The construction industry is booming. Are workers seeing the benefits?

For most of the ten years that Moises Sandoval worked as a security guard on construction sites around New York City, he worked overnight — including one shift that lasted from Saturday night all the way through Monday morning, according to a class-action Fair Labor Standards Act lawsuit filed in federal court in New York in 2010.

At one construction site in Far Rockaway, there were no bathroom facilities for Sandoval to use. “He complained to his bosses” about the bathrooms, the complaint states, “but they ignored him.”

According to the complaint, Sandoval sometimes worked up to 120 hours in a single week — but he was only paid $600 each week with no overtime. When inspectors came to the construction site, Sandoval’s bosses allegedly told him to “go to a nearby store to buy something, so as to stay out of the inspectors’ sight.”

Those bosses, supervisors at companies including Galaxy General Contracting Corp. and S&Z Construction Corp., agreed to a maximum class settlement fund of more than $2 million in 2013 for Sandoval, who could not be reached for comment, and “each current and former employee” who was employed as a security guard or construction worker on their sites between July 2004 and July 2010.

But now, Galaxy is the general contractor on four city projects that have been awarded a total of $39,883,115 in city loans and grants.

S&Z is the general contractor on one city project at 3815 Putnam Avenue that hasn’t been awarded grants or loans.

The two are among at least five companies accused of mistreating workers by underpaying them and creating unsafe working conditions that continue to get city contracts to build affordable housing through the Department of Housing Preservation and Development, according to an analysis by New York Focus. All five companies either did not respond to requests for comment or declined to comment.

Experts like Diana Florence, who led the Manhattan District Attorney’s Construction Fraud Task Force from 2015 to 2020, say that for many companies, wage theft and cut corners are entrenched business practices. They are the essential building blocks of the industry that has paved the sky with glass.

“The unscrupulous companies look at their bottom line,” she said. “You can’t screw your suppliers — you need wood and concrete and that kind of thing. You can’t screw your equipment rental, because you need the heavy machinery. But the human capital, you can basically play around with.”

Despite years of advocacy against these practices, unions, lawyers and workers themselves say that wage theft and workplace safety issues are still rife within the industry and that companies often get away with it — as illustrated by HPD’s continued work with known offenders. Union leaders also describe long and winding chains of subcontractors on both public and private projects that, at best, muddy compliance checks and at worst, allow companies to commit wage theft, punt injury liability down the chain and encourage workers compensation insurance fraud.

And workers who staff projects from the bottom of the subcontractor chain – many of them Black and brown and often formerly incarcerated – say that they are being targeted for low wages and unsafe working conditions that serve the industry’s bottom line.

Enhanced Review

Galaxy, S&Z Construction, and three other contractors or subcontractors — A. Aleem Construction Inc., Crescent Builders Inc. and Lemle & Wolff Construction Corp. — are among the companies that have continued to receive HPD contracts despite being on the department’s “enhanced review” list.

An HPD spokesman, Jeremy House, said in an emailed statement that the agency prioritizes worker safety and protections.

“Contractors under Enhanced Review are held to the highest labor monitoring standards and are subject to rigorous oversight procedures before they can participate on any HPD-assisted project,” he said. “These requirements have made a clear difference as firms have put systems in place to better comply with their legal obligations.”

As of June 2021, the “enhanced review” list included about 50 different contractors. While companies can land on the enhanced review list for myriad problems, including poor construction quality, the five aforementioned contractors or subcontractors have been sued for wage theft and workplace safety issues in particular, according to a review of state and federal court filings and news clips.

Aleem Construction was part of a $255,000 settlement in 2017 after the company was found to have failed to pay prevailing wages on HPD projects. Now, A. Aleem is the general contractor on an HPD project at 128 East 112th Street that received a $6,993,889 city loan and a $1,500,000 city grant.

Lemle & Wolff settled for an unknown sum in a class action lawsuit in 2014 after workers claimed that the company paid workers $100 a day, regardless of overtime – the complaint said workers were told additional hours were “off-the-clock.”

“Plaintiffs were initially paid their wages twice per week, then once per month, until ultimately they were not paid at all for their work but were instructed to keep working with promises of future payment of outstanding wages,” said the complaint.

Now, Lemle & Wolff is the general contractor on four HPD projects, bolstered by $32,766,623 in city loans and grants.

The enhanced contractor review process stretches across multiple city agencies. Each agency’s specific role used to be outlined on HPD’s website, but that information appears to have been removed. As of 2013, HPD’s Labor Monitoring Unit is in charge of maintaining the list of entities and updating it on a quarterly basis, meeting with the Office of Development staff quarterly as well. The list currently available was last updated on June 10, 2021.

The Division of Building and Land Development Services is meant to keep up a database of contractor performance. HPD confirmed that multiple agencies, including the Division of Economic Opportunity and Regulatory Compliance, review the company’s history.

Before approving a contractor chosen by a developer or owner, the Office of Development or the Office of Asset and Property Management is supposed to review the list and the BLDS database and consult with the Labor Monitoring Unit with questions, according to the 2013 site.

To remove an entity from the list, HPD may require the contractor to hire a third-party company that will monitor and assist the entity with compliance.

All but two of the 11 current projects being built by entities on the list accused of labor issues have received city capital loans, ranging from just over $1 million to nearly $18 million. Many of the buildings are being built or slated for construction in the Bronx and Northern Manhattan.

HPD declined to provide the number of complaints it has received through a labor monitoring hotline, through compliance officers who staff sites and through an email address. It’s not clear how frequently complaints to the email address are monitored: an email sent to the labor monitoring unit this month bounced back, but HPD later said the email address has been repaired.

Layers of Subcontractors

James Makin, a representative at the New York City District Council of Carpenters, has an encyclopedic memory of contractors in the city that have done workers wrong. Asked about chronic offenders, he tapped forcibly away on a tablet to pull up the evidence.

He and his compatriots sometimes work out of a big table in a kind of war-room covered in white boards that are stamped with the names of companies and details about their offenses.

Makin’s cause right now is the gratuitous use of subcontractors, a common way for construction companies to hide wage theft.

The general contractor will “hire a subcontractor to do part of the job, and the subcontractor will then go out and hire another subcontractor, and that subcontractor might actually not have a business, but he has the labor,” Makin said. “The second, third layer of subcontractors — that’s usually labor brokers.”

Makin explained that using subcontractor chains to offload labor provides considerable savings for companies.

New York has the second-highest worker’s compensation premium rates in the country, right behind New Jersey, according to a study by the Department of Consumer and Business Services in Oregon.

Passing the buck on insurance can save companies money in the short-term, said Makin, and the chain of subcontractors also makes it easier to commit worker’s insurance fraud — by masking the true number of workers on a job — and wage theft.

“All the paperwork all of a sudden gets very mushy; there’s no payroll, really, they’re just writing checks,” he said. “That brings a considerable rebate.”

The penalties for failing to provide worker’s insurance are high. New York companies that don’t buy worker’s compensation insurance can be charged with misdemeanors or felonies, and can get fined up to $50,000 plus $2,000 every 10 days without coverage.

Some entities are willing to take the risk.

The Manhattan District Attorney’s Construction Fraud Task Force indicted Dragonetti Brothers Landscaping, Nursery, & Florist, a longtime city contractor last September, for underreporting the number of workers to avoid paying for insurance — the company lied and said that 217 laborers, foremen and heavy-equipment operators were actually florists, office workers or sales representatives, said the task force in a press release.

Last September, a contractor working on the Virgin Hotel in Midtown had to return$112,000 in stolen wages to 18 workers, said a press release from the Manhattan District Attorney’s Construction Fraud Task Force.

Since March 2020, the Comptroller’s office has returned about $7.5 million in unpaid wages to more than 400 workers on construction public works projects, according to a press release.

In the past, pursuing legal avenues was difficult, said Jonathan Silver, a lawyer who has worked on about 40 wage theft cases over the last decade. If companies are using subcontractors to muddy their payroll responsibilities, shell companies don’t have money or property to seize when a case is won.

“The subcontractor often is either a corporation or a person who is less viable in the long run as somebody to collect the money against,” he said.

But that’s about to change. In September, Gov. Kathy Hochul signed a bill that will hold general contractors liable for unpaid wages withheld by subcontractors. It went into effect earlier this month.

Florence, formerly of the Construction Fraud Task Force, said enforcement of that law will be key.

“There’s always going to be a swath of bad actors who are going to do whatever they can to get away with it until we make it not worth their while anymore,” she said.

Body shops

While state legislators have looked to regulate general contractors, city officials have tried to crack down on “body shops.”

These body shops have nothing to do with cars, nor the stores that sell sweet-smelling soaps and lotions. Rather, “body shop” is a colloquial term for labor brokers — subcontractors who operate as temporary staffing agencies, providing labor to construction projects.

In New York, construction projects typically have a developer that designs and finances the work through a patchwork of private financing and public subsidies. The developer seeks bids from a general contractor, which oversees the actual construction. Body shops staff the work of the general contractor or subcontractors and pay the employees in exchange for a fee from the client.

Staffing agencies that place temporary workers assign more than 150,000 people to temporary or contract jobs each week in New York state. Long-term employment agencies are licensed by New York City. But until now, temporary labor brokers were not. That will change later this year. The City Council passed a bill last year that will require labor brokers to be licensed by the city, to provide employees with summaries of their rights and to disclose wage data to the city. Parts of the bill will go into effect in May.