The issues of Wage Theft and payroll fraud were highlighted in Houston, Texas last week when two leaders on the issues spoke before the Houston City Council.  This was part of the effort to garner support against those contractors and business owners who continue to cheat their workforce by not paying them overtime, benefits or by misclassifying them as Independent Contractors and not paying unemployment insurance, federal income taxes or medical benefits.

Kim Bobo, Executive Director of Interfaith Worker Justice and author of the book Wage Theft in America, and Stan Marek, CEO of the Marek Family of Companies based in Houston, aimed a shining a bright light on those abuses with their testimonies, and made the Council members aware of how Wage Theft can occur on their construction projects even though they might not be aware of it.

Cindy Gutowski, a worker in the floral industry, testified about her losses when she was defrauded of overtime pay.  Kim Bobo testified about how widespread the issue is across the United States in a number of businesses, and Stan Marek spoke of the impact of the issue on the construction industry in Houston and around Texas.  They each spoke of losses of wages, competitiveness and taxes and how Read more » about Wage Theft Issue Brought Before Houston City Council

The political follies are in full swing.  We have another nine months before the “Great American Public” will select the 45th president of the US.  No way yet to tell what will emerge from both sides as the campaigns turn up the volume.  Right now the Republicans are pummeling each other on the way to the convention and the Democrats are taking copious notes on every negative article and revelation that emerges from the fist-fight underway on the “R” side of the aisle.

Some of our industry organizations are already taking sides.  At their National Board of Directors Meeting in Phoenix last week, the Associated Builders and Contractors (ABC) announced their position.  According to their press release,

“Associated Builders and Contractors (ABC) today endorsed Republican presidential candidate and former Massachusetts Gov. Mitt Romney to be the 45th president of the United States.”

I wonder why they made that choice?  The press release goes on to explain.   Read more » about Which Presidential Candidate is Best for YOUR Construction Industry?

The economy in California might be on the upswing, but the construction industry falls short regarding the underground economy and wage theft and insurance fraud for one of the bandit firms that we are ferreting out all over the country.  Doherty Painting and Construction in Millbrae is neither responsible or honest.

According to an article on National Underwriter’s website Property Casualty 360, Frances Ann Doherty, owner of Doherty Painting and Construction in Millbrae, is accused of stealing from her workers over $600,000 of wages.  Not only did she withhold wages owed, she reported to her clients, the city of San Francisco and a number of school districts, that she had paid the prevailing wage to her workers.

“Liar, liar, pants on fire!”  According to the California Department of Insurance, Doherty is accused of misreporting over $600,000 in wages and over $100,000 in insurance premiums to her insurance companies.  Read more » about Another Bandit Subcontractor Gets Bitten by the Law

New Wage Theft and Payroll Fraud Study Released in Florida

According to a recent report in the Florida Independent, wage theft and payroll fraud are rampant in Florida, and the state enforcement mechanism is overwhelmed and grossly understaffed.  They cite a recent report from the Research Institute on Social and Economic Policy (RISEP) at Florida International University entitled Wage Theft: An Economic Drain on Florida – How Millions of Dollars are Stolen from Florida's Workforce that illustrates the nature of the wage theft and payroll fraud issue in Florida, specifically in 5 industries: Accommodation and Food Services, Retail, Construction, Healthcare and Social Services and Administrative Support.   Read more » about Construction Bandits Rip-Off Workers in Florida

Subcontracting companies working at Pulte Homes sites in Massachusetts have been found guilty of wage theft, payroll fraud, and unemployment insurance violations.  The subcontractors have been ordered to pay more than $400,000 in unpaid wages and penalties, and more than $141,000 has been recovered in previously outstanding revenue for Massachusetts’ unemployment system.

Pulte Homes of New England LLC and Pulte Braintree LLC operated several construction sites which were investigated after Massachusetts Attorney General Martha Coakley’s office and the Joint Enforcement Task Force on the Underground Economy and Employee Read more » about Subcontractors on Pulte Construction Sites Guilty of Payroll Fraud

The following viewpoint was offered by Mike M., a 24-year-old intern who supports the ConstructionCitizen blog.

The painful truth is that the vast majority of Americans are dangerously oblivious to the decisions being made in Congress; before yesterday's organized blackout of hundreds of the most popular websites across the Internet, I only knew one or two people who had ever heard of SOPA or PIPA.  Even now, most of those who are aware lack a true understanding of the provisions of these two bills, bills that are being sold to the public as “protection for intellectual property rights”, but are in reality the beginning of something far more dangerous: the regulation and censorship of the Internet itself.

The authors of these bills claim that the bills are designed with the sole objective of preventing the mass-downloading of music and movies that is allegedly hurting the entertainment business.  I say “allegedly” because the theory that every downloaded album is one less sold is ludicrous, and media companies still seem to be doing just fine for themselves.  Videndi, the corporation that owns Universal Music Group, posted $2.2 billion in pure profit for 2010, just to name one example.   Read more » about What’s this SOPA Thing I Keep Hearing About?

Loren Steffy, in his Sunday column for the Houston Chronicle, spells out the impact of payroll fraud and worker misclassification on the US deficit.  He says that two things are happening that are symptomatic of the situation.

First, by misclassifying workers as independent contractors or 1099 workers, the employers in the construction industry and in other labor intensive industries like hospitality and food service are not paying the taxes or benefits on the workers they hire.  Steffy states:

“For every $1,000 employers pay in wages, they are supposed to collect from employees $14.40 for Medicare and $42 for Social Security.  In addition, employers are supposed to contribute $62 themselves to Social Security, another $14.50 for Medicare and $25 Read more » about Budget Shortfalls Exacerbated by Payroll Fraud

California’s Department of Industrial Relations, the Employment Development Department, Contractor's State Licensing Board, Board of Equalization, the Bureau of Automotive Repair, and other California state agencies have teamed up to create the Labor Enforcement Task Force (LETF), which will be established effective January 1.  This will be the newest effort to battle the underground economy where workers are not given their legal rights or wages, and to level the playing field for businesses who uphold the law.

The Department of Insurance, the Attorney General and Local District Attorneys, and others will collaborate with LETF, sharing information and using new technology to better enforce existing laws.

The news distribution website PR Newswire (registration required), quotes Labor and Workforce Development Agency Secretary Marty Morgenstern as stating:   Read more » about California State Agencies Collaborate to Level Playing Field for Ethical Companies

On July 13, Construction Citizen shared a story first reported by Dallas/Fort Worth television station WFAA about misclassification of workers on a school construction project.  Last week, the same WFAA reporter submitted an update to the story.

The original story featured a subcontractor who lost the bid for work on Mansfield Independent School District’s Center for the Performing Arts to a competitor who does not pay payroll taxes, unemployment tax, or workers’ compensation insurance.  Following the investigation and airing of the story, the Texas Workforce Commission (TWC) charged Mireles, the subcontractor who was hired for the project but did not pay those taxes, for Read more » about Update on Misclassification in Texas Construction

Connecticut newspaper The Stamford Advocate reported that subcontractor John Dosky, owner of American Building Group LLC, was recently arrested by Connecticut State Police for wage theft violations against three brothers, one of whom died from a fall while working for him.  Dosky was charged with three felony counts of “failure to pay wages” for owing the brothers almost $8,000 in unpaid wages.  The Department of Labor is also taking action against his company for misclassifying these and other employees as independent contractors, a practice known as payroll fraud.

The death occurred in October after 36-year-old Javiar Salinas fell more than 50 feet at the Chelsea Piers sports complex construction site in Stamford.  An article in The Danbury News-Times reported that Salinas’ estate is filing suit against each of his employers, including the developers (Chelsea Piers Connecticut LLC and Stamford Exit 9 LLC), contractor (Merritt Contractors Inc), subcontractor (AP Construction), and the sub-sub contractor (Dosky’s company, American Building LLC), because Salinas was not wearing a safety harness when he climbed to the roof that day, allowing a gust of wind to knock him off of the roof.

After the accident, Javiar’s brothers went to the Department of Labor to seek help in collecting Read more » about Contractor Charged with Felony Wage Theft Following Death of Worker