Construction union celebrates new laws to keep ‘bad actors’ from cashing in on public subsidies

July 19, 2024 by

Eduardo Canales brought his daughter, Dariana, to the rally at Callisto Commons in Fridley. The development used Environmental StoneWorks, a contractor that Canales said misclassified him as an independent contractor when he installed stone veneers like the one visible at the Fridley site.

Members of the Laborers union (LIUNA) staged a demonstration June 24 outside a subsidized housing development in Fridley, publicly shaming a construction-supply company they allege has cheated both workers and taxpayers.

Environmental StoneWorks’ veneer product was on full display at the future site of Callisto Commons, a development along University Avenue Northeast where LIUNA members rallied with lawmakers and community supporters.

The action kept the heat on StoneWorks, which faces allegations of discrimination and worker misclassification. But the event also raised awareness of new laws passed this year by the labor-endorsed “trifecta” of state lawmakers, including new labor standards on subsidized housing projects and stiffer penalties for worker misclassification.

“This isn’t about a few bad actors,” Rep. Emma Greenman (D-Minneapolis) said. “This is about a business model that is about extracting from workers, extracting from taxpayers. The business model is what has to change.”

And it likely will, thanks to new laws requiring contractors on developments that access funds through the state’s Low-Income Housing Tax Credit – like Callisto Commons in Fridley – to pay prevailing wages. Minnesota is the first state to tie prevailing wage to the tax credit.

Other measures now on the books will make it harder for contractors with a history of labor violations to bid on publicly subsidized projects, give state regulators new tools to shut down job sites where labor violations are occurring and create new penalties of up to $10,000 for employers that misclassify their workers as independent contractors.

LIUNA members from across the country, in the area for an organizing conference, joined the rally.

That’s what Eduardo Canales alleges happened on job sites where he installed Environmental StoneWorks’ product over a period of four years.

Although he worked exclusively as an installer for the firm, Canales said he was never classified as an employee by the firm. As an independent contractor, he was ineligible for workers’ compensation, collective bargaining rights and overtime pay – even in weeks when he worked 70 or more hours installing the stone veneer.

“It means if there is an accident and someone gets hurt on an Environmental StoneWorks project, it is my problem, not theirs,” Canales said through a Spanish language interpreter at the rally. “There was a guy who broke his foot working for Environmental StoneWorks, and instead of providing medical treatment, he said his boss terminated him.”

StoneWorks’ manufacturing facility, meanwhile, is the subject of a discrimination complaint filed with the Minnesota Department of Human Rights. Angel Torres, who worked at the North Branch facility from 2009 until he was fired in December 2023, said the company offered two wage scales, one for immigrant workers and another, higher scale for those born in the U.S.

Torres, also using a language interpreter, told rally-goers that he complained to management that newly hired “American” workers were making $2 more per hour than immigrants who had been working at the plant for several years. “I believe that’s the reason I was fired from this company, for speaking up for the workers,” he said.

Angel Torres (L) said StoneWorks discriminated against immigrant workers at its North Branch manufacturing facility.

“The reason we came to this country is to better our lives for our families, but we should be treated with dignity like any other employees,” Torres added. “That’s why I came here to speak today, to ask the community to not be quiet. We need to speak up in order for things to change.”

On the construction worksite, at least, change appears to be coming.

Lucas Franco, a LIUNA researcher, said Minnesota’s new laws “will, we are confident, break the cycle of unscrupulous contractors and worker mistreatment on publicly funded projects.”

That’s no small slice of the construction industry, either.

An analysis published by NorthStar Policy Action in November 2023 found that $84 million of taxpayer subsidies went to affordable housing developments in Minnesota that used contractors tied to proven or alleged exploitation of workers. And that’s “just the tip of the iceberg,” author Jake Schwitzer said, noting that the Callisto Commons project was not named in the report.

“We’re here today because we know Minnesota can meet its affordable housing needs and development goals without sacrificing worker dignity and safety,” Franco said.

– Michael Moore, Union Advocate editor

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Unions to stay vigilant at Capitol: ‘What we’ve got can go away in a vote’s notice’

February 23, 2024 by

Minnesota AFL-CIO President Bernie Burnham spoke at a rally outside a business lobby event on the opening day of the 2024 legislative session.

Minnesota’s unions will approach the 2024 state legislative session looking to expand on – and defend – the historic package of labor standards and public investments passed by DFL lawmakers last year.

Legislators returned to St. Paul on Feb. 12. Before their deadline to adjourn May 20, they are sure to hear from union members pressing for action on a range of issues, including infrastructure investments, pension adjustments, protections for health care and railroad workers and more.

Of course, union members and their allies won’t be the only voices lawmakers hear from at the Capitol this spring. On Day 1 of the new session, the Minnesota Chamber of Commerce hosted a reception with legislators at River Centre in downtown St. Paul. The event’s theme was “Restore the Balance.”

To union members like Jake Anderson, a special education teacher in the St. Paul Public Schools, that sounded like going backwards – “and we are not going backwards,” he said at a rally outside the event.

“We won a lot of things last time around,” Anderson, a member of the St. Paul Federation of Educators, said. “Our kids get free school lunch. We get unemployment for our paraeducators. But it’s not enough, it’s just the beginning.”

Kelly Gibbons, executive director of Service Employees (SEIU) Local 284, said 18,000 education support professionals accessed unemployment insurance last summer, after legislation passed to make hourly school employees eligible for the benefit. She said union members have told her that “unemployment insurance has changed their lives.”

“They’re going to talk about going back to the system that was rigged against us, the workers,” Gibbons said of the Chamber. “They want it to go back in their favor, and we’re here to say absolutely not.”

The state’s largest labor federation, the Minnesota AFL-CIO, last month identified its top priorities for the session, and defending the gains made in 2023 is at the top of the list.

Minnesota AFL-CIO President Bernie Burnham said the federation developed its priorities through conversations with affiliate unions and labor leaders.

“First and foremost, we’ve got to protect the things we’ve got,” Burnham said. “We’re going to be working to make sure that paid family and medical leave and union rights – all of that and more – stay in place. What we’ve got can go away in a vote’s notice.”

Burnham said it’s an indication of just how much work lawmakers did on labor issues last year that there are few holdovers from 2023 on the federation’s list of legislative priorities.

Along with paid family leave and unemployment for school employees, union-backed measures to expand earned sick and safe time benefits, ban captive audience meetings, raise safety standards in refineries and give public-sector unions more bargaining rights all became law, not to mention historic one-time investments in public schools and infrastructure jobs.

Still, there are policy measures the state AFL-CIO will work to advance in 2024, including a crackdown on employers who misclassify their workers as independent contractors. Unions have long said the practice is alarmingly common in the nonunion construction industry, but it also applies to the gig economy, advocates say.

Unions want to see legislators put teeth into the state’s existing misclassification laws this session. When workers are misclassified, Burnham said, “they lose out on minimum wage, they lose out on benefits like workers’ comp and overtime pay.”

The federation also plans to lobby for extending unemployment insurance to workers who are on strike. Such a law would level the playing field in collective bargaining, Burnham said, noting that employers can replace striking workers, cut off their health care and stall negotiations.

“There is so much action right now among people who are fighting to do better on the job,” she said. “If they have to go on strike, how are they going to make ends meet?

“If we are going to continue in Minnesota with all the good things we got last year, why wouldn’t we go that next step further?”

– Michael Moore, Union Advocate editor

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Construction wage theft back on MN lawmakers’ agenda

March 17, 2023 by

Alvaro Chavez (L), a member of CTUL, testifies in support of the Construction Worker Wage Protection Act, authored by Rep. Sandra Feist (R).

Construction firms in Minnesota would bear greater legal responsibility for the labor practices of their subcontractors under legislation introduced by DFL lawmakers last month.

Building Trades unions and worker advocacy groups say the measure is necessary in the wake of reported abuses on non-union construction sites, most notably the Viking Lakes development in Eagan, where last year 40-plus workers alleged being cheated out of over $100,000 in combined wages.

Under the proposed Construction Worker Wage Protection Act, tradespeople hired by a subcontractor or labor broker would be empowered to seek unpaid wages from the larger contractors responsible for bringing their boss onto the jobsite.

Advocates say holding so-called “upstream” contractors accountable will create a much-needed incentive to do business with responsible subcontractors. The measure would also give construction firms legal authority to request payroll information from their subcontractors, so they can avoid liability.

“Compliance would finally be incentivized,” the Carpenters union’s Adam Duininck told members of the House Labor Committee during a hearing on the bill March 2.

Minnesota Building Trades unions lobbied to pass the nation’s strongest wage theft legislation four years ago, but Duininck and other labor leaders say the new law has not deterred developers and general contractors, like the Wilf family’s MV Ventures, from turning a blind eye to wage theft on their projects.

A report approved by Ramsey and Hennepin county attorneys last year found “rampant wage theft” in the non-union construction industry, estimating that employers in those two counties steal over $3 million in wages each year and divert over $11 million from Social Security and Medicare funds by misclassifying employees as independent contractors or paying in cash.

During the committee hearing March 2, Alvaro Chavez, with assistance from a Spanish language interpreter, explained to lawmakers how he witnessed the wage-theft model firsthand. After working for several weeks framing the bottom floor of a multifamily development in St. Paul, Chavez said, he and his crew abruptly learned they were being replaced for the project’s next phase.

“They never paid us for the work we had already done,” Chavez said. “When the supervisor of our group called the owner of the company, Strong Framing, who was a subcontractor on this project, he wouldn’t answer the phone.”

Chavez and other members of the crew approached the local worker center CTUL for assistance recovering their lost wages. Their first call was to the project’s developer, Yellow Tree.

“They told us they had contracted with U.S. Framing to do the work and we should call them,” Chavez said. “When we called U.S. Framing, they told us they contracted with Strong Framing, the company of the person who was no longer taking our calls.

“None of these companies wanted to take responsibility for paying our wages.”

Dan McConnell, president of the Minnesota State Building and Construction Trades Council, said that responsibility rightly belongs to those with most control over the construction site. “Managing a project and making sure everybody gets paid is literally what owners pay a general contractor to do,” he said.

But too often, by the time workers like Chavez discover they have been cheated out of their wages, it’s too late to hold their immediate employer accountable, Simon Trautmann, a labor attorney and member of the Richfield City Council, told lawmakers.

“You’ll have the subcontractor who has an LLC with zero assets,” Trautmann said. “That creates a policy problem where there is literally no money and literally nobody (to hold) accountable. This is a business model.”

Members of the House Labor Committee voted to advance the measure, House File 1859. Its companion bill, Senate File 1988, has so far passed through two committees.

“The bottom line is if you control the worksite, then you can prevent wage theft,” said Rep. Sandra Feist (D-New Brighton), the bill’s lead author in the House. “We want to level the playing field so ethical business practices can win the day, and they’re not going to be underbid by unethical subcontractors.”

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County attorneys take aim at criminal wage theft

April 27, 2022 by

Ramsey County Attorney John Choi’s office recently hired Jacob Shawback (L) to investigate prevailing-wage and wage-theft allegations. Shawback previously worked at the Fair Contracting Foundation of Minnesota, which monitors labor standards on publicly funded construction projects.

Local prosecutors intend to shine a search light on the shadowy corners of the economy where wage theft and labor trafficking have found a home, especially the non-union construction industry.

Ramsey County Attorney John Choi recently hired a full-time investigator to begin delivering wage-theft cases for potential prosecution under the state’s theft-by-swindle statute. Choi, who co-chaired a Labor Advisory Council with Hennepin County Attorney Mike Freeman, said the hiring is a step toward moving more wage-theft cases into the criminal justice system.

The most common types of wage theft occur when employers misclassify workers as independent contractors, fail to pay minimum wage or don’t follow overtime laws. The state’s labor and commerce departments investigate those violations, but the investigations often result in civil penalties – a warning, a fine or being temporarily barred from bidding on public projects.

“In a way, it can all be just looked at as a cost of doing business,” Choi said.

“Both Mike Freeman and I have this really strong belief that some of this conduct should be looked at from a criminal prosecution perspective,” Choi added. “Oftentimes, it’s not until people are subject to potential jail or prison time – or that negative publicity of being prosecuted – that you get people’s attention.”

‘Rampant’ wage theft

The advisory council led by Choi and Freeman pulled together prosecutors, regulators and labor advocates to work collaboratively on best practices for holding wage thieves accountable in the criminal justice system.

Earlier this year, the council approved a report that found “rampant wage theft” in the non-union construction industry in Hennepin and Ramsey counties, noting that it comes at a significant cost to local communities.

The report estimated that 4,872 construction workers in the two counties are victims of payroll fraud, that employers steal over $3 million in wages each year and that wage theft diverts over $11 million from Social Security and Medicare funds.

For unions and labor advocacy groups like CTUL, the report’s findings validated the complaints they have heard from people working in the non-union construction industry, where layers of subcontractors and labor brokers too often conceal illegal dealings.

“Wage theft cannot be tolerated in an industry that is so essential to our city’s infrastructure,” CTUL Co-Director Merle Payne said. “Not only does wage theft hurt workers and their families, it also puts a strain on taxpayers when developers off-load the cost of labor and insurance onto the public.”

Raising the profile

The Labor Advisory Council also worked to create a “handoff process,” so that civil investigators could deliver relevant information to agencies pursuing criminal prosecution without hindering either process. The council also reached out to both county sheriffs to get buy-in from law enforcement.

“We know there’s a lot more we can do in the criminal justice system if we get the right kind of investigation done,” Freeman said.

The Hennepin County Attorney’s Office demonstrated as much with its high-profile prosecution of Ricardo Batres. The notorious wage broker pleaded guilty in November 2019 to felony charges of labor trafficking and insurance fraud, and received a nine-month jail sentence.

But even as they celebrated the Batres case, labor advocates warned that his crimes were just the tip of the iceberg when it comes to wage theft in the Twin Cities. Choi said the Batres case was a turning point in his office’s decision to get proactive about criminal prosecution.

“I just realized, we’re sitting here waiting because we’re usually the recipient of cases,” Choi said. “But sometimes to get something done, you just have to go and do it yourself. So let’s go out and hire somebody to be our investigator.”

Choi’s office gained funding from the county board to replace a retiring, part-time employee who investigated prevailing-wage violations with a new, full-time investigator to help deliver cases related to prevailing wage and wage theft.

The new investigator, Jacob Shawback, previously worked for the Fair Contracting Foundation of Minnesota, which monitors labor standards on public construction projects across the state. “You’ve got to love working on behalf of working people, and Jacob has the background of working with labor unions around this issue,” Choi said.

The county attorney said he hopes the increased public attention on wage theft as a crime will have a deterrent effect and raise awareness among other prosecutors in the state. Choi compared it to his office’s focus on sex trafficking a decade ago, which drew nationwide attention.

“I remember when I first started talking about it, people would ask if it’s really happening here,” Choi said. “A lot of people weren’t aware of it. But we gained a greater awareness, and that greater awareness came, in part, because we started having cases.

“Our labor partners are telling us they know for a fact these violations are happening. It’s not a clerical mistake; people are actually stealing. And I think this is one of those areas that needs improvement to make sure these cases get the attention of the justice system.”

Learn more

Choi and others involved in the Labor Advisory Council’s work will offer a presentation at the May 11 St. Paul Regional Labor Federation (RLF) delegate meeting, beginning at 6 p.m.

“Despite the strongest wage theft protection law in the country, we know workers in Minnesota continue to experience wage theft,” RLF President Kera Peterson said. “I’m glad for the opportunity to serve on the Labor Advisory Council, and I’m thankful that County Attorney Choi and the Ramsey County Attorney’s Office are working to enforce our existing wage theft law.”

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Union carpenters spotlight tax fraud in construction industry

April 14, 2022 by

Members of the North Central States Regional Council of Carpenters demonstrate outside a development site in northeast Minneapolis.

Union carpenters across the Midwest this week are calling out contractors who commit payroll fraud to gain an unfair leg up in bidding on construction jobs, a practice that drains $136 million from state coffers each year in Minnesota alone, according to one recent study.

In northeast Minneapolis Wednesday, members of the North Central States Regional Council of Carpenters picketed a residential construction site, taking aim at Wisconsin-based Painting America Inc., a contractor on the project, for undermining area wage and benefit standards.

Painting America has faced charges from the Minnesota Department of Labor Industry for illegally misclassifying employees as independent contractors, and union representative Woodrow Piner said former employees have reached out to the Carpenters for help recovering lost wages.

“At some point workers get frustrated by how they’re being treated and look for a change, and they find their way to our office,” said Piner, the NCSRCC’s director for central and southern Minnesota.

“A number of workers from Painting America Inc. have reported being paid off the books, not having withholdings or taxes held off their checks, and not being paid overtime after 40 hours,” Piner said. “And these were workers directly under the supervision of Painting America.”

Contractors who follow the law and pay workers fairly struggle to compete on cost with unscrupulous bidders, driving down standards in the industry. Piner said the practice is most prevalent on multifamily, wood-frame construction sites.

But construction workers aren’t the only ones hurt by employee misclassification and other forms of payroll fraud. It costs taxpayers, too.

In a study issued in January 2021, researchers from the Midwest Economic Policy Institute found Minnesota loses $136 million in state revenues annually due to construction payroll fraud, including $65 million in lost income-tax revenue. Nationally, tax fraud in the construction industry costs the public $8.4 billion per year, according to the Carpenters Union.

“That means hardworking taxpayers are picking up the slack,” Piner said.

Construction payroll fraud also drains $13 million from the state’s unemployment insurance fund and $58 million from the workers’ compensation pool, according to the report. Adding insult to injury, workers misclassified as independent contractors or paid off the books are not eligible to access those funds if they are laid off or injured on the job.

Although payroll fraud persists in Minnesota, the state’s new wage theft law – touted by supporters as the strongest in the nation when it passed in May 2019 – gives state regulators new tools and more resources to crack down on the practice. County attorneys in the metro are increasing their attention on wage theft, too.

That’s good reason, for carpenters on the picket line in northeast Minneapolis, to keep shining a spotlight on the multifamily, wood-frame construction industry.

“We’re looking for elected officials, developers and contractors to pay more attention, to be accountable for what is happening on these projects,” Piner said. “Not only does it hurt the taxpayer, it’s about the dignity of workers.”

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