If drywall and flooring could talk, they’d probably have a dark story to tell about Wisconsin’s ongoing construction boom.
Behind projects big and small, say people close to the industry, there thrives an underground economy made up of contractors who cheat their workers out of wages and benefits to deliver projects on time and under budget.
At the forefront of the fight against worker misclassification and other forms of wage theft is a small team of private investigators who stalk job sites to root out worker abuses.
Edna Baldwin, Jeff Hennen and Victor Centeno are wage-theft investigators at the Construction Business Group, a union-backed trade organization. Together, they investigate wrongdoing contractors in southeast Wisconsin, reporting unscrupulous business practices to state authorities.
The CBG has been investigating wage theft for decades. In recent years, investigators there have seen this form of abuse grow only more prevalent, stretching out its tentacles into the drywall, steel-stud and flooring industries.
The situation has become alarming enough that state agencies involved in the fight against wage theft, most notably the Department of Workforce Development, have themselves begun to take another look at both how they enforce laws banning this form of abuse and what more they can do to prevent it.
It’s not a mystery why worker misclassification exists.
“It’s greed,” Hennen said. “It’s a snowball. The more people that are doing it, you can’t compete anymore.”
Worker misclassification occurs when companies treat full-time workers as though they were independent contractors. In some cases, contractors may mistakenly misclassify workers because the rules governing when employees can be counted as independent contractors are complex. In other cases, contractors intentionally misclassify workers to gain a bidding advantage by avoiding paying worker’s compensation, unemployment taxes, health benefits and other costs associated with employing someone full time.
CBG has been investigating wage theft since the ’90s, and now employs seven investigators. Baldwin, Centeno and Hennen are responsible for the greater Milwaukee region. Nearly all of the CBG’s investigators are former police officers; Baldwin is the only one who hadn’t previously worked in law enforcement. Hennen, for his part, is a retired investigator who had worked for the Waukesha Police Department, and Centeno recently retired from the Milwaukee Police Department.
That’s not to say Baldwin’s experience isn’t relevant. Before joining CBG two years ago, Baldwin had been at the Wisconsin Department of Transportation’s Labor and Wage Compliance office. There she would review documents submitted by contractors, looking for discrepancies. When the numbers didn’t add up, she’d visit job sites to speak to workers.
She and the other CBG investigators still scour bid information and other documents to find red flags. One sign that wage theft may be occurring are bids that are remarkably lower than the next-lowest offers. Although contractors are always trying to reduce their costs, Baldwin explained, it’s rare that they are able to find big savings on things like building materials and rental equipment.
“How do you cheat the easiest way? Labor,” she said.
Still, her work at CBG differs in several big ways from what she had done at WisDOT.
At WisDOT, employers were required to allow her onto a job site to interview workers. But at CBG, it’s not so easy. The group has no right to enter a job site. At times, investigators will be invited onto job sites by project leaders. At others, they are not so lucky.
When investigators are granted access to a job, they will interview any worker they can find. But sometimes they find people are reluctant to speak to them.
Many workers the investigators encounter are new to the U.S. entirely. It’s not uncommon to step onto a Wisconsin job site and find people who hail from places as far flung as Guatemala and various Eastern European countries. Difference in languages, and the resulting difficulties in communication, are sometimes exploited by contractors. CBG tries to overcome this obstacle by employee bi-lingual inspectors. Baldwin and Centeno both speak Spanish and Hennen is learning the language.
Wage theft, as is true of many crimes, often has investigators struggling to stay ahead of the perpetrators. Culprits tend to catch on quickly to what the authorities are doing.
One of the biggest tell-tale signs of misclassification, Baldwin said, is cash payments to workers. Many employers already know this and will coach their workers to tell authorities that they’re being paid by check.
Another sign that’s something amiss: Employers showing reluctance to leave an employee alone when investigators are around.
“You know right away that something’s not right,” Hennen said. “It’s like if you’re going to a domestic (abuse complaint) and the husband doesn’t want to leave the room with the wife. He wants to be intimidating and he wants to hear what they are going to say.”
Contractors will also use their dealings with subcontractors to hide cheating.
A general contractor, for instance, might hire a drywall subcontractor for a particular job. That sub might then hire a so-called labor broker, who has a separate LLC, and make that company responsible for recruiting workers for the project.
Payments will then have to travel a circuitous route before reaching their intended recipients. Often, they’ll trickle through the drywall contractor, then to the labor broker and finally to the workers themselves, who may be classified as independent contractors.
In such a situation, it can be difficult for workers to know exactly whom they are working for and how they are getting paid. Also difficult is knowing if they’re being paid fairly.
“It’s all subcontracted,” Centeno. “But you look outside and the vehicles all belong to this big company.”
The country’s strong economy has made the situation worse, the investigators say. Project delays also put contractors under greater pressure to bring in cheap labor. Still more stress comes from the persistent shortage of skilled workers in Wisconsin.
And general contractors can be shielded from the consequences of making bad decisions, since they usually are faced with no penalties for hiring companies that don’t treat their workers fairly.
“If it’s a big job, and it’s not being done on time, there’s going to be a crew coming from somewhere to finish it,” Baldwin said.
Because of the nature of construction — with its complicated relationships among general contractors and various subs — wage theft tends to be much more common in this industry than others.
Tips from CBG are a big source of complaints for the DWD in particular.
“We value the partnerships we have developed with groups across the state, and look forward to continuing our collaborative approach to combating worker misclassification in Wisconsin,” said Mike Myszewski, section chief of the DWD’s Worker Classification Section.
State officials are redoubling their efforts to crack down on the abuse. Gov. Tony Evers signed an executive order this spring forming a task force that’s charged with drawing up recommendations on how to deter bad actors among contractors.
Baldwin said she is confident the renewed push will have the desired results, although progress will most likely take time.
“We’re confident that we’re going in the right direction but it’s an ongoing process,” she said. “We’re seeing misclassification, payroll fraud in every trade.”
Meanwhile, even when instances of worker misclassification are discovered and the culprits punished, much of the fight against wage theft takes place in the dark.
CBG investigators are prohibited from disclosing which companies flout state law in this way. State investigations into offending companies happen within the agency, and state law prohibits public officials from disclosing details of their investigations or saying which companies are being punished.
One culprit CBG’s investigators blame for the rise in wage theft is the repeal of Wisconsin’s prevailing-wage requirements. Baldwin said this step “opened the window” for fly-by-night contractors to compete for work in Wisconsin. Since the repeal of prevailing wages, which had set minimum rates of pay for projects that make use of public money, out-of-state contractors have had an easier time competing for Wisconsin jobs, the investigators say. Companies that offer substandard pay in order to keep their bid prices low now have a chance at winning public contracts.
The influx of out-of-state contractors has also complicated efforts to root out wage theft. Companies will bring in a team of workers from as far away as Texas and North Carolina, picking up jobs in Wisconsin for several weeks before moving elsewhere.
Workers who have been thus moved from state to state can find it hard to know what rights they have in the place they are working at any given time.
Hennen said he feels dismay when he sees power concentrated in the hands of contractors who skirt the rules. He himself comes from a blue-collar family, and took an active part in his union when he was a police officer in Waukesha. His father belonged to a union at an engine manufacturer. His grandfather, for decades, was a union worker at the manufacturer Allis-Chalmers.
“When I see the owners of the company taking from these guys who are working their asses off, it pisses me off,” he said. Follow @natebeck9