are forced to shoulder a larger burden because of these other businesses that aren’t doing the same.’’

Casey Ross can be reached at cross@globe.com.
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