Study shows wage theft rampant in construction industry
For more than three years, workers doing asbestos removal and demolition jobs for several Woburn companies were paid in cash, resulting in more than $700,000 in unreported wages, federal prosecutors charged in an indictment last week.
Meanwhile, construction workers around the state — particularly immigrants hired by subcontractors — say they sometimes go for weeks without pay. When they do get paid, it can be less than promised, and overtime pay is virtually nonexistent.
Many of them are hired as independent contractors, without the job protections or tax deductions of a traditional employment relationship.
The practice, known as wage theft, "has reached epidemic levels" in Massachusetts, namely in the booming residential construction industry, according to research from the University of Massachusetts Amherst.
In the past 18 months, the state attorney general's office has issued more wage violation citations against employers in the construction industry than in any other sector — 253 citations in all, resulting in more than $1.6 million being recovered in penalties and unpaid wages. The attorney general's office said cracking down on wage theft continues to be a priority.
"This is the new model," said Tom Juravich, a UMass Amherst labor professor and the lead author of a paper detailing wage violations in the state's residential construction industry. "The assumption [in the industry] is that the great majority of subcontractors is going to use undocumented workers and is going to cheat them out of wages."
The state chapter of Associated Builders and Contractors, a nonunion construction trade group, acknowledged that wage violations are an issue in the industry but maintained that most companies treat workers fairly.
In an attempt to save money on labor costs, more employers are classifying workers as independent contractors, according to the Department of Labor, in an attempt to get around overtime and health insurance rules and to avoid payroll and insurance taxes. But in Massachusetts, if a worker is taking direct orders from an employer and otherwise acting like a traditional employee, this arrangement is illegal.
Going after crooked employers can be difficult, Juravich said, because even though the state has strong wage laws, it has a limited ability to enforce them. Job sites have become fluid, with multiple layers of subcontractors outsourcing work, making it tricky to determine who a person works for.
Before the economic downturn, as many as one in four Massachusetts construction employers were misclassifying construction workers as independent contractors, according to a 2004 Harvard University study, the most recent construction-specific estimates available. The problem is no doubt worse today, said study author Elaine Bernard, executive director of the law school's Labor and Worklife Program.
Legislation filed in the House and Senate would give the state more power to weed out corrupt employers. It starts at the top — holding lead employers responsible for the wage violations of their subcontractors. The measure, which has not yet had a hearing, would also give the state the power to issue stop-work orders at job sites where workers are being misclassified or getting paid in cash.
In a briefing on the bill Monday on Beacon Hill, David Weil, head of the Wage and Hour Division at the US Department of Labor, noted that wage theft is a "huge problem" that has spread from construction to many other industries.
"In virtually every corner of the economy, this problem has become pervasive," Weil said.
But Greg Beeman, president of Associated Builders and Contractors in Massachusetts, said that holding lead employers responsible for the actions of subcontractors could be an unfair burden.
"We've got to be careful to not do something that's going to have severe repercussions to normal business operations of a very significant industry," he said.
One wood framer, a native of the Dominican Republic who asked not to be identified for fear of losing his job, said he worked 12-hour days for a month at a Braintree job site without getting paid — then finally received a check for two weeks of work. Another, a drywall worker from Mexico, said he has been underpaid or paid late on several job sites, forcing him to borrow money to pay for rent and groceries.
Last year, the state's Council on the Underground Economy recovered more than $20 million in unpaid wages, payroll and insurance taxes, and related penalties. A greater ability to bust unscrupulous subcontractors could bring in even more revenue, according to the Boston advocacy group Community Labor United. A report commissioned by the Council on the Underground Economy estimated that unreported wages could be costing the state nearly $350 million a year in payroll and unemployment insurance taxes.
The state declined to comment on attempts to step up enforcement, but Colleen Quinn, spokeswoman for the department of Labor and Workforce Development, noted that "legitimate businesses often wind up paying higher costs when other businesses evade the law."
The New England Regional Council of Carpenters, which helped craft the legislation cracking down on wage violations, has been going after what it says are dishonest subcontractors for years. One organizer said he has helped recover $2 million in unpaid wages for workers in the past nine years, mostly by holding or threatening demonstrations at job sites.
Luis Tirado, a native of Puerto Rico who lives in Southbridge, said he was forced to take a siding job in Worcester as an independent contractor. After several disputes, including tasks being added to the job after the price was set, Tirado went to the union for help — and said he still wasn't able to get the overtime he was owed.
"There's a lot of people out there that need money to support their family to pay their bills, to better themselves," said Tirado, 51, now a member of the carpenters union. "And then these people come out of nowhere and take advantage of them."