Asbestos cleaning. Photo: newportchurches.com
The hazardous mineral, used for fireproofing, filled 900,000 square feet of the building on F Street in downtown Washington, D.C. It took more than a hundred licensed workers almost a year to pry out the substance during a renovation that began in 2011. The workers would log nightly nine-hour shifts in air-tight spaces that reached 100 degrees. Some didn’t wear clothes beneath their protective Tyvek suits, hoping to stave off heat exhaustion and avoid bringing home cancer-causing asbestos fibers.
The pay for this grueling work was determined by the Davis-Bacon Act, a 1931 law that promises specific wages and benefits for work on government buildings and infrastructure. The pay set by the U.S. Department of Labor under the act, based on location and job duties, is often higher than what’s offered on private-sector projects.
But many of the employees had never heard of the law. And their employer didn’t let them know.
The Labor Department says the workers should have earned $25.47 per hour as skilled laborers, a specific category of employee under Davis-Bacon. Instead, their supervisors paid them $15.84 an hour and classified their work as general labor.
“You feel powerless,” said Luis Alonzo Fonseca, who, like his former colleagues on the GSA job, lost about $1,300 per month before overtime, which also was underpaid. “You see that companies are doing what they want and you can never do anything against them.”
The Labor Department, which will decide the outcome of Fonseca’s case, must enforce more than 18 wage laws and statutes across the nation’s 29 million businesses with a team of only 929 investigators as of June. Federal agencies, which spent more than $470 billion on contracts during the 2016 fiscal year, are saddled with a flawed system to vet contractors and monitor their compliance with those laws. As a result, contractors’ violations rarely show up in government databases. Subcontractors, which often employ most of the workers on construction projects, get even less scrutiny.
Last year, the federal government spent more than $40 billion on government contracts covered by Davis-Bacon. But a Center for Public Integrity investigation found that about 70 percent of the businesses caught violating the law in 2016 don’t appear in federal databases designed to track companies’ contracting records.
Weak oversight allows subcontractors, in particular, to shortchange workers on government projects with little fear of being caught or barred from winning future contracts. Meanwhile, their overseers often maintain clean labor records and continue to win government business. This fiscal year, federal agencies have spent more than $425 million on contractors found to have violated Davis-Bacon in 2016, according to U.S. Treasury and Labor Department records. The top spenders: U.S. Department of Defense and the GSA.
A GSA spokeswoman said the agency could not comment on the wage-theft allegations related to its headquarters renovation because of the ongoing Labor Department investigation.
In a written statement, a Defense Department spokesman said the agency reviews companies’ available performance information, which can include labor violations, to ensure that it awards contracts to responsible companies.
True extent of wage-theft problem unknown
In fiscal year 2016, the Labor Department found 12,567 Davis-Bacon violations and recovered about $20.5 million in back wages for workers, down from an average of $26.5 million over the previous five years. But the true extent of the problem is impossible to know given the department’s limited ability to police millions of businesses and the prevalence of misinformation and fear that keeps workers from getting the wages they are due. Between 2008 and 2010, the agency added nearly 300 investigators to its Wage and Hour Division. Recovery of back wages owed to workers jumped accordingly; collections in 2011, for example, were more than double those of the previous year.
Unlike the Fair Labor Standards Act, which establishes the federal minimum wage, Davis-Bacon bars workers from trying to recover lost pay through private lawsuits. Aggrieved workers, therefore, must go through the Labor Department for relief.
Enforcement by the department is complicated by the layers of companies often involved in construction work. The prime contractor on the 2011 GSA renovation was Whiting-Turner, which was paid $124 million to oversee the work. Luis Fonseca worked under a subcontractor called Asbestos Specialists Inc., which brought him on through a staffing company, further distancing him from Whiting-Turner management.
The Wage and Hour Division investigated Asbestos Specialists in 2013 and accused it of misclassifying – and therefore shortchanging – workers on the GSA project. But the case remains open on appeal four years later, and the former asbestos workers have yet to receive the $640,693.74 the Labor Department says they’re collectively owed. “We all have commitments – we have responsibilities with our kids, our parents, our wives,” said Manuel Vega, one of the workers owed back wages.
In a related investigation in 2016, the Equal Employment Opportunity Commission accused Asbestos Specialists of discriminating against the workers, most of whom are immigrants from Latin America. The workers claimed company supervisors harassed them with racial slurs and demeaning treatment, such as giving them unfiltered water – sometimes after spitting in it – while the supervisors drank from bottles. In a settlement with the EEOC, the company agreed to pay the workers a total of $100,000 and provide anti-discrimination training to its staff.
Nonetheless, Asbestos Specialists hasreceived at least $5.8 million in federal construction contracts since 2013. In a written statement, the company’s lawyer said Asbestos Specialists has appealed the Labor Department’s decision in the GSA case and believes it paid the workers properly.
Apart from Fonseca, Vega and the 125 other workers it hired through the staffing company, Asbestos Specialists put 13 of its own employees on the GSA job. Those 13 workers were paid close to the legal rate of $25.47 per hour.
“They pay us different rates,” Fonseca said, “but we’re all facing the same cancer.”
Poor track record of oversight
Government subcontractors underpay their employees any number of ways, Labor Department records show. Some companies misclassify workers, claiming they belong to a lower-paying trade, as was the case with the GSA asbestos-removers. Others have been caught striking employees from payroll records entirely. Still others cut workers’ hours on paper to make it appear that the wages paid reflected actual time worked.
In one case, air-conditioner installers on a job financed in part by the U.S. Department of Housing and Urban Development were routinely given paychecks reflecting the $50.70 per hour to which they were entitled under Davis-Bacon. They were forced to cash the checks and return half the money to their employer, Igloo HVAC, LLC, the Labor Department alleged. Payroll records submitted to HUD reflected none of this.
The Labor Department settled the case with Igloo HVAC, which paid more than $80,000 in back wages to five workers. Roberto Flores, the company’s owner, declined to comment, citing the settlement agreement. A HUD spokesman said that while the agency reviews payroll records submitted for projects it finances, it can’t always verify the accuracy of those records.
Wage theft in federal contracting has taken on new urgency as the Trump administration proposes a “great rebuilding of our country,” a $10 trillion increase in public infrastructure investment over the next 10 years.
In June, Transportation Secretary Elaine Chao announced that wages paid to workers on highway and other infrastructure projects would be covered by Davis-Bacon.. But federal agencies’ track record on monitoring violators isn’t good. Regulations require agencies to determine whether potential contractors are “responsible,” which can have myriad meanings – whether they can stick to a schedule, for example, or have sufficient assets. Federal contracting officers use a network of databases to review companies’ performance, but the databases, which are maintained by the Defense Department, don’t usually divulge labor-law violations. Companies that win contracts are responsible for vetting their own subcontractors, which generally don’t appear in the databases.
Toward the close of the Obama administration, the Labor Department tried to address these problems with a rule that aimed to bring government contractors into compliance with Davis-Bacon and other labor laws before they could receive additional awards. The short-lived Fair Pay and Safe Workplaces rule, which became final last year, established a system under which agencies could review companies’ violation histories: Companies would report any violations from the previous three years. Each agency would get a labor compliance officer, and contracting databases would become more comprehensive.
The rule also included a paycheck-transparency mandate, requiring contractors to break down payment amounts in detail to workers and specify their job classifications.
Most of the rule’s provisions never went into effect – they were stayed by a federal judge following a lawsuit filed by two trade groups, Associated Builders and Contractors and the National Association of Security Companies.
All of this became immaterial in March, when President Donald Trump affirmed Congress’s vote to dismantle the rule under the Congressional Review Act.
“When I met with manufacturers earlier this year — and they were having a hard time, believe me — they said this blacklisting rule was one of the greatest threats to growing American business and hiring more American workers,” Trump said as he signed the legislation.
Now, as was the case before, information on companies’ labor infractions lies scattered across Labor Department offices, each of which maintains its own database.
David Weil, who led the Wage and Hour Division from 2014 to 2016, said he found the revocation of the rule “remarkable,” given Trump’s stated concern about creating a “level playing field for American companies and our workers.”
“If these are the laws of the land, you should be paying the workers according to fair prevailing wages and paying them the benefits you’re supposed to be paying,” said Weil, a labor policy professor at Boston University’s Questrom School of Business. “Why should companies that have consistently violated multiple federal labor statutes in the past be given the opportunity to get more government work?”
A slow process
For workers who file complaints with the Labor Department, recovering wages can be an arduous process. The 864 Davis-Bacon cases the department closed in 2016 where a violation was found took an average of 434 days to resolve, well above the 347-day average over the previous five years. Some were closed within one month; the oldest case closed last year was opened in 2006.
Fonseca and Vega, the former GSA asbestos workers, still don’t know when their case will end. It involves four interconnected employers. At the top of the chain was Whiting-Turner, the general contractor. Next came Interior Specialists Inc., a subcontractor. That firm, in turn, hired Asbestos Specialists. Finally, there was Waste Management Solutions LLC., a staffing company that directly employed the asbestos-removers. Waste Management isn’t part of the Labor Department’s investigation. The other three companies have contested the wage-theft charges.
A Whiting-Turner spokeswoman declined to comment on the case. Spokespeople for Interior Specialists and Waste Management did not respond to requests for comment.
The GSA renovation project isn’t the only federal job on which workers alleged underpayment by a Whiting-Turner subcontractor.
In 2011, Whiting-Turner won a contract for construction work on a District of Columbia Superior Court courthouse. Edgardo Terceros was hired by subcontractor Jacinto Construction, Inc. as a carpenter. His first week on the job, he was underpaid by $280, court records show. His boss told him his benefits were going into a retirement account that didn’t exist, he said. The second week Terceros’s check was $121 short. The week after that, the gap grew to $596. By week four, the checks stopped. Payment would come soon, his boss told him.
“I said, ‘I live off the check, I don’t live off of your promise’” said Terceros, who, like the other workers quoted in this story, spoke in Spanish.
As is common in the construction industry, the courthouse renovation involved multiple subcontractors. Whiting-Turner paid Maryland-based C.R. Calderon Construction Inc., to restore portions of the building for $929,639. Calderon then paid Jacinto Construction one-fourth of that amount to carry out most of the renovations.
That firm’s owner, Jacinto Cespedes, quickly ran out of funds to pay his carpenters the Davis-Bacon rate of $33.38 per hour. Court records show that one worker saw no money for 12 weeks. Yet Cespedes signed documents — filed with the government — declaring that all his employees had been fully paid.
The workers sued for overtime violations and breach of contract in U.S. District Court in 2012 and filed a complaint with the Labor Department over the alleged Davis-Bacon violations. In 2014 court testimony, Cespedes blamed C.R. Calderon’s owners for the underpayments. He testified that one of the owners told him to hire undocumented workers because he could pay them lower wages. Cespedes hired four and did just that.
Six years after working on the D.C. courthouse the carpenters have yet to be reimbursed. A federal judge and the Labor Department decided in their favor in 2016 and 2015, respectively, but C.R. Calderon and Jacinto Construction have appealed the findings.
C.R. Calderon’s lawyer said the company paid Jacinto Construction the correct amount. The subcontractor, he said, is responsible for the workers’ underpayment.
TK CESPEDES COMMENT or testimony
Under Davis-Bacon, general contractors ultimately are liable for workers’ back wages. Whiting-Turner, the contractor on the courthouse job, settled with the Labor Department for $150,000, though the workers have yet to see the money.
‘You’re artisans’
In April, Trump made an appearance at North America’s Building Trades Unions’ legislative conference. “I’ve spent my life working side by side with American builders, and now you have a builder as your president,” he told his audience.
He called out different trades represented in the room, from bricklayers to ironworkers to plumbers, waiting for each group to cheer.
“You’re not only builders, you’re artisans,” he said. “Just as you take pride in your work, our nation takes great, great pride in you.”
The Trump administration’s Wage and Hour Division, whose top posts remain unfilled, has yet to reveal its enforcement strategy, and division officials declined to be interviewed for this article. However, the Labor Department’s fiscal 2018 budget request indicates a shift in priorities.
Under the Obama administration, the division tried to boost enforcement. It sought $50 million in increased funding for fiscal 2017, outlining a plan to target industries known for labor violations and reach vulnerable employees unlikely to register complaints. But Congress failed to appropriate the money.
This year, the House Appropriations Committee has proposed a $10 million funding cut for the division, and a $1.3 billion cut for the Labor Department overall.
In March, acting Solicitor Nicholas Geale said the Labor Department needed to show “a little more humility” following the Obama administration’s vigorous enforcement approach. In June, the department reinstated a practice that had been suspended under Obama: the issuance of opinion letters, which on their face help employers clarify gray areas of labor law. Critics say the letters create a rationale employers can later use as a defense in worker lawsuits.
To Rajesh Nayak, a Labor Department official under Obama, the Trump administration’s moves so far are telling. “It starts to paint this picture of a very different Wage and Hour [Division] – and one that doesn’t match the rhetoric of putting American workers first,” said Nayak, who served as deputy chief of staff to Labor Secretary Tom Perez.
The division has long fought an uphill battle. Its investigators rely on worker complaints, tips from industry and labor groups and their own sleuthing to enforce wage laws.
Construction workers on government projects, however, are often reluctant to complain.
“These guys may very well lose their jobs,” said John Monroe, a labor compliance officer at the Foundation for Fair Contracting. The foundation, funded by building-trades unions, seeks out wage-theft violations on public construction sites and submits complaints to the Labor Department.
Monroe regularly walks onto job sites, blending in with a hardhat and safety vest. He asks workers about their pay and passes out a sheet showing Davis-Bacon rates for different trades.
Monroe said he’s never been to a job site where he didn’t encounter a case of wage theft. But even when the Labor Department finds violations, companies usually are forced to pay only back wages. Penalties and damages are rarer in Davis-Bacon cases than in those brought under other labor laws. In 2016, damages were assessed in less than 1 percent of cases where Davis-Bacon violations were found, and penalties were paid in less than 2 percent.
“The penalty for robbing the bank is to give the money back,” Monroe said, “and that’s just not a deterrent.”
