To Find the Root of Construction Abuse, Follow the Money
Abuse of construction workers won’t end until we make it unprofitable for the developers who encourage it.
Developer Brookfield Properties, headquartered at 250 Vesey Street, “is awarding contracts to employers they know have committed wage theft and tax fraud, employers they know have been sued for stealing workers’ wages,” said Ed McWilliams of the District Council of Carpenters. “I’d like to see them go up to Central Booking. They’re ripping people off in the Bronx and Brooklyn.”
The New York City construction industry is flush with over $50B in spending this year. In 2019, the year before the pandemic slowed everything, the industry grew to over $61B. Everyone expects the sector to rebound past that peak quickly.
So why does the recent Brookings Institution report entitled, Meet the Low-Wage Work Force, name “construction worker” as one of the most common low-wage occupations in New York City? Why are workers not sharing in the current boom?
Many industry and labor experts believe that the people who determine how contracts are handed out are largely to blame. They argue that developers seek and reward lower and lower project estimates from building companies. And the sad result is broad illegality and worker abuse by subcontractors.
Here’s a very simplified example to illustrate this theory. Say you are a developer and you plan to create a building that you expect will cost $2B to put up and for the sake of this example you expect it to generate $3B in rent/sales earnings. The vast size of the outlay makes the project a risk, but the expected revenue makes for a nice expected profit. But what if you can get it built for $1B instead of $2B? That would mean even less risk and more profit.
In an industry flush with money, rich developers rake it in while the workers win the classification of "the new low wage worker" from the Brookings Institution.
According to the Brookings Institution report, Meet The Low Wage Worker, construction workers make up the largest share of low-wage earners without a high school degree, despite the fact that New York City construction is experiencing near unprecedented investment.
Some real estate experts believe that this drive to decrease financial exposure and increase profits has created a low-bid frenzy in New York that has resulted in a raft of bad consequences. Now, to win work from developers and primary contractors, many non-union subcontractors rely on some harmful bid-lowering tactics like wage theft, evading safety requirements, skimping on quality materials and even deceiving building inspectors.
While these tactics will lower job costs and line the pockets of some of New York’s most wealthy individuals, they harm workers and their families and combine to make buildings less well-built than they can or should be.
The Anti-Wage-Theft Law
In a win for New York construction workers, primary contractors now have an anti-wage-theft law to deal with. Enacted by Governor Kathy Hochul on Labor Day of 2021, it holds the Primary Contractor (PC) — the firm that hires and manages the subcontractors on a project — responsible for any wage theft that occurs on a project they oversee.
This law is a sea change. It was once forbidden in New York to sue or charge an employer for crimes committed by their hires. This wrinkle enabled PCs to demand lower prices from subcontractors, who would then commit wage theft (as in, steal pay from their workers) to meet those low prices. It’s a practice that everyone mentioned in this scenario knew was happening, but because of the old law the PCs were immune to any repercussions that might arise from worker challenges. Now PCs are subject to large fines and criminal charges if wage theft occurs on their project.
In the aftermath of the anti-wage-theft law, will developers actually take less profit to make projects safer, or will they simply expect subcontractors to find new ways to cut costs?
Michael Stern, head of developer JDS, who once told the Commercial Observer, unions are done in this town, is one developer prioritizing the hiring of non-union subcontractors over unionized builders because of cost and control. Some real estate experts believe this trend is harming the city, our buildings and our middle class. -- F. Harper via Commercial Observer
But will this law alter the behavior of developers? Do we believe they will take a lower profit to accommodate the law? Or will they stick to their current bid demands and expect non-union subcontractors to turn up the dial on their other list of criminal tactics to meet those bid expectations?
Evading Work Site Safety Requirements
One of those other nefarious tactics that enable subcontractors to meet the low-bid demands of developers is skimping on safety requirements.
Following safe construction site practices is not cheap. There is the required personal safety equipment for every employee, like helmets, lanyards, vests, and face guards. Then there is the safety work that must be done on the site, like installing debris netting, edge guard rails, and trench retainer walls. And then there is the safety training requirement for various construction tasks stipulated by the country, state and city.
If you are the developer and you believe that site safety is your responsibility and everyone has the right to return home after their shift — which is the mantra of construction unions — then you bare these costs without a question. But if you see paying workers and maintaining work site safety as impediments to your own profits, then you will find ways to skirt these requirements.
And many non-union builders are doing exactly that. The report by the New York Committee for Occupational Safety and Health (NYCOSH), “Deadly Skyline” says construction fatalities continue to increase in the city and that non-union work sites are especially dangerous for workers.
Lawmakers have placed the passage of Carlos's Law at the top of their priority list. The law will place heavy fines and felony charges on contractors who evade safety requirements resulting in death or injury on their worksites. -- Andrey Bayda/ Shutterstock
Which is why New York needs Carlos’s Law, named for Carlos Moncayo who died at a Harco Construction site because the managers of that site refused to install the proper safety equipment despite repeated warnings. Under the proposed law, which is stuck in committee in the state senate, when contractors endanger workers and ignore safety standards, they will be met with stiff fines and criminal charges.
We also need to put unionized contractors on fair footing. A union’s first priority is the well-being of their members, which is why those illegal tactics employed by non-union shops to lower their costs are not available to unionized shops. As a result, non-union contractors have a clear advantage in the bidding wars. Unfortunately, it’s an advantage driven by illegal behavior and that is paid for by their unrepresented workers. Sometimes those workers lose their rightful pay, and too often some lose their lives.
Many wealthy developers and primary contractors have demonstrated that they will take as much advantage as they can in an industry that is swimming in money. Labor groups, unions, legislators must continue to fight against the bad efforts that are harming workers and jeopardizing our building quality. The Anti-Wage Theft Law was a great start, but it is not the end. We need to do more.
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