DLT Has $1 Million in Uncollected Fines, Wages

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Friday, August 31, 2012

Stephen Beale, GoLocalProv News Contributor

The Rhode Island Department of Labor has failed to collect $1 million in fines and back wages from delinquent contractors who have ducked paying prevailing wages on publicly-funded construction projects, a GoLocalProv investigation has found.

The half dozen contractors listed in DLT records have not appealed their cases and have not struck a payment plan. So far, none of them have paid a dime in cases that date back almost a decade. (See chart.)

Labor leader: no enforcement against deadbeat companies

A top labor union leader says that contractors have been able to get away with underpaying workers and breaking labor rules with impunity for years. “There’s no deterrence,” said Michael Sabitoni, President of the Rhode Island Building and Construction Trades Council. “You get fined. You just keep going about your business.”

Another 16 companies who have violated other labor laws—mostly dealing with unpaid wages or employee misclassification—have amassed $135,000 in back wages and nearly $40,000 in administrative fines in years-old cases which have been referred to the state Attorney General for legal action, DLT records show.

Sabitoni blames lack of enforcement by the state. “They’re not doing the job for one reason: they do not have enough staff,” he said, adding that state officials that are doing their best with limited resources. “I know the people over there. They’re all good people.”

He said the staff available to the division that handles such issues—formally, the Division of Workforce Regulation and Safety—has been “decimated” over the last 15 years, much of that under the administration of former Gov. Don Carcieri.

“It’s not because of the quality of the staff,” Sabitoni said. “It’s the quantity.”

State losing out on hundreds of thousands

The biggest debts rest with the contractors who did not pay prevailing wages—based on federal standards—to workers on local or state public works projects worth $1,000 or more, as mandated by law. Out of the $1 million that is owed, about $315,000 is in wages and nearly $700,000 is in penalties.

“It’s not a lot of money, but it’s money,” Sabitoni said.

At a time when the state is under fiscal pressure, $700,000 is enough to save a program somewhere in a cash-strapped budget, Sabitoni said.

And, in all likelihood, he said those figures barely scratch the surface of the violations that are out there. For about a decade, Sabitoni said there had been just one investigator allocated to cases involving wage and labor rule violations—one for billions of dollars in construction spending in one state. “Imagine if you had six or seven [investigators]. Do the math,” Sabitoni said.

But the investigative force has, apparently, been beefed up. Both the Prevailing Wage and the Labor Standards units each currently have two investigators, according to Valentino Lombardi, senior legal counsel at the department.

Construction industry up in arms

It’s not just underpaid workers and state coffers that are suffering. One of the biggest kinds of victims of underpayment and misclassification of workers is other contractors who compete for public contracts. “They were being outbid by entities that were cheating,” said Richard Sinapi, a lobbyist for the Rhode Island Association of General Contractors and the New England Mechanical Contractors Association. “They either weren’t paying prevailing wages or they were misclassifying workers.”

Paying someone below the prevailing wage on a public project cuts the cost of the biggest variable in any construction project: the cost of labor.

Another way of cutting corners is misclassifying workers. Improperly classifying them as independent contractors when they are really employees allows a contractor to dodge the cost of unemployment insurance, workers comp, and payroll taxes. Other contractors may classify someone as an employee, but put them in the wrong category—as a laborer, for example, rather than higher hourly earning positions as plumbers or pipefitters, according to Sabitoni.

Efforts to beef up enforcement

It’s become such a problem for the industry that the trade associations and the labor organizations teamed up to pass a bevy of bills in the last legislative session aimed at putting the teeth in the current regulations.

The toughest measure to pass is a new law aimed at deterring delinquent contractors. Under the law, which took effect this summer, contractors that owe outstanding wages or “other sums” levied by the Department of Labor and Training, will have their licenses revoked or suspended by the Contractors Registration Board.

Another law institutes stiffer penalties for incorrectly classifying workers as independent contractors rather than employees. First offenses are $500 to $3,000 per employee; second offenses are as much as $5,000 per employee, according to Sinapi.

One issue, Sinapi said, is that violators simply fly under the regulatory radar. He said a key problem is being able to detect and identify prevailing wage violations.

Two other new laws are meant to change that by giving DLT investigators more arrows in their quivers. One requires that state agencies share information with each other. In particular, the law mandates that the DLT get a peek at vital tax information that might help them identify businesses that are misclassifying workers. The other law makes certified payrolls on public works projects public records.

Casualties of the economy?

Lack of full enforcement may not be the only or even the main reason that such large sums of fines and back wages have gone uncollected for so long.

Economic factors could also be at work for an industry which has borne much of the brunt of the recession. Of the five companies with prevailing wage violations, Lombardi said he knew at least two of them had gone out of business.

GoLocalProv was able to successfully reach only one of the remaining three businesses, A & K Safety Systems, which is listed with a Warwick post office box. A woman who answered the business line yesterday claimed that A & K Safety Systems had actually been found “not guilty” of prevailing wage violations, but she declined to give her name or provide any other information or documentation to back up her claim.

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