We need new tools to deal with epidemic of wage theft

What happened in Amherst should never happen again

MASSACHUSETTS NEEDS new legislation to curb wage theft because what happened in Amherst should have never happened and should never happen again. Nine undocumented Hondurans worked 10 hours a day, six days a week for five weeks in a row hanging sheetrock in a new apartment complex in Amherst. Collectively they were owed $50,173 for their labor – but they did not receive one penny in wages.

How could this happen in my community? I drive by this complex on my way to work. The buildings looked so beautiful as they emerged at the building site. But what was happening inside? Don’t we have laws to prohibit this kind of exploitation of these vulnerable workers?

Wage theft takes many forms. It happens when tips are skimmed at a restaurant, when employers fail to pay for prep time before the official beginning of a shift, not paying time and a half for overtime hours, or when an employer does not pay the wages that are owed to workers for a job that they perform. This example from Amherst reveals how commonplace wage theft has become in Massachusetts, even at major employers who should know better, and why we need new legislation to stop it.

These workers in Amherst were building the North Square Apartments for the socially conscious Beacon Properties – which touts its commitment to affordable housing. With several moderate-income units, Beacon would receive over $2.5 million in tax breaks from the town of Amherst for this development.

Despite Beacon’s commitment to building affordable housing, their progressive social values did not guide the way the development was built. They relied on multiple subcontractors who used undocumented workers who were illegally misclassified as independent contractors. This allowed them to defraud the state by not paying taxes, unemployment insurance, and workers compensation.

Our recent study that examined the records of the Commonwealth found that more than one in six employees in construction are illegally misclassified, and that this costs Massachusetts as much as $82 million annually. And paying workers in cash as independent contractors has created a hothouse for wage theft, as we saw in Amherst.

Beacon Properties hired Keith Construction as the general contractor, which awarded Combat Drywall the contract to hang the sheet rock. Combat, however, has no employees to perform the work and subcontracted the work to Alvarez Drywall.

Alvarez is not registered with the secretary of state in Massachusetts as a business, has no website, no phone number, no real company identity. In fact, Alvarez is not a drywall company. It is simply a labor broker that brought undocumented workers to the job to work as “independent contractors” under Combat supervision. They were not employees and Alvarez would pay them in cash – or Alvarez was supposed to.

Week after week Alvarez promised to pay, but after five weeks of grueling work without a paycheck, several workers reached out to Frank Gomez, an organizer with North Atlantic States Regional Council of Carpenters. Gomez had helped other workers to get back wages from Combat, which he calls “a repeat offender.”

Beacon’s president, Joshua Cohen, was aware of this situation but refused to intervene. Unable to negotiate with Alvarez, on July 28, 2019, Gomez filed a wage complaint with the Massachusetts attorney general’s office on behalf of the Combat workers.

It took 10 months for the attorney general’s office to act on this case, but they issued citations to both Combat and Alvarez. Meanwhile, workers had to borrow money from family and friends. One worker told me how he had to ask for money back that he had sent to family in Honduras. Others borrowed from loan sharks.

However, the attorney general only awarded the nine Combat workers $23,977.85—less than one-half of what they were owed for the work they performed. These were the lucky workers who were fortunate to have the Carpenters Union advocate for them. What about the tens of thousands of undocumented workers in the Commonwealth who have no one to speak for them? Even though the attorney general acted in this case, the situation illustrates just how broken our regulatory structure is and why we need new wage theft legislation.

The civil penalties assessed against the firms were minuscule. A $2,000 penalty for Combat was little more than a slap on the hand, and the $17,500 the attorney general’s office assessed Alvarez can be more than covered by the money stolen from workers for a week’s work. There is no way that penalties of this amount would deter these employers from engaging in wage theft again. Frankly, it amounts to a license to steal.

More importantly, under current law, neither Keith Construction nor Beacon Communities could be held responsible for the illegal and immoral activity of their subcontractors, even though they financially benefit from it.

After I issued my first report on wage theft in Amherst, the Daily Hampshire Gazette reported that Beacon had a change of heart. “We are prepared to make up the difference in workers’ wages,” Cohen said. While the workers were pleased to receive what is rightfully owed them, it shouldn’t take bad publicity to shame a lead contractor or developer to do the right thing and it should not take so long to get justice. This is why we need new wage theft legislation.

Massachusetts is not the only state moving to prevent this epidemic in wage theft. California passed comprehensive wage theft legislation in 2021 and New York just passed a major wage theft bill for construction.

In both those states, the lead contractor, Keith Construction, would have been held responsible for what was happening on their job site and workers’ wages would have been paid promptly. This would also be the case if the proposed House Bill 1959 passes the Massachusetts Legislature and is signed into law by the governor.

There will be many in the business community who will support this legislation. They know that companies that regularly use wage theft to pad their pocketbooks undercut firms that play by the rules and this kind of illegal behavior is bad for competition.

In the past, some employers have opposed this kind of legislation because they fear that honest mistakes in payroll administration could have dire legal consequences. H1959 has a number of safeguards to prevent this kind of capriciousness.

For example, owners cannot be held responsible for wage theft of others if the work provided is outside the owners’ usual course of business. The legislation provides for a full week of notice before a stop work order is issued and goes into effect. And homeowners are excluded from the bill.

The right to be paid for the work we do in a timely fashion is perhaps our most basic employment right in Massachusetts. No worker in the Commonwealth should ever have to suffer what the workers at the North Square apartments had to go through. We need to hold employers and lead contractors responsible and stop this kind of wage theft with the passage of H1959.

Meet the Author

Tom Juravich

Professor of labor studies and sociology, UMass Amherst
We should all be able to drive or walk through our communities and not have to worry about what is taking place at building and construction sites. As I drive by the North Square Apartments on my way to work now, it stands as a monument to the mistakes that we made and how this can never happen again.

Tom Juravich is professor of labor studies and sociology at the University of Massachusetts Amherst. He is the author of The Social and Economic Costs of Illegal Misclassification, Wage Theft and Tax Fraud in Residential Construction in Massachusetts and Worker Misclassification and Wage Theft in Rhode Island.