We have posted in the past about the Wage Theft Game and how rampant it is in construction around the globe. Globally, this game is played through the use of forced labor, conscripted labor, labor trafficking and a variety of other less than honest methods. Government officials in some second and third tier countries around the globe take bribes, kick-backs, endorse nepotism, make deals with the cartels and generally use a variety of illegal and underhanded methods to get projects built. Those projects range in size from major infrastructure projects such as bridges, dams, highways to palaces, second homes, schools and individual homes.
So, it is no wonder that many Contractors and Subs have either borrowed or brought with them the methods of the Wage Theft Game to the construction industry in the United States. Owners and investors may or may not know that these games are being played on their projects and we thought that we would reiterate some of the ways that Wage Theft games are being played on projects in your local market so that you would recognize it when you see it being played.
There are generally four variants of the Wage Theft Game that we see in our markets and that are defined in a recent article in Construction Dive. Those include non-payment, underpayment, misclassification and unauthorized deductions. Let’s take a quick look at each of them to see what they look like.
Non-payment- This one is relatively straightforward. Workers or subs do the work and the contractor or owner refuses to pay for that work. In today’s marketplace where we are seeing tight labor markets, contractors and subs are getting away with it as the result of the wider use of illegal workers - workers who have no recourse when a sub or contractor withholds paychecks and tells the illegal workers that if they complain that the Contractor will call ICE on them and their families and see that they are sent back to their home countries.
Underpayment – Many contractors and subs underpay their workers by using the “sub-sub” method where the prime sub gets a project for a specific bid or negotiated price and then subs the work to another work crew for a lower price and tells that crew that, “ I only have X dollars in this job and you can have it if you take it for that price.” The crew and the craft workers get shorted either by hourly rates or by flat rates for the project while the prime makes profit on the spread.
Misclassification – This game has been the subject of numerous hours of discussion in State Houses around the country, especially now as we are deep into the gig economy and many contractors are classifying their workers as Independent Contractors and not as employees. By classifying the workforce as Independent Contractors and not employees, the contractors avoid paying overtime, benefits and workers' comp. Many small contractors and subs play this variation of the game because they don’t want to have the overhead or to provide medical benefits to their workers.
Unauthorized deductions – This one is not talked about much in these discussions, but many of the contractors and subs claim that they are paying a livable wage, but then make deductions from the weekly paychecks for transportation to and from the jobsite, fees for tools, materials, and personal protection equipment. By playing the Wage Theft Game that way, they are getting the workers to pay for the contractor’s costs and further reducing the paychecks for those same workers.
A number of states including California and Massachusetts have passed laws that strike at the heart of this game. The Governor of Colorado, according to a recent article by Kim Slowey in Construction Dive, just signed into law, the Human Right to Work with Dignity law that makes it a felony to withhold payment of more than $2,000 from any employee. Colorado and a number of other states have previously considered Wage Theft to be a misdemeanor. But the elevation of Wage Theft to a felony has raised the stakes for Contractors and Subs who play the game of Wage Theft. Another part of this legislation “includes migratory and foreign workers under the definition of employee.” This was written in response to the amount of Labor Trafficking in the state.
So, if you continue to play the Wage Theft Game, you might want to give it a second thought.