NORTHAMPTON — Art Butler knows a thing or two about wage theft and the misclassification of workers in the construction industry.
As an inspector for the former state Department of Labor and Industries in the 1970s and ’80s, and attorney general’s office in the ’90s, he’s been shining a light on violators for decades.
At 78, Butler is still roving western Massachusetts, interviewing workers at job sites and mining payroll records, continuing a decades-long effort to stamp out fraud and protect not only workers but also companies that play by the rules.
“There’s a lot of it out there,” says Butler, who has spent the last 16 years with the Foundation for Fair Contracting of Massachusetts, a nonprofit watchdog group that targets wage theft and compliance with public bidding laws in the commonwealth. “What we try to do is keep it honest.”
Butler’s work reviewing certified payroll records was instrumental in getting AK Electric Inc., of Palmer, and its owner Anibal C. Alves, to pay more than $61,000 in restitution and penalties last month to resolve allegations it had underpaid workers on a public construction project at the University of Massachusetts Amherst.
The penalty was imposed by the state attorney general’s office’s fair labor division, which is responsible for enforcing the laws regulating the payment of wages, including prevailing, minimum and overtime wages.
“They were trying to get an edge,” Butler said. “They got shot down.”
AK Electric declined to comment on the case when contacted by the Gazette.
The case is hardly the only one in the arena of alleged wage theft, tax and insurance fraud in the state’s construction industry. While most companies pay workers properly, the attorney general’s office asserts that cases of firms not giving employees their fair compensation are on the rise, especially in industries where workers are sometimes paid in cash.
“Wage theft is all too common, especially among vulnerable workers,” Emalie Gainey, a spokeswoman for the attorney general’s office wrote in a statement to the Gazette. “Our office has made it a priority to address wage theft and help victims, particularly in the construction industry. We will also continue our efforts to make sure that workers know their rights and don’t fall victim to unfair and exploitative practices.”
The enforcement efforts are welcome in an industry where many companies try to play by the rules.
“There are a lot of ways to try to get around paying people their properly earned wages and benefits,” said Jonathan Wright, founder and senior adviser of Wright Builders in Northampton. “Proper enforcement is a good thing because we do our best to play it straight and do it right and those that don’t have an unfair advantage.”
In the first quarter of 2016, the attorney general’s office assessed more than $326,000 in restitution and penalties and 29 civil citations statewide against 16 construction companies for wage theft.
The figures represent an increase over the previous two quarters, when restitution and penalties totaled $85,889 and $169,517.
Approximately 159,000 construction workers were paid $2.7 billion dollars in wages in the third quarter of last year with an average weekly wage of $1,330, according to the most recent quarterly data tracked by the state Department of Labor and Workforce Development.
According to the attorney general’s office, more than half of the fair labor division’s enforcement was on behalf of construction workers in the first quarter. However, Gainey said wage theft — when an employer fails to properly compensate an employee for work done — is on the rise in many sectors of the economy.
In the case of AK Electric Inc. a representative from the local electricians union had asked the Foundation for Fair Contracting of Massachusetts to look into wage issues at the UMass job. That prompted Butler to examine the company’s certified payroll records available from UMass, which awarded the public construction contract.
After Butler identified problems, the foundation referred the case to the attorney general’s office, which began investigating in July 2015 and determined that the company had improperly classified and paid workers as apprentices who were not registered with the state Department of Labor & Workforce Development’s Division of Apprentice Standards. The employees should have been classified and paid at a higher prevailing wage rate because they were unregistered, the attorney general determined.
Other western Massachusetts cases resolved this year include nearly $8,000 in restitution and penalties against ST Floor Covering LLC of Granby over its failure to pay prevailing wages on projects at UMass Physical Plant and Westfield City Hall.
The attorney general also ordered more than $30,000 in restitution and fines against Rubner Enterprises of Chicopee for failure to pay prevailing wage and nonpayment of wages at a school construction job in Waltham.
Under the state’s prevailing wage law, contractors and subcontractors must pay employees a special minimum wage on public construction projects, wage rates based on the occupational classification for the type of work. Contractors can classify and pay employees as apprentices, but unless they are registered with the division of apprentice standards, they must be paid at a higher prevailing wage rate.
Wage theft cases on private construction jobs are often harder to detect because there are fewer reporting requirements and less transparent record-keeping. While there is nothing in the law that says an employer cannot pay workers in cash, doing so often raises red flags.
“Any industry where they pay cash is very difficult because there are no records,” said Karen Courtney, executive director of the Foundation for Fair Contracting of Massachusetts and a former deputy commissioner of the Department of Labor and Industries under then-Gov. Michael S. Dukakis. “There are no records you can really get your hands on and it’s very difficult to find out who the workers are and where they are.”
Those who monitor the construction industry say cash payments are not always driven by an employer, either. In some cases, it can be a mutually agreed-on arrangement between a company and a worker in which the worker may already be collecting unemployment benefits or worker’s compensation payments.
In other cases, state regulators say employers can take advantage of workers by paying them in cash, leaving them without unemployment insurance, workers compensation benefits or employer-provided health benefits. They also may be cheating the state out of payroll taxes and payments into the state’s Workers Compensation Trust Fund and Division of Unemployment Assistance Fund.
“Wage theft is a real issue in Massachusetts, including in the construction industry where dishonest companies continue to cheat their employees,” Attorney General Maura Healey said in a statement on the latest round of restitution and penalties. “Our office is working to level the playing field so that workers are paid fairly and contractors who follow the rules are not at a disadvantage.”
Based in Boston, the Foundation for Fair Contracting of Massachusetts was founded 21 years ago and has six employees, three of whom are monitoring public construction jobs around the state. Last year, the group says, it targeted 490 construction jobs worth a total of $2.3 billion, reviewing payroll records and bid records. It is funded by nine different trade unions.
The organization mails informational packets to workers (nearly 1,000 last year) to help them determine whether they have been properly classified and paid. In 2015, the foundation referred 61 cases to the attorney general’s office as well as the Department of Revenue, and departments within the Executive Office of Labor and Workforce Development. The group also refers cases to the state’s Council on the Underground Economy.
John O. Martin, director of procurement and campus services at the University of Massachusetts Amherst, said Butler’s foundation has been a good agency to work with over the years and sees its role as an industry watchdog for various trade unions who want to ensure a level playing field.
“They’re an advocacy group and, from our point of view, anything we get assistance on in a positive manner is welcome,” Martin said. “If we’re paying prevailing wages to contractors and they’re not passing it down to workers, that’s not appropriate and it should be brought up.”
Since its inception, the foundation has played a role in the levying of $6.5 million in back wages and penalties by state and federal regulators against contractors, including $217,000 last year, according to figures provided by the organization. Courtney said it is workers who file the complaints, with assistance from the foundation.
“I think this is serious,” Courtney said of the most recent wage theft uncovered in the industry. “We’re very encouraged and happy that they (the attorney general’s office) are being aggressive and letting people know they’re being aggressive.”
While the foundation focuses on public construction, trade union representatives monitor the work of contractors on both public and private jobs.
According to the attorney general’s office, one of the biggest challenges in wage theft cases is getting workers to come forward with concerns and complaints. In addition to the Foundation for Fair Contracting of Massachusetts, the office says it works with many other industry organizations and community groups who refer cases.
Last year, Gainey said, the attorney general’s office launched a new Community Engagement Division, which together with the Fair Labor Division, held 25 community outreach events on workers’ rights throughout the state. As a result, she said, the Fair Labor Division received a record number of complaints — 5,025 — and its hotline fielded more than 20,000 calls. Nearly 400 citations were issued and more than $3.3 million recovered for wage and hour violations.
The attorney general’s office encourages workers who believe their rights have been violated to call its Fair Labor Hotline at 617-727-3465 or file a wage complaint through its website at www.mass.gov/ago/bureaus/public-protection-and-advocacy/the-fair-labor-division/
Dan Crowley can be reached at dcrowley@gazettenet.com.