Undocumented and unprotected

On a commercial construction project in Hanover, a worker from Ecuador reached down from a ladder to shake the hand of a union organizer and discuss his presence on a job site a continent away from home. The Ecuadoran -- a recent hire at the Village Square strip mall work site -- said he crossed the border this year to look for work in the United States. Guided by friends, he found it in the construction boom south of Boston, working for $11 an hour for 10 hours a day. He is paid in cash and considered an independent contractor.

Other carpenters working with him from countries such as Brazil and Mexico have similar arrangements, and travel daily to Hanover from living quarters in Fall River, according to Mario Majia , a representative of the New England Regional Council of Carpenters .

The undocumented workers are part of an underground economy fueled by fast-paced growth in the region. But this underground economy poses particular problems for both the workers and the Commonwealth's taxpayers.

Because the laborers' unidentified employer is classifying them -- in violation of state labor law, union officials say -- as independent contractors, they are not eligible for the benefits and safeguards available to regular employees. They are paid no overtime and are not eligible for health insurance or worker's compensation.

At the same time, the state and its taxpayers lose the withholding taxes that the employer would otherwise pay, as well as the employer's contribution to the unemployment insurance and worker's compensation funds. Lost, too, is any contribution to Social Security. Neither the Ecuadoran nor anyone else involved on the project could identify the subcontractor that hired them, and neither the project's developer nor its builder returned phone calls.

Attorney General Tom Reilly , in a written explanation two years ago of the state law governing employee classification, said employers who classify construction workers as independent contractors "unfairly reduce employees' state and federal tax withholding and related obligations." They deprive workers of benefits and disadvantage companies that comply with the law, Reilly said.

Undocumented workers are often afraid to complain. And many know nothing of the benefits they might otherwise enjoy.

At a construction site for luxury condominiums in Canton last month, two workers from Brazil said they were unfamiliar with the system of withholding taxes and government benefits common to American workers who receive W-2 forms from their employers. They, too, said they learned of the construction jobs from friends and get paid in cash as independent contractors. The men interviewed did not want to give their names for fear of being deported.

Contractors and developers typically favor subcontractors who keep costs down, and one way to do that is for the subcontractors to classify their workers as independent contractors.

Not all builders are guilty of violating the state's employee classification law, their representatives point out. "If someone cheats," said Greg Beeman, president of the Massachusetts Chapter of Associated Builders and Contractors , "it puts the legitimate companies who make up the vast majority of the industry at a great disadvantage." The rules governing independent contractors are confusing, he said, adding to the problem.

Although many undocumented workers from Mexico, Central America, and South America have been drawn to the construction trades, the issue is not immigration, said Mark Erlich, executive secretary of the carpenters' council. Unscrupulous employment practices have nothing to do with immigration, he said.

Exploitation of undocumented workers results in a spectrum of practices, he said, that includes paying cash which is not reported as income, paying workers no overtime, paying wage rates barely half industry standards, and violating child labor laws. "Our beef is with those kinds of practices," Erlich said. Treating construction workers as independent contractors should be prosecuted as tax and insurance fraud, he said.

Such concerns are not limited to union organizers. A 2004 study by researchers at the University of Massachusetts and Harvard University concluded that one in every seven construction workers was misclassified as an independent contractor. The researchers estimated that the illegal practice costs the state $7 million a year in worker's compensation premiums, $4 million a year in payroll taxes, and $4 million a year in unemployment insurance payments. Specialists say the costs to taxpayers have continued to climb.

"The trend line in our report shows it gets worse," said Elaine Bernard , one of the principal researchers for the study. Even if workers are carried on the books and sent 1099 forms by builders, it is up to the workers to report the income and pay taxes on it, she said. And with no Social Security, health insurance, pension, or worker's compensation, the costs of these workers' health problems and disabilities are borne by the public in the form of higher health insurance premiums.

While the problem is widely recognized, addressing it is another matter. Beeman , whose Massachusetts Chapter of Associated Builders and Contractors represents more than 475 general contractors and others in the building industry, said his members want to follow state law but are confused by language that appears to ban subcontractors.

Contractors are frustrated when they call industry groups to ask, "What's the story with this law?" and the groups are unable to give clear instructions to members, Beeman said. He said his board of directors recently declared that the law needs to be clarified but added, "It's also important that the law be followed."

He also said efforts to single out the construction industry's use of independent contractors ignore findings that the practice is equally, or even more, prevalent in other industries. And he worries that such practices in his industry hurt builders who play by the rules.

Beeman is not the only one with that concern. Bernard, co-author of the UMass and Harvard study, makes the same point in a slightly different way. "It's not a victimless crime," she said. "The victim is not just the worker; it's also the employers who play by the rules, who pay worker's compensation and Social Security because they are supposed to."

It's a tender subject within the industry.

On a visit to the Village Square construction site in Hanover -- which will soon be a 12,500-square-foot retail center on Route 53 -- the site supervisor told union representatives he had no idea who was the subcontractor who hired the Ecuadoran or any of the dozen other workers framing and roofing the second story of the commercial development.

Calls to the developer's Norwell office and voice messages left for the company president seeking comment on the employment status of the workers on the site were not returned. JVO Corp. , a Hanover builder, lists the Village Square on its website as one of its projects, but calls to its office for comment were not returned.

The story was similar at the site of the 60 -unit luxury condominium project in Canton, part of Blue Hill Commons off Washington Street. The subcontractor who hired the immigrant worker could not be identified. Paul Chouinard , the site superintendent for Pinncon of Braintree, the project's construction manager , said he had no involvement with the labor practices of the subcontractors .

"I'm the cook," Chouinard said, "but I don't do the shopping" -- an allusion to former Patriots coach Bill Parcells's dismissal of responsibility for his team's draft picks. Chouinard said few Pinncon employees were on the site.

Calls to Pinncon officials seeking comment on the employment status of workers on the Canton site were not returned. The project's website listed Vazza Co. of Canton as developer. Calls to officials there were not returned.

Union officials are concerned about worker safety. On a visit to a job site earlier this year, Majia said, he observed workers struggling to haul a heavy gable into position without a forklift, relying on a pulley arrangement instead. Federal Occupational Safety and Health Administration officials later intervened to enforce safety rules, he said.

Steve Joyce, a spokesman for the carpenters council, said enforcement of employment rules on construction sites is a slow and frustrating process. Often jobs are finished before complaints are investigated or prosecuted, he said.

The council backed a legislative proposal this year to add 12 inspectors to the attorney general's office to investigate violations, contending that the money recouped by the state in taxes and insurance payments would far surpass the cost. But the proposal failed to get funding.

A spokeswoman for the attorney general, Meredith Baumann, said the office's fair labor and business practices division has amassed "impressive numbers" in enforcing fair labor laws. Last year the office heard 67,000 calls on its hot line, received 4,500 formal complaints, and brought workers $2.3 million in restitution.

No complaints have been received about employment practices at the Village Square and Blue Hill Commons work sites, Baumann said.

Baumann said the office's 20 inspectors depend on workers and other members of the public who witness abuses to report them.

Robert Knox can be contacted at rc.knox@gmail.com.

Figures
A 2004 study by researchers at the University of Massachusetts and Harvard University concluded that one in every seven construction workers was misclassified as an independent contractor and estimated that the illegal practice cost the state $7 million a year in worker compensation premiums, $4 million a year in payroll taxes, and $4 million a year in unemployment insurance payments.

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