Watchdog Group: Wage Exploitation Of Construction Workers Threatens Housing Supply

Almost half of the families of construction workers in California are enrolled in public safety net programs that cost the public more than $3B annually, according to a recent study from the University of California, Berkeley Labor Center. The center said this is due to the many construction workers in the state who lack full employee status, are paid under the table and don't have insurance through their work.

While troubling, those findings weren't surprising to David Kersh, executive director of the California-based Carpenters/Contractors Cooperation Committee, known as Quad C. Kersh said that many of these low-paid workers are involved in the construction of desperately needed new housing.

“All levels of government are directing their attention to our state’s housing needs, but the challenges faced by the workforce that builds the housing is of critical importance too,” he said. 

Left unaddressed, Kersh said, wage theft and unlawful business practices could threaten the state's ability to keep up with demand for new housing.

Quad C is a nonprofit organization that was founded more than 30 years ago to work with local, state and federal civil and criminal law enforcement agencies to crack down on unlawful business practices in the construction industry. 

The group’s goal, according to Kersh, is to promote compliance and ensure that responsible contractors are hired for projects. Bisnow spoke with Kersh to learn more about construction workers’ wage issues and what Quad C is doing to help.  

Bisnow: What is the connection between new housing and workers’ wages?

Kersh: There is no way to build hundreds of thousands of housing units without investing in and promoting a skilled and trained workforce. It is crucial the jobs created are solid, middle-class careers and not ones with poverty wages and wage theft business practices. 

Why would young men and women want to get into a trade where they look around and see people getting cheated or paid low wages? We are doing our part to support a dignified workplace with good wages, respect and lawful, responsible practices.

Bisnow: How did we get to this point?

Kersh: Over the years, the single-family tract home, multifamily and affordable housing sectors of the construction industry have become hubs for wage theft, underground economy practices, unskilled labor practices and poverty wages. We come across daily examples of worker exploitation and its emotional and financial toll on the lives of workers and their families. 

At the same time, we see honest, law-abiding contractors trying to play by the rules and unable to compete for projects against law-breakers. Ultimately, this creates a downward cycle that threatens the vitality of the construction industry and the critical role it plays in the larger economy. 

Bisnow: What do some of these questionable business practices look like?

Kersh: Two factors stand out: the use of a piece-rate system and labor traffickers used primarily by drywall and framing subcontractors. 

In the housing sector, piece rate is a pay system in which a worker is paid for a unit of production at a set rate, usually by square foot or the number of dwelling units, rather than an hourly rate. Unscrupulous contractors or labor brokers set the piece rate so low that, just to make ends meet, workers must work long hours daily and on weekends. With limited supervision, high production pressures and lax or falsified record-keeping, this opens up the door to rampant labor violations, wage theft, tax and insurance fraud, as well as serious safety concerns. 

Regarding drywall and framing work, the process enables illegal labor traffickers to proliferate and spread a culture of exploitation and widespread civil and criminal practices as they move workers from project to project and county to county. Piece-rate workers must often share and divide checks among themselves, pay labor traffickers a kickback and hope that when they get to the bank, their paycheck doesn’t bounce. 

Bisnow: What is Quad C doing to address these issues?  

Kersh: In the last four years, our compliance activities have resulted in more than $20M in citations issued by enforcement agencies against concrete, framing and drywall subcontractors for labor violations. In Southern California, we are currently monitoring more than a thousand projects, including those in the housing sector where piece-rate practices are common. The subcontractors on these jobs work for all the major homebuilders, developers and general contractors, which profit from these problematic piece-rate practices. 

Almost all of our active cases with civil and criminal law enforcement agencies involve unlawful business practices linked to the large piece-rate workforce. The same is true for many of the Private Attorneys General Act cases listed on the California Department of Industrial Relations website involving framing and drywall subcontractors in the housing sector filed by different legal firms on behalf of construction workers. 

Without strategies for cleaning up the industry, cracking down on cheaters, supporting honest contractors and promoting a skilled and trained workforce, we will not be able to realistically address our housing needs.  

This article was produced in collaboration between Studio B and the Carpenters/Contractors Cooperation Committee. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.