A Massachusetts Task Force on the Underground Economy review has revealed multiple labor and tax violations by 15 separate construction companies during the $18 million renovation of the Boston Marriott Copley Place.
Contractors failed to report $1.2 million in wages that would have brought an extra $86,000 in tax revenue to the state. 63 employees were incorrectly labeled as independent contractors by six different companies and thus did not receive proper pay or benefits for their time on the job site. The largest such violator misclassified 28 workers, failing to report $410,000 to the state. According to Joanne Goldstein, the state’s secretary of labor and workforce development:
“These violations not only hurt employees, but also impact legitimate businesses and taxpayers, who end up subsidizing the unpaid wages, unemployment, and workers’ compensation costs and taxes.
Many of the labor violations were found after investigators originally looked into the wages of workers that came from a Philadelphia drug rehab/ministry. Those workers, subcontracted by a southern California furniture installer, were paid $4 an hour for 12 hour shifts, six days a week. Last month, the Boston Globe reported this low-life exploitation of those struggling to re-engage with society. On top of low pay, workers were forced to live in substandard conditions:
At night, Carter and 11 other laborers packed into a pair of two-bedroom apartments in Chelsea provided by the contractors. His pay for nearly three months of labor worked out to about $4 an hour, half the required minimum wage in Massachusetts.
“For what we got paid,” Carter said, “that job was crazy.”
Local unions have spent the better part of a year protesting the Copley Marriot’s behavior. Some contractors participating on the project told the Boston Globe they were unaware of the labor conditions until officials arrived to investigate, but General Contractor Baystate appears to have catalyzed the unsavory work environment in order to cut costs and underbid other companies. Using out-of-state workers and abusing various loopholes, Baystate’s actions undercut the local economy:
Baystate’s $4 million bid for the contract was significantly lower than the bids from several unionized competitors. For example, J.J. Vaccaro of Somerville bid $8.5 million, according to CEO Michael Kennedy.
A major problem in the construction industry is that standup contractors, many of whom are union, can’t compete with artificially low bids based on systematic abuse. Governor Deval Patrick’s Joint Task Force on the Underground Economy was intended to police this exact kind of situation and has been largely successful since it’s 2008 inception, growing each year as it legitimatizes the state’s work sites.
Meanwhile, the volume of violations being discovered at Massachusetts work sites continues to increase.
In 2011, the state task force on the underground economy collected nearly $11 million in fines, back taxes, and unpaid wages from companies found in violation of labor laws, up from $1.4 million in 2009.