It seems that every other story in the media related to the housing crisis ends up bringing up the catch-phrases “labor shortage” or “high labor costs.” But rarely are these terms probed deeper to get a sense of the troubling current working conditions on many of our mixed-use and multi-family residential projects across the region.
The Carpenters/Contractors Cooperation Committee (C/CCC) is a labor-management watchdog group that monitors the construction industry for compliance with the law. Our goal is to ensure quality development and promote responsible contracting. Just in the past 3 years, our collaboration with law enforcement agencies has resulted in close to $20 million in citations issued against concrete, framing and drywall subcontractors for labor violations on multi-family and mixed-use residential projects. At the same time, there have been multimillion-dollar criminal cases involving subcontractors committing wage theft, embezzlement, forgery and workers’ compensation fraud. If we add this to the cases we are currently working on, it is safe to estimate that there are probably 5,000 to 7,000 residential construction workers in the Southern California residential industry victim of illegal business practices on the part of a handful of major drywall, framing and concrete subcontractors.
This is happening all across Los Angeles, in the San Fernando Valley, Miracle Mile, Koreatown, Marina and Downtown. They involve notable developers and general contractors. For example, one framing subcontractor who admitted to a $6 million criminal workers’ compensation fraud and labor theft scheme worked on multiple Jamison Properties projects in Koreatown. Or the largest wage theft case conducted by the State Labor Commissioner occurred at The Mansfield project in mid-Wilshire resulting in a $12 million citation for a subcontractor cheating over 1,000 workers.
With the increase in residential construction activity, the need for a workforce is creating a situation where labor brokers are trafficking workers across the area, from project to project, from subcontractor to subcontractor. This sets up an underground economy with rampant worker exploitation, tax evasion and unsafe and unlawful working conditions. And it makes it nearly impossible for responsible law-abiding subcontractors to compete and succeed in getting work. Not to mention the exploited workers themselves, also experiencing the dire strains of the housing crisis.
Clearly, this is not the way to build the future and address our housing crisis and workforce needs. The solution starts at the top. Developers and general contractors have to take a more active and serious role in ensuring they are working with responsible subcontractors that play by the rules, pay good middle-class wages, provide training and a dignified work environment. It’s hard to attract our youth into the construction trades and build our future if what they see is wage theft and poor working conditions.
For too long general contractors felt they could just hire bottom-feeder law breakers, benefit and profit from the cheap labor, and be immune from a jobsite ripe with labor violations. But that is not the case anymore. A change in the law came about with AB 1701, which holds a general contractor responsible for its subcontractor’s labor violations - a major policy change to help create a culture of compliance.
This law also allows labor-management groups like the C/CCC to take legal action against general contractors to ensure a subcontractor’s workers can recover their stolen unpaid wages.
Not only is it morally degrading to turn a blind eye to shady schemes that exploit workers, but it’s also bad for business. Hiring irresponsible subcontractors brings added liability, costs, risk and delays that threaten a timely project completion. It can mean that long after a project is done, the general contractor or developer is still having to deal with never-ending legal issues or a tarnished brand simply because of the fraud and shady practices of its subcontractors.
It pays to do it right the first time and ensure good subcontractors are on the project. It’s time we clean up the industry and ensure quality development and quality jobs