(1) The Hyper-Exploitation of Precarious and Undocumented Workers Illegally Misclassified

The past two decades have seen tremendous consolidation at the top tier of residential construction.⁹ According to Ormiston and his colleagues “In 1994, the ten largest homebuilders (by numbers of homes) accounted for 9.2 percent of new homes sold in the United States; in 2017, the ten largest companies were responsible for 27.5 percent.”¹⁰ This concentration at the top does not reflect the actual process of building. According to Walsh and his colleagues, “Most large production homebuilders in the United States have discontinued the practice of self-performing work on their projects, and instead rely upon a network of highly specialized subcontractors organized by trade or activity.”¹¹ Weil and Theodore suggest that this fundamental change in residential construction demonstrates how the major homebuilders have moved away from acting as general contractors and now perform as construction managers.¹²

The subcontractors who actually perform the work for a growing number of very large firms are themselves very small-scale. According to the Bureau of Labor Statistics, 88.4% of the subcontractors “had fewer than ten employees and less that 1 percent had more than fifty workers.”¹³ In this way, residential buildings built by large national homebuilders that dominate the market are actually constructed by a very large number of very small subcontractors who operate in local markets.

Without unions to represent the workers, the pay and working conditions offered by these small subcontractors have significantly deteriorated. “When I started in 2003, if you were building a custom home, you would get about $11 or $12 a square foot. If you were doing multi-residential, you got about $9 a square foot. Now, on custom homes, people are getting $9 or $10 a square foot, and on multi-residential, they’re getting $5,” says a longtime carpenter now working in management for a major construction firm. “So rates in Massachusetts have gone in half in 20 years. So if you were a carpenter [between] 1999 and 2003—and say that guy just hired you off the street—you would get $20 an hour cash. Now, its 2020, the guy hires you off the street, you’re still getting $20 an hour cash. So the rate has not moved.”¹⁴

Brian Richardson, Organizing Director for NASRCC, adds:

So, you know, inflation in construction—land has gone up a thousand percent, material has gone up double in the last 10 years, but the labor price is actually going down, you know. Not necessarily what the subcontractor is bidding, but what the subcontractor is actually paying his people has gone way down. So, you know, the developers are making a lot of money, the contractors are making a lot of money, but the community suffers, the worker suffers because of this dynamic.¹⁵

Similar to situations in meatpacking and fish processing, the entrance of immigrants did not result in the deterioration of jobs in residential construction; rather, working conditions and pay became so bad that subcontractors faced continual labor shortages.¹⁶ Thus the growth of immigration, especially from Central America, created a large pool of workers to fill jobs in residential construction. Their undocumented status, however, made them extremely vulnerable to employment abuse, and with a growing number of undocumented workers on the job, conditions have continued to worsen on most non-union sites.

As was clear in the Harvard report, contractors were already misclassifying their workers as independent contractors, but former NASRCC Executive Secretary-Treasurer Tom Flynn noticed that things were changing. “It kind of shifted into the labor broker model to a point where we are now where a lot of the companies are just flat-out paying people cash. They don’t even exist at all on the books.”¹⁷ This is exactly how it worked in Amherst, MA, at the construction of a major project.

Massachusetts Governor Charlie Baker was on hand on June 14, 2018, for the groundbreaking for the North Square Apartments in North Amherst, Massachusetts. This $47.5 million development of 130 housing units is just a few miles north of the University of Massachusetts, Amherst. The developer for the project, Boston-based Beacon Communities, has built and operates more than 90 developments in 11 states and the District of Columbia and has a long-standing commitment to building affordable housing.¹⁸ In North Square, 26 units are classified as affordable so Amherst will be providing Beacon with $2,795,009 over 10 years as an affordable housing tax incentive.¹⁹

Given the developer’s reputation and its location in a progressive community shadowed by the university, one would expect the highest quality construction carried out by well-trained and fairly compensated construction workers. This would not turn out to be the case. When we examined how the construction was done at the North Square development, we documented nothing less than a tragedy.

Beacon hired Keith Construction Inc. (KCI) as the general contractor for the development. As is the norm for construction projects of this size, KCI in turn hired a number of subcontractors who would take charge of different components of the construction. The contract for drywall was awarded to Combat Drywall Inc., based in Billerica, Massachusetts. Although Combat registered as a company with the Massachusetts Secretary of State in 2013, the firm has no website. Its listings on a number of business webpages show only two employees and a revenue of approximately $160,000 per year.²⁰ These figures do not appear credible, until one looks more closely at the operation of the firm.

Employees of Combat would not actually hang drywall in Amherst or the other jobs they have signed onto as a subcontractor. Instead, they would subcontract the work to a labor broker. This accounts for their low number of employees —although perhaps not as low as suggested online—given that the workers who perform the work are not their employees. The role of their employees, as we will see, is largely supervisory.

In this case, they subcontracted the actual hanging of drywall work to Jimy Reyes d/b/a/Alvarez Drywall, a labor broker. Alvarez is not registered with the Secretary of State in Massachusetts as a business, has no website, no phone number, and no real company identity. Alvarez finds the workers to do drywall. Combat primarily supervises workers on the job, and Alvarez is expected to pay them. Neither Combat nor Alvarez consider the workers to be employees.

As a labor broker, Reyes, who the workers knew as “Poncho,” simply brought workers as individuals to the job site. He provided no tools, no ladders, and no Bakers (the rolling scaffolding named after an original manufacturer that are the basic staging for hanging drywall) Workers provided their own basic tools, including a screw gun to affix the drywall to the studs, knives to cut the sheetrock, and routers to make holes for light switches and receptacles. The big equipment, the Bakers and ladders, were provided by Combat, not Alvarez.

Combat Drywall is not alone in this reliance on labor brokers. Jonathan Nuno started in construction as a teenager—he is now 30—and he has 15 years of experience in residential construction, most of it working for labor brokers in drywall and metal framing. Starting out in New England was not easy for him. “I think it was Thanksgiving, and I was working with Poncho [Jimy Reyes, the labor broker who also worked on the Amherst North Square Apartments]. Around that time, he didn’t pay me, and we were struggling. … It was coming up to two weeks. … I went [into] the holidays with no money.”²¹ He reached out to the Worcester-based Carpenters Union organizer Manny Gines. Nuno told us that Gines “went, and he met up with the guy, and he got me more money than I was supposed to get paid, because he made them pay the time and a half [for the overtime he had worked].”²²

Nuno worked a number of years for labor brokers who were subcontractors to Metro Walls. Metro Walls is a very different kind of firm than Combat Drywall,. According to the company website, “Metro Walls was established in 2004 in Manchester, New Hampshire. In less than a decade we have grown to one of the leading drywall & framing companies in New England.”²³ Metro Walls’ owner and President Mike Dion grew the firm’s sales tenfold from $770,000 in 2010 to $7,940,000 in 2018.²⁴

The Metro Walls website further boasts: “With more than 250 employees and up to a 600-man workforce, the company proudly provides outstanding solutions to the region’s biggest and best contractors.”²⁵ Unlike many drywall companies who rely almost exclusively on workers brought to them by labor brokers to do the actual work of hanging drywall, the firm has its own workforce. But even in the numbers it reports publicly, the company reveals a reliance on labor brokers and the workers they recruit, more than double its workforce.

One of the major factors behind Metro Walls’ growth and profitability is its ability to hold down labor costs by routinely using labor brokers—brokers who never pay overtime, keep wages low, pay in cash, do not deduct payroll taxes or pay into the workers’ compensation or unemployment insurance contributions and routinely cheat workers out of wages. This became the practice of not only modest companies such as Combat Drywall, but also of major industry players like Metro Walls in major markets such as greater Boston.

Nuno describes working on a Metro Walls job. “We get to the jobsites; we sign into Metro Walls’ sign-in sheets. That’s what you do, we’re on their payroll, supposedly.” But he continues, “I never got hired by Metro Walls.” And he knows he won’t be paid by Metro Walls, but by the labor broker who actually hired him. So, says Nuno, “When we are on the site, if any OSHA [staff] or any person outside of the site comes through and asks us anything—could be union guys, it could be anybody—they ask us who we work for, we got to say we work for Metro Walls, yeah.” He adds, “I’ve seen people get fired for saying that they work for the subcontractor [labor broker].”²⁶

“Sometimes, the company already has a name for you to sign in with.” He explains how this is an attempt to make their employment practices look more legitimate. “What they’re doing is they’re rotating guys sometimes that are on their payroll, and using their names over here, or using them over there, just to try to make some sort of paperwork on these jobs.”²⁷ What may have been haphazard early on was fine-tuned by Metro Walls. To anticipate regulators and auditors, the firm built in a system to cover the tracks of its illegal behavior. Brian Richardson explains. “So, when somebody comes from the AG [Attorney General] and says, ‘I want to see, you know, your payroll records,’ they show 80 guys. The AG says, ‘Well, they have 80 guys; they have workman’s comp, everybody is getting what they’re supposed to be. They’re good.’” But Richardson adds that despite appearances this is just a manipulation: “Nobody actually has the names or knows who the workers are. Nobody ever peels the onion back.”²⁸

In terms of the labor brokers who worked with Metro Walls, Nuno reports that the workers on the job knew nothing about them. “A first name, and where to meet him so you could get paid, sometimes not even the real name, it’s a nickname.” I’ve talked to workers that have been working for the same guy for almost two years, and all they know about him is his name and that he pays them every week.’”²⁹ Carlos is a young carpenter who got his start hanging drywall in the non-union residential housing industry.” When it came time to be paid, he tells us, “They would either come to our house or we’d go to their house or meet somewhere. It would be the most underground thing ever. Always cash.” When asked if he ever saw the labor broker on the job, he replied, “Never, they’re never there.”³⁰

Jonathan Nuno reports that on Metro Walls jobs the labor broker is nowhere to be seen. The job is run by a Metro Walls foreman. When pushed about how he knew these foremen were from Metro Walls, Nuno reported that they told him they work for the company, and “they have Metro Walls shirts, Metro Walls trucks, coats … they’re company guys. And that’s the person that you talk to if you’re going to leave early or anything, anything like that. …Even [the foreman’s] helmet, his hard-hat, its Metro Walls.”³¹ Given that the work is entirely run and managed by Metro Walls and not the labor broker, this is without a doubt the illegal misclassification of these workers.

From our interviews it is clear that the era of residential construction being built by the employees of contractors and subcontractors is largely over. In projects large and small built by small and very large non-union firms, the new model for residential construction in the Commonwealth is that residential buildings are built by workers not directly employed by general contractors or subcontractors but supplied by labor brokers. It is important to look more closely at labor brokers and how they operate in this new environment.