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(3) Regulation of Labor Brokers
The labor brokers that have emerged to play a central role in residential construction operate largely outside the legal system. They are not registered as businesses with the Secretary of State; they have no other business identities on the web or elsewhere. In their current form, they simply have no relationship with the Commonwealth of Massachusetts. It is as if they do not exist. And because they operate in the world of cash, their work and operations are not traceable. There’s is truly an underground economy.
Such “invisibility” prevents them from being held responsible for anything that happens on a jobsite—working conditions, safety and health, and whether workers get paid appropriately in a timely manner—or, as we saw the case of the North Square Apartments in Amherst, paid at all. We have seen, in case after case, that when things get difficult the brokers just walk away. This is especially problematic when the Attorney General has ordered them to pay back wages or penalties. For example, in another case the Carpenters Union worked on regarding Pulte Homes, less than 10% of the back wages and penalties were ever paid by a number of labor brokers who were charged by the Massachusetts AG’s office.170 When faced with fines, they literally shut down and reopened the same operation under a different name.
As a former carpenter who now works for a contractor told us, “If partner A has an issue, he goes, ‘I got in trouble guys, and you’re in charge now.’ They close the company; partner B opens a company. Then as soon as partner B gets in trouble, he goes, ‘Uh-oh, I’m in trouble guys,’ partner C opens a company, and they just keep rolling….”171 Because the brokers operate completely under the radar, there is no property to seize or any other mechanisms to ensure payment of back wages and fines and there is also no way under the current regulatory structure to bar them from re-entering the industry under a new name.
Each Labor Day, the Attorney General in Massachusetts issues a report that details the back wage settlement and penalties it has assessed against employers, including construction firms. What is not reported and what we don’t know is in fact how many of those payments are actually made, particularly in terms of fines brought against labor brokers such as Alvarez Drywall. In their investigative piece in the Boston Globe, Beth Healy and Megan Woolhouse report: “Companies oftentimes fail to pay even small sums. [AG Maura] Healey’s office has collected just one-third of the $1.7 million in violations since January 2015, [amounting to] $580,234. The bulk of the rest is under appeal or past due.”172 Although the orders to pay back wages and fines are an important first step, they are only meaningful to the workers and a deterrent to future actions when the payments are made.
No serious effort at restoring fairness and integrity in residential construction is possible without the regulation of labor brokers. Even when developers and contractors are held responsible for what happens on the jobsites, the continued reliance on labor brokers will make it more likely that there will continue to be an underground economy, abuse, exploitation, and wage theft. The use of labor brokers is not only an issue in residential construction. The use of labor brokers has exploded in the United States and around the world; as these factors become central to employment in a number of industries there has been widespread calls to both license and regulate their activities.173
The Commonwealth of Massachusetts needs to establish a system for both licensing and regulating labor brokers. The licensing process should begin with all firms registering with the Secretary of State, as we expect firms from other industries in the Commonwealth to do. Second, there needs to be a Bill of Rights for those who utilize labor brokers. This could be based upon the rights of temporary workers in Massachusetts, which has already been established in the Commonwealth.174 As part of this process, there would need to be a mechanism by which labor brokers who violate these rights would be banned for some period of time from reentering the marketplace.
Finally, licensure and oversight of labor brokers must prohibit the use of cash payments. As we have seen, it is far too easy (and common) in the cash world for a company to avoid paying taxes and engage in wage theft. As long as cash is allowed in the construction industry it will continue to be a subterfuge for illegal activity.