Wage theft “epidemic” in construction. Taxpayers paying the tab.

By: - July 27, 2018 5:45 am
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A new ad from Attorney General Adam Laxalt’s gubernatorial campaign alleges his opponent, Steve Sisolak, awarded a public works job to Las Vegas Paving, a union company, for $100 million, over a non-union contractor who bid $4.6 million less.

But construction industry experts contend lower bids generate projects that are too often built on the backs of Nevada workers who are enduring a wave of wage theft on public works jobs. And your tax dollars are fueling it.

“From what I’ve seen, if you point out a project, someone is cheating on it,” says Evangelina Diaz of the Painters’ Union. “It’s crazy out there. It’s a dirty business.”

“It’s the only way the contractor can submit a lower bid.  A gallon of paint is going to be the same. Brushes, rollers — materials are going to cost the same.  It’s the wages where they can cheat,” Diaz says.

“There is a company, Vision Drywall, that paid over a million dollars years ago in back wages and they are still in business. Then we caught them again and they paid several hundred thousand dollars.  That’s just the cost of doing business for them,” Diaz says.

Federal court records indicate Vision Dry Wall entered into a confidential settlement in 2014 with workers who claimed they were intentionally and systematically denied overtime.  The Nevada Labor Commission reports eight complaints filed against the company, the last in 2015.

Nevada law requires prevailing wages be paid on public works jobs of $250,000 or more, while all federal jobs of $2,000 or more require prevailing wage.

Las Vegan Guy Bennallack owns a number of construction companies in a variety of trades including painting and roofing, and has contracted on numerous public works jobs.

Bennallack was convicted of 13 counts of tax evasion in 1994. Court records from his failed appeal reveal how far Bennallack was wiling to go to save money by defrauding the government.

“Here, appellant created false documentation to hide his illegal conduct; provided false W-2 forms to his employees for them to prepare false returns; used Southern Distributors as a secret supplier of cash by directing them to issue rebate checks to appellant; evaded detection by instructing Southern Distributors to issue the checks in amounts less than $10,000; maintained two sets of books in order to conceal sales; withheld information from his tax-advisors in order to falsify his returns; withheld invoices from the IRS.”

Today, Bennallack says he has 500 jobs going on at one time. He says cheating employees, who he says are well-versed in the law, would be impossible.

“I’m telling you there’s no way to do that. The penalties are far worse than anything you would ever gain,” he says.  Asked what the penalty would be, Bennallack admits workers would be paid the amount they would have legally been due, but likely no more.

A spokeswoman for the state says the Bennallack-owned Painting Company has had two wage and hour complaints and two prevailing wage cases prior to 2012.

The Original Roofing Company, owned by Bennallack, had one wage and hour complaint in 2016.

Nevada’s Labor Commissioner is tasked with ensuring workers are paid fairly, and has an online list of contractors who are prohibited from bidding on prevailing wage projects because of prior violations.

The law allows the Labor Commissioner to assess a $5,000 administrative penalty against wage violators and the discretion to increase it in certain cases.

Contractors who are assessed an administrative penalty by the state may be prohibited from being awarded a public works contract for three years for a first offense and five years for subsequent offenses.

The Attorney General, who is notified of all violations, has the ability to prosecute.  Adam Laxalt’s office did not respond to the Current‘s request for information on wage theft prosecutions.

The National Employment Law Project, an organization dedicated in part to eliminating wage theft, says in many states, “wage laws are weak and enforcement is tepid. Employers know that if they fail to pay wages, the worst that may happen is that they will eventually have to pay the bare amount of wages owed.”

The Labor Commissioner filed 107 claims against Nevada contractors between July 1, 2016 and June 30, 2017, assessing $170,668 in disputed wages and $5600 in penalties and forfeitures.  In fiscal year 2018, which ended in June, the Commissioner filed 89 claims for $145,789 in unpaid prevailing wages and assessed $24,400 in penalties and forfeitures.

“You’re touching the edges of a huge problem in the construction industry,” says Roofers’ union trustee Douglas Ziegler. “This is how these contractors lower their bids and get their jobs. They steal from the workers.”

Ziegler says immigrant workers are particularly at risk.

“Just about every roofer in Las Vegas today is an immigrant. They aren’t going to complain about being shorted,” he says. “The problem is getting them to talk about it.”

Diaz’ job is not an easy one. She’s charged with ferreting out wage fraud among non-union contractors who are often opposed to paying the higher, prevailing wage required on some public works jobs and employ a variety of scams to evade the law. Victims can surprisingly be as reluctant to report wage theft as contractors are eager to hide it.

“You try to tell this guy he’s being cheated and he doesn’t want to do anything about it. You can’t force it,” Diaz says.

Many of the workers are undocumented, she says.

“That’s one of the major reasons. Also, they are hopeful their boss is going to promote them to foreman. Maybe they have a criminal background and this is the only work they can get. But usually it’s because they are undocumented and also they are afraid they can’t find work somewhere else.”

No shortage of scams

“It’s a disease. It’s a virus,” says Diaz of the multitude of schemes used to defraud workers.

Some contractors cash workers’ checks and pocket a hefty chunk of the pay, Diaz says. Other contractors simply take their chances by paying less than the wage required by law.

“I’ve seen where the worker should be earning $46 an hour and their check stub says $25,” says Diaz. “The contractors are just greedy and I’ve heard them say, ‘Why should they make $50 an hour when they didn’t finish high school?’ You can’t determine on your own what they’re worth on a public works job.”

“The contractors are getting smarter.  It used to be I could look at a certified payroll.  Now they look perfect, but the worker’s pay stub doesn’t match the amount on the payroll,” Diaz says.

Some contractors don’t pay at all.

The Clark County School District hired Valley Floors in 2011 to perform work at E.W. Clark High School in Las Vegas. The complaint submitted to the Labor Commissioner on behalf of Ernesto Esquivel indicated he worked 579 hours over the course of several months and never got paid. Esquivel says Valley Floors owner Wesley Smith promised to pay him at the end of the project.

“The guy said you don’t work for us so we’re not going to pay you,” says Diaz. “This guy worked for three months. After doing the math I determined he was owed $24,000. The Labor Commissioner agreed and awarded Esquivel more than $21,000.

“When you have so many subcontractors working on a project you can never tell who is there and who just walked on,” Smith told the Current. “Some guy showed up and started pushing a broom around. I don’t know who he was.”

“That’s what they all say,” says Diaz. “Sometimes we’ll have pictures of the contractor interacting with the workers and they still deny it.”

Smith says he’s abandoned prevailing wage work because of the incident.

“It was all one-sided, based on a person’s testimony. They were all Spanish on the school board and the worker was, too.”

Yet another scam involves “ghost workers,” people who don’t want to use their own identity for a variety of reasons — perhaps child support liability, immigration status or a criminal background — assuming the identities of former employees with the blessing of the employer.

Diaz says she’s heard of legitimate workers whose names were used being hit later by the IRS with penalties for unreported income.

Nevada law defines “public work” projects as new construction, repair or reconstruction of a project financed in whole or in part from public money, including jails and prisons, public roads, highways, utilities, water mains and sewers, parks and playgrounds and public convention facilities.

Diaz says some government agencies bypass the public works bidding process entirely.

“The Clark County School District fired people and they were rehired by Manpower to paint schools. The law allows for employees to perform maintenance work. The district had these workers paint everything, the entire school, lockers, tables, everything, without putting it out to bid, and called it ‘maintenance.’”

At the time, prevailing wage was required on public work jobs of more than $100,000.  Lawmakers have since increased the threshold to $250,000.

“The school district will fight us on everything with their high-priced lawyers.  Long story short,” Diaz says as she shows copies of two checks dated July 18, 2016 — one for $55,282 and the other for $53,685 – representing payment for two workers who came forward. “They got their money.”

The Labor Commissioner ruled against the District and imposed a $20,000 penalty.

“It’s frustrating for so many reasons.  First of all we’re paying them, you and me, and all the other taxpayers in this county and workers aren’t being paid correctly and it took three years.  They kept fighting on every little thing,” Diaz says.

The school district would not say why it failed to seek bids for the jobs or why it fired workers and hired them through Manpower.

Luci Davis of the Clark County School District’s construction office says she receives about 2,500 certified payroll records a month, which are fed into a software program that identifies workers who are not being paid in accordance with their prevailing wage classification. But the program can’t determine whether workers are actually receiving the amount that appears on the payroll, nor can it verify identities.

Davis says her office lacks the personnel to perform site checks, a method used in other states to ensure compliance.

“The only way to know if there’s a wage claim is if there’s a complaint filed through the commissioner. We ask the contractor for pay stubs, daily sign-in sheets and we’ll bring in the worker if they’ll come in and do an interview.” Davis says that’s the hard part. “A lot more often than not they don’t have a problem with the employer so they don’t want to come down. But we do have site signs on all of our new schools telling workers it’s a public works job.”

More policing needed

The Commissioner’s office conducts site inspections that vary in intensity from site to site.

“It depends on the project and the type of work performed, and if we’ve gotten complaints/claims from the project,” says David Gould, who is based in Northern Nevada and conducts site inspections for all counties but Nye and Clark.

Gould says his inability to speak Spanish results in a communication issue at times.

“However, we do have a person in the office who can speak Spanish fluently, so if I need follow up she will call the person.  Otherwise, I seek out someone who can translate on-site if available,” he says.

“We do match up not only the certified payroll reports, but also the actual time logs, pay stubs, and if available, records of the superintendent. We occasionally talk with employees to ensure they are aware of the public works prevailing wage rates, and classifications. As far as violations, they aren’t very common, but we are seeing an uptick, especially down south there.”

Teri Williams, a spokeswoman for Labor Commissioner Shannon Chambers, says the Southern office has between one and three investigators who handle wage claims.

“Investigators make site visits based on complaints/claims, and other information that they receive concerning ongoing projects.  They have limited staffing and resources and the way that the law is written, the awarding body is the first in line in the process of holding those projects accountable and for conducting the audits, so the regular site visits and job logs are the responsibility of the awarding/public body.”

Evangelina Diaz of the Painters’ Union agrees the Labor Commissioner simply doesn’t have adequate staff to conduct site visits, leaving the policing largely to the labor unions.

“I have a compliance officer who goes out to work sites. Sometimes it’s word of mouth. Maybe the workers have heard another trade is being paid prevailing wage. We let them know their rights and make sure they are paid correctly,” says Diaz.

In some states, Labor Commissioners assess double or even treble damages against contractors who rip off employees. Diaz says in Nevada, penalties are nominal.

“There’s a person at the labor commissioner’s office who said their job is not to put contractors out of business. If a contractor owes you $10,000, the Labor Commissioner may tell them to settle for four or five,” she says.

“The Labor Commissioner’s job is not to “put companies out of business'” but to impose disciplinary action and fines as allowed by state law,” says Teri Williams, a spokeswoman for the office. “And the Labor Commissioner’s office in particular strives to ensure that all workers are treated fairly under the law.”

Leslie Mujica, the executive director of the Southern Nevada International Brotherhood of Electrical Workers, says wage violations are prevalent in her industry.

“Over the last decade our organization has recovered over $1 million for workers who had been cheated of their wages.  There have been many egregious cases over the past few years,” she says.

A ruling last year from the Nevada Supreme Court in Neville, Jr. vs. Eighth Judicial District Court, is expected to result in more lawsuits against employers.  Although state wage laws don’t expressly give employees the right to sue rather than take action exclusively via the Labor Commissioner, the Court ruled the Legislature implied the right to sue by allowing for an award of attorney’s fees.

Diaz says she’d like to see more policing of public works sites by the contracting agencies, and stronger penalties imposed against cheaters. But she says persuading policymakers that there’s a problem is a challenge of its own.

“Lawmakers, they don’t believe it or they don’t want to believe it or it’s not in their best interest. I remember one city councilperson said, ‘Now, really? If this person knows his wages should be $45 an hour, why would he work for $20?’ They have no concept of how desperate people are to have a job. They don’t always know what the wages are and they don’t always have options. It’s a major problem.”

The National Employment Law Project recommends a number of policy and legislative changes to discourage wage theft, including:

-Encourage contracting agencies to be proactive rather than waiting for employees to file complaints

-Extend the time for filing a complaint

-Increase financial penalties

-Impose criminal penalties against employers (Nevada already has a criminal statute on the books)

-Revoke business licenses of repeat offenders

-Award attorney’s fees to plaintiffs to encourage attorneys to file suits

Diaz says the improved economy is helping to reduce wage theft.  Workers who were desperate just a few years ago for a job can be more selective today.

“The market is starting to pick up,” she says. “They know there’s more money coming in now. The boss can’t tell them, ‘Oh, I can’t afford to pay you.’  You hear that all the time. ‘My boss can’t afford to pay me prevailing wage.’ Really?”

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Dana Gentry
Dana Gentry

Dana Gentry is a native Las Vegan and award-winning investigative journalist. She is a graduate of Bishop Gorman High School and holds a Bachelor's degree in Communications from the University of Nevada, Las Vegas. Gentry began her career in broadcasting as an intern at Channel 8, KLAS-TV. She later became a reporter at Channel 8, working with Las Vegas TV news legends Bob Stoldal and the late Ned Day. Gentry left her reporting job in 1985 to focus on motherhood. She returned to TV news in 2001 to launch "Face to Face with Jon Ralston" and the weekly business programs In Business Las Vegas and Vegas Inc, which she co-anchored with Jeff Gillan. Dana has four adult children, two grandsons, three dogs, three cats and a cockatoo named Casper.