By Gregory B. Hladky
2:12 PM EDT, September 10, 2013
Late last month, a worker at a Walmart construction site on Hartford’s Flatbush Avenue fell 23 feet and broke both his legs. The guy’s employer turned out to have none of the workers’ compensation insurance required by Connecticut law, and labor inspectors issued a stop-work order.
According to state officials, those kinds of violations have become epidemic at construction job sites all over Connecticut and the nation. And Walmart projects are right there at the top of the problem list.
In the past 15 months, Connecticut state inspectors issued stop-work orders to 11 different subcontractors at Walmart projects in Danbury, Naugatuck, Putnam, Brooklyn and Hartford. Violations included failure to pay proper wages, payroll reporting gaps, dodging unemployment taxes and no workers’ comp.
Walmart, the largest private employer in the U.S., is facing all sorts of worker protests and wage issues, and happens to be doing a whole bunch of construction and renovation work in Connecticut right now. All of which helps to draw even more attention to those multiple labor violations by Walmart subcontractors.
“I have had quite a few issues with Walmart,” says Resa Spaziani, who heads up the Connecticut Department of Labor’s fraud unit. “We do try to get to every Walmart that’s under construction in Connecticut.” (Walmart officials failed to respond to requests for comment on this story.)
The greater problem is, Spaziani warns, that Walmart is far from being the only offender.
“There’s a lot of this everywhere,” Spaziani says. “At so many sites, when [our teams of labor inspectors] are going in, the workers are running out.”
“We certainly know when we pull up and workers are running off, there’s a problem,” she says. Spaziani recalls that at one recent worker job-site exodus, there were construction employees hightailing it “into the bushes… One guy ran so fast down the road that he lost his work boot,” she laughs.
They’re running because they know either they or the construction contractor they’re working for is somehow violating the law. It could be the workers are getting paid under the table to avoid taxes, or that they’re undocumented immigrants, or are being paid starvation wages, or the company has no workers’ compensation insurance, or is deliberately failing to keep payroll records.
The sluggish Connecticut economy and lack of jobs means lots of people are willing to work under those sorts of illegal conditions.
David Jarvis, a Connecticut organizer with the New England Regional Council of Carpenters, totally agrees with state officials about the extent of the violations. “The problems are rampant across the construction industry as a whole,” he says.
Between May 2012 and May 2013, the state Labor Department issued nearly 200 stop-work orders after finding violations at construction sites around Connecticut. Since 2007, subcontractors and construction companies have paid something around $600,000 in fines for “misclassification of workers,” which means they were claiming their people weren’t regular employees but “independent contractors” that didn’t qualify for regular wages or workers’ compensation.
At one Norwalk job site in August 2012, state inspectors found a 13-year-old boy in a hard hat working with an Allstate Interiors crew, his clothes covered in drywall tape and compound. The company’s president, Fred Soward, was charged with violating child labor laws, but insisted he’d done nothing wrong.
In May of this year, one of those state inspections at a Walmart site in Naugatuck found serious violations at a subcontractor called Providence Building Co. “The workers were all receiving cash, and nobody had paid any taxes,” Spaziani says. “In excess of $50,000 was due in taxes.”
Union people like Jarvis say certain companies and certain general contractors tend to fall into a pattern of using subcontractors with long records as labor law violators. They do it, Jarvis says, because it’s the easiest way to cut costs.
He says one of the general contractors often used by Walmart on its New England projects is Callahan Inc., a company headquartered in Bridgewater, Mass. Union officials claim Callahan has a habit of hiring subcontractors that frequently violate labor laws.
“The same problems follow them wherever they go,” Jarvis says. Callahan was the general contractor on that Norwalk project where the child-labor violation was found, and on at least two of the Walmart projects where stop-work orders were issued.
“Callahan requires that all of its subcontractors pay an appropriate wage and adhere to rigorous safety standards in full compliance with all local, state and federal laws,” Patrick Callahan, president of the company, said in statement. “We regularly spot-check our subcontractors to make sure they are complying with the law.”
If a subcontractor can skimp on wages or unemployment insurance taxes or workers’ comp, it allows that company to make a lower bid for the construction work. And everybody is looking for the low bidders and the lowest costs for their projects, a combination that often results in widespread violations.
“I think it’s true of every construction project in Connecticut and of every construction project in the nation,” says Spaziani. Project owners (like Walmart) and their general contractors or construction managers simply take the low bidder without bothering to check if a subcontractor has a history of violations, she adds.
The all-consuming drive to keep construction costs as low as possible, and the intensity of the competition among subcontracting companies to get work, has pushed things to the point of absurdity.
“I have contractors tell me they bid on projects at zero or 2 percent [profit margin] and still get under-bid by $200,000 or $500,000,” Spaziani says. “The bar has gotten so low… that the only corners they can cut are the labor costs.”
She says she’s heard of contractors submitting extraordinarily low bids “just to keep their people on the payroll” rather than to actually make money.
“I have contractors telling me, ‘I could not do that project if I knew I had to pay taxes or that I had to have workers’ comp,’” Spaziani says.
Spaziani says major corporations like Walmart often use out-of-state contractors that aren’t familiar with Connecticut labor-law requirements, and that adds to the problems.
The kicker to all this is that major corporations and their general contractors aren’t held responsible if the subcontractors they use are violating labor laws. “There’s no liability on private projects” if a subcontractor is skirting the law, Spaziani says.
So the owners of projects (like Walmart) and their general contractors and construction managers continue to save money by using subs that continue to cut corners by shortchanging their workers and the state on labor costs and taxes.
Until the big-money companies in charge of these projects are made to feel some of the financial pain for violating labor laws, Spaziani says, these problems won’t be solved.
“We’re just hitting the giant on the ankles,” she says of the state’s efforts to enforce labor laws, “but we’re not knocking the giant down.”
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