PROVIDENCE — Across Rhode Island, there are scores of workers on local construction sites who are underpaid and out of sight.
This underground economy is happening on jobs where developers promise to rehabilitate old buildings to create luxury apartments. It’s happening at new construction sites featuring ceremonial groundbreakings and lucrative tax credits. Subcontractors are cutting corners with laborers who aren’t paid properly, and the general contractors and developers benefit by looking the other way.
The problem is so pervasive that this year, the attorney general’s office, the state Department of Labor and Training, and the unions are asking the General Assembly to put some teeth in the law to stop wage theft and employment fraud.
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A bill sponsored by state Representative Robert E. Craven Sr. would increase penalties for wage theft and employee misclassification. Wage theft of over $1,500 would be made a felony, with punishment that could include prison time and fines. The attorney general may also bring criminal charges in cases of employee misclassification, with the possibility of prison time.
“It’s a matter of fundamental principle that theft is theft, and when employers knowingly and willfully misclassify employees, it’s theft and should be treated as such,” Deputy Attorney General Adi Goldstein told the House Judiciary Committee, which Craven chairs, earlier this month. “It’s not fair that some employers benefit from breaking the law.”
Other supporters said the legislation would be an important step in combating the overall underground economy in construction, as well as other professions.
“This is a really big problem for our community,” said Heiny Maldonado, cofounder and executive director of Fuerza Laboral, a workers’ rights organization in Central Falls.
Unions for teachers, police officers, health workers, Department of Children, Youth and Families employees, and supporters for tenants’ rights all back the bill. Some said they see the impact of poverty on the families they care for.
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Opponents, including local chambers of commerce, Rhode Island Lumber and Building Materials Dealers Association, the Rhode Island Builders Association, and Construction Industries of Rhode Island, said increasing the penalties would hurt the industry and independent contractors.
Laurie White, president of the Greater Providence Chamber of Commerce, warned the House Judiciary Committee of “unintended consequences” for independent contractors and companies that could hesitate to hire them, out of concern for violating the law. “Conscientious employers want to do the right thing,” she said. “They want to have the proper guidance.” Alex Mitchell, secretary of the Rhode Island Builders Association, said the organization supported the bill’s intentions but called it “vague.”
Robert Baldwin, a third-generation home builder, said the threat of a felony charge left no room for innocent mistakes by an employer. “It’s going to hinder new companies from expanding and tradesmen who want to be independent contractors,” Baldwin told the committee at the hearing on Craven’s bill.
Some argued that the DLT has the tools it needs to combat the problem. The DLT disagrees.
In written testimony to the House Judiciary Committee, DLT director Matthew D. Weldon said that misclassification of employees as independent contractors and paying workers less than minimum wage, or failing to pay overtime, remains “a major challenge in our state.”
The practice entrenches workers into poverty and gives unscrupulous employers an unfair advantage over those who follow the law and pay fair wages, unemployment insurance and payroll taxes, and workers compensation, Weldon wrote. A small group of employers continue to skirt the rules, because the financial advantages outweigh the risks.
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The legislation would make it a felony for an employer to “willfully and knowingly” withhold more than $1,500 from an employee. Those found guilty of wage theft of more than $1,500 could face up to three years in prison. Those who owe more than $5,000 can face up to six years in prison, and those convicted of owing more than $10,000 may be incarcerated for up to 10 years. An employer could also face fines of up to twice the amount of wages that were withheld.
The most common form of employee misclassification, basically workplace fraud, is when employers deliberately pay workers “under the table” in cash and call them “independent contractors.” The DLT has estimated this practice probably costs Rhode Island tens of millions of dollars in uncollected income tax and uncollected premiums for unemployment insurance, temporary disability insurance, and workers’ compensation insurance.
The legislation would allow the attorney general’s office to bring criminal charges against an employer who misclassifies a worker. The penalty for a first offense could mean up to three years in prison; a second offense would be up to five years. Both could also carry fines. Goldstein, the deputy attorney general, said the legislation would mean they could extradite out-of-state employers to face charges.
“By increasing the fines for these practices and classifying knowing and intentional egregious wage theft and misclassification as felonies, this bill will create the strongest possible disincentive and go a long way toward eliminating wage theft and misclassification in our state,” Weldon wrote, urging the committee to pass Craven’s bill.
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From 2020 through 2022, the DLT has recovered about $1.6 million of unpaid wages unlawfully withheld from more than 500 Rhode Island employees. The Rhode Island Building and Construction Trades Council cites a 2022 report by the UMass Labor Center that found 9.3 percent of Rhode Island employers are illegally misclassifying workers as independent contractors.
Just this year, the DLT found numerous issues at the redevelopment of a former church in Pawtucket.
The DLT found that three subcontractors on the job had misclassified a total of 15 workers, who were all owed $750 each. The companies were ordered to pay the workers and pay the equivalent in fines. In a settlement agreement, AMD Builders LLC of Central Falls was ordered to pay $18,000 for a dozen workers; DCS Masonry Construction of Natick, Mass., was ordered to pay $3,000 for two workers; and Brazil Floors of Shelton, Conn., was ordered to pay $1,500 for one worker.
State law requires that contractors and subcontractors on any publicly funded project costing $1,000 or more pay the prevailing wage to workers. For some companies, though, breaking the law and risking fines is the cost of doing business.
Justin Kelley, business representative of Rhode Island Painters and Allied Trades, rallied a crowd of about 150 union members just before the May 11 hearing by reminding them of the issue in plain sight.
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“It’s a premeditated act that the general contractors, the construction managers and developers in the non-union section of the industry, purposefully engage in,” Kelley shouted through a bullhorn outside the State House.
Every few weeks, a crew of union representatives from the building trades and advocates for immigrant workers have made unannounced visits at different construction sites and have handed out cards from Protect Your Pay Rhode Island, a website paid for by BuildRI, to inform workers about wage theft and offer help.
Kelley said that’s how they often see and hear about problems:
Employers who pay workers the prevailing wage but require them to work for free on the weekends. Employers who tell workers to work for free the first week, and disappear when the job is finished. Employers who tell workers to kick back money for their benefit packages, which they don’t get.
“Phantom workers,” where the certified payroll won’t accurately reflect the number of workers on the books or the hours they are working. Workers living illegally on construction sites. Workers who are given fake names.
“We see the same cases with different faces all the time,” said David Molina-Hernández, a community organizer with Fuerza Laboral. “When people are undocumented, things are much worse. They will get paid even less than minimum wage.”
Some people are paid in cash, which means they don’t benefit from Social Security when they retire. Others are deemed “independent contractors” but don’t actually have control over their work schedules or working conditions.
“It’s a structural trap that workers get forced into that creates unsafe working conditions, a lack of ability to get proper pay, and no benefits,” Kelley said. “It violates labor law, and it creates a scenario where they’re technically deemed unable to organize, because they’re not considered an employee of an employer that has the ability to collectively bargain.”
They are often people who have no power to advocate for themselves, Kelley said.
“We see particularly vulnerable workers, people who are formerly incarcerated just out of prison, people in halfway houses, people with drug or alcohol issues that are in recovery, and immigrant workers, with and without status, but particularly with undocumented workers, who tend to be the people who are the heaviest victims of the underground economy,” Kelley said.
One morning in early May, the union representatives and Fuerza Laboral toured sites in Warwick, Providence, and Pawtucket. As observed by a Globe reporter, the unannounced visits went pretty much like this:
Kelley, to the construction supervisor: “We’d like to have a conversation with you about how to do things better. We’d like to speak to the workers.”
Supervisor: “Get out.”
A developer in Pawtucket called the governor’s office to complain about the group’s visit. A developer at a Providence site called the police and falsely accused the group of breaking and entering.
Still, during each visit, it didn’t take long for the group — which included representatives from Laborers’ International Union of North America New England Region, Plumbers, Pipefitters, Refrigeration Local 51, and the Sheet Metal Workers’ Local Union No.17 — to spot issues.
Workers without safety gear. Workers who admitted they didn’t know who they were working for. One renovation project in Providence didn’t have barriers around a wide opening in the basement, or safety rails around elevated walkways. A mill under renovation in Pawtucket had two ancient campers parked in the lot with extension cords running to the building and a small refrigerator filled with groceries. To the union representatives, it seemed clear that there were workers living there.
At a mill renovation at 49 Westfield St. in Providence, where the DLT had cited the contractor, K&S Design Build LLC, subcontractor Gamez Construction Masonry, and a worker, fining each $1,500 for operating a forklift telehandler without a license, some workers wore T-shirts with the logo of another subcontractor with a history of problems. The subcontractor drove away as the group walked toward his truck.
And at one site in Pawtucket, the group had just arrived when a painting subcontractor took Molina-Hernández aside.
He had been a victim of wage theft, by several different contractors. He liked what the union group was doing ― and he was ready to work with them.
Amanda Milkovits can be reached at amanda.milkovits@globe.com. Follow her @AmandaMilkovits.