Cash Pay Schemes Spreading

Florida is not the only state seeing check cashers and contractors conspiring to pay workers off-the-books. A bar owner in the Bronx and a pawn shop owner in New Jersey were arrested after a Port Authority and Manhattan DA investigation into contractors underreporting payroll. Contractors’ workers were paid in cash to evade paying taxes and workers’ compensation premiums. The defendants are accused of cashing almost $17 million in checks for 19 businesses from 2012 to 2014.

According to court papers, a contractor brought a $149,250 check to the bar and received $141,787. The check was then brought to the pawn shop where it was deposited for $147,011 in cash which was brought back to the bar.

USDOL Issues Guidance on Joint Employment

One of the primary schemes of corrupt contractors is using subcontractors and labor brokers that pay employees off-the-books or as 1099 subcontractors to evade paying employment taxes, workers’ compensation premiums, overtime and wages. When faced with law enforcement, corrupt contractors use that subcontract relationship as a shield against accountability. But when looked at closely, the contractor often times acts like an employer of the workers just as much as the subcontractors or labor brokers. It is a growing trend and construction is not the only industry facing the problem.

In response, the US Department of Labor issued an Administrative Interpretation (AI) of joint employment under the Fair Labor Standards Act (FLSA). Joint employment under the FLSA makes the contractor and subcontractor or labor broker separately and jointly liable for unpaid wages and overtime if the contractor is also acting as an employer of the workforce. The AI does not change the law, it provided guidance on existing law and gives notice to employers that the USDOL will use joint-employment findings more often.

Dr. David Weil, Administrator of the USDOL Wage & Hour Divisions wrote, “As the workplace continues to fissure, and as the employment relationships continue to become more tenuous and murky, we will continue to identify where joint employment applies and hold all employers responsible.”

In a press release supporting the USDOL’s action, General President Doug McCarron said, “This action by the Labor Department lets cheating contractors know that they can’t continue to hide behind their labor broker subcontracts.”

Construction Co. Owners Face Racketeering Charges in Florida

Gaetan Richard and Murray Rice were arrested this month on numerous charges, including racketeering, related to workers’ compensation fraud. According to state records, they have two active construction businesses: Richard and Rice Construction LLC and Richard & Rice Construction Co., Inc. Four other co-defendants were also arrested.

The alleged criminal scheme involved paying workers through over twenty shell companies. Over the course of about two years, Richard and Rice paid the shell companies nearly $40 million. According to an affidavit from the investigating detective, more that $12 million in workers’ compensation premiums and over $3 million in federal payroll taxes went unpaid.

If convicted, they could face 30 years in prison.

Today: UBC Meets the Challenge

Initially, many of unions were taken by surprise by the non-union sector’s developing economic clout. In the absence of a comprehensive counter-strategy, a number of locals and district councils adopted wage concessions in order to stay competitive with the non-union sector. Non-union employers effectively undercut that tactic by simply driving their own pay rates down further. At the same time, the ABC grew in political sophistication and became one of the linchpins of the “New Right” that propelled Ronald Reagan to the presidency in 1980.

“Our organization was set up to deal with the industry as it was in post-World War II North America,” said UBC General President Doug McCarron when he was elected in 1995. “But the industry has changed drastically since then, and we must change with it.”
Since his election, McCarron has reorganized the Brotherhood’s priorities and its structure. He set organizing as the union’s number one priority and has redirected its resources to get that job done. The union’s localized and often politically-motivated structure has also been restructured and streamlined to reflect today’s regional and national construction industry, as well as to ensure that union leaders are more accountable to members for the job they do.

The ultimate goal of these structural changes is to organize and reorganize every carpenter and contractor in North America and set the standard for wages, benefits, and working conditions on every jobsite. It is an ambitious goal, and one that will take a long-term effort to complete. But it can be done through organizing.

The UBC faces a complex and challenging future. New tools and materials and new methods of construction are entering the industry at an accelerated rate. In many ways, the carpenter of the 1990s is no different from the carpenter of the 1880s. But all indications are that the dawn of the 21st century will bring much more rapid technological innovation. Increasingly, the on-site carpenter is more an “installer” than a “fabricator” with the development of prefabricated materials, modular components, and panellized building sections. The multi-faceted general contractor is giving way to the construction manager whose subcontractors expect their carpenters to restrict their skills to more highly specialized tasks, such as concrete forms, framing, drywall, ceilings, finish work, etc. Union apprenticeship and journeyman-enhancement training programs have addressed these new developments while at the same time maintained a high level of all-around craft competence that union journeymen will always need.

Ultimately, maintaining and extending a strong union for carpenters will depend on combining an awareness of the dynamics of the future with the finest traditions of the past. The days of “country club” unionism that provided job security to members by keeping membership numbers down and the unorganized out are over. The UBC’s growth in the future rests on its ability to reach out and open its doors to all working carpenters.

Just as Peter J. McGuire built the Carpenters Union in the 19th century by organizing all carpenters, today’s leaders must rebuild this union in the 21st century in much the same way. They must embody that same spirit of inclusion in order to organize the unorganized and mobilize current union members to talk to their non-union brothers.

In 1882, W.F. Eberhardt of Philadelphia’s UBC Local 8 (which remains strong to this day), wrote a letter to the Carpenter. He outlined the efforts of his local’s members to contact every single carpenter in the city on a ward-by-ward basis. He described how those pioneering volunteer carpenter-organizers held regular meetings across the city to bring the unorganized carpenters into the new union. Today, more than 116 years later, the Brotherhood is using a “new” model much like the outlined by Eberhardt. Every district, council, and local in the union currently boasts an active volunteer organizing committee that uses today’s modern techniques and technologies, as well as old-fashioned one-on-one contact, to spread the still-relevant message of unionism to every non-union carpenter in their area. The American workforce may look different today–more multi-cultural, multi-racial, and multi-lingual. But the underlying principle of organizing all the men and women who make their living at the carpentry trade is exactly the same as it was in 1881, when 36 carpenters met in Chicago to improve their lives, their futures, and their trade.

Photo source: FreeImages.comGeorgeBosela

Prosperity, Complacency and Trouble

Local unions took advantage of the favorable conditions to expand into new areas of collective bargaining. In 1950, for example, the New York District Council of Carpenters negotiated a 3% payroll tax to support a Carpenters Welfare Fund. The idea of health and welfare funds became so attractive that the national office’s Health and Welfare Committee, appointed in 1954, urged all locals to set up programs as quickly as possible. Jointly trusteed pension funds soon followed, as well as other contract gains, such as safety measures, travel time, and coffee breaks.

The accomplishments of this period brought additional stability into the lives of working carpenters and their families. Unfortunately, the extended boom and success in the bargaining arena also bred a measure of complacency within the unions. With nearly full employment becoming routine, business agents often reduced their roles to those of office administration, job referrals, and contract negotiations. Traditional tasks such as organizing the unorganized and membership education fell by the wayside. Furthermore, many union leaders and rank-and-file members, terrified by the nightmare of the Great Depression, were convinced that job security depended on limiting the number of union members in order to minimize competition for a finite number of jobs.

The post-war construction boom, however, outpaced the unions’ ability to satisfy all the labor requirements. As a result, a significant number of non-union contractors began to appear on the fringes of the industry, particularly in suburban and rural homebuilding. Many unionists remained unconcerned about the potential threat of these newcomers since work was plentiful in the growing commercial and industrial construction sectors. Compared to the physical demands and the short life span of house construction, employment was more stable and of longer duration on large-scale projects. Ignoring the emerging non-union workforce came at a cost, however. While union trades workers continued to build 80% of all construction in the U.S. As late as 1969, the reliance on bigger projects and a limited membership allowed the non-union employers to win a foothold in the industry.

The 1970s began a new and more difficult era. The face of labor relations in construction has been completely transformed in the last 20 years. While the Carpenters Union and other building trades unions have always had to contend with hostile governmental interference and economic insecurity, they still successfully established unionism as a widely accepted force in the industry by the turn of the century. Since 1970 however, the rapid rise of the open shop has upset the long-standing collective bargaining equilibrium in construction. Modern anti-union advocates have been able to accomplish much more than their predecessors did. Today, just 30-35% of the construction dollar in the U.S. involves union workers.

The roots of this transformation can be found in the spiraling costs of the late 1960s. Escalating materials and labor prices set off alarms in the ranks of building owners, management consultants, corporate journalists, and public policy makers. In 1969, 200 of the nation’s top executives formed the Business Roundtable in order to put a lid on construction bills. The Roundtable, made up of the heads of General Motors, General Electric, Exxon, U.S. Steel, Du Pont, among others, concluded that the route to financial control over capital construction costs lay in blunting the power of the building trades unions.
The Roundtable built political support to weaken legislation, such as the Davis-Bacon Act, that protects construction workers’ wages. It laid out a collective-bargaining agenda to eliminate union gains. Finally, many of its members sponsored and subsidized non-union contractors on their own projects. The Roundtable’s efforts combined with the severe building recession of the mid-1970s and an increasingly anti-labor political climate in the United States to provide a generous window of opportunity for the open-shop movement.

Non-union builders, gathered under the umbrella of the Associated Builders and Contractors (ABC), took advantage of these opportunities. Today, construction in the U.S. is no longer dominated by union contractors. Open-shop and/or double-breasted firms now participate in and even control many major construction markets. Their mission is clear. They reduce wages, weaken established safety and working conditions, and change the way work is carried out on the jobsite. They seek to replace the traditional egalitarian apprentice/journeyman system with the co-called “merit shop” philosophy in which workers are pitted against one another and have no real shot at quality training or a decent lifelong career in the trades.

Decline and Recovery

The American Plan of the 1920s challenged the status of unions in the United States, but the Great Depression of the 1930s threatened the very existence of working people. The stock market crash in 1929 was a signal to the world that the economy was in crisis. In the months that followed unemployment rose at the astonishing rate of 4,000 workers a week.

As always, the construction industry served as an advance indicator of general economic conditions. In many parts of the country, the depression started for carpenters in the midst of the “Roaring Twenties.” By 1928, many local unions were issuing “stay away” warnings to travelling carpenters. Conditions only worsened, however. Total construction in the United States amounted to $20.8 million in 1929; four years later it reached just $6.6 million. Membership ultimately dropped to a low 242,000 in 1932 and fully 40% of those members were unable to pay their dues. By the next year, the Carpenter reported that less than 30% of the union’s ranks were employed as carpenters.

The pain of unemployment was devastating. The incidence of alcoholism, divorce, emotional depression, and suicide soared during the early 1930s. Proud carpenters, whose sense of self-worth was wrapped up in their craft and their ability to make a living as independent tradesmen, were unable to put bread on the family table. Local unions tried a variety of ways to ease the pain–lowering dues payments, negotiating for 24- or 30-hour work weeks, forbidding overtime, and instituting job-sharing programs. But all of these attempts were little more than bandaids on a fundamentally crippled industry.

Some union leaders on the local level looked to political action as a solution to their problems. A number of locals called for an independent Labor party as an alternative to the Republican and Democratic political parties. In 1932, the Chicago Carpenters District Council urged the UBC national leadership to lead the fight for an unemployment insurance system. Hutcheson was wary of such activities. His mistrust of governmental intervention in the collective bargaining process, fueled by his experiences during World War I, made him reluctant to support an activist agenda by the federal government. While Hutcheson ultimately accepted the idea of unemployment insurance, he unsuccessfully opposed the AFL’s endorsement of a minimum-wage bill in 1937. As late as 1940, after eight years of popular New Deal legislation, Hutcheson maintained his opposition to extensive federal involvement. “Labor,” said Hutcheson, “has known that what government gives, government can take away.”

Rank-and-file carpenters and local leaders had less difficulty welcoming the New Deal programs. Like Hutcheson, unemployed carpenters were not advocating welfare or relief. But they did want jobs. They eagerly greeted Roosevelt’s alphabet soup of public works agencies (PWA, CWA, CCC, and WPA) instituted to help revive the ailing economy. Initially, conflicts arose between federal desires to put people to work at any price and union commitments to maintaining a decent wage. By 1936, however, federal and union policies coincided to enable skilled tradesmen to move into their customary roles.

New Deal initiatives created jobs for millions of Americas but they did not end the Depression. In fact, almost 9.5 million people were still out of work in 1939. Only the monumental task of preparing for entry into World War II was finally able to generate enough work to eliminate the suffering of the jobless. The war-driven building demand and the general post-war prosperity finally provided American carpenters with reasonable opportunities and greater financial security.

The wages of union carpenters rose 15% between 1945 and 1949, 30% through the 1950s, and 72% during the 1960s. While inflation ate away at some of those gains, by and large the quarter-century following World War II proved to be the longest period of sustained improvement in the standard of living of American workers. The nation’s labor organizations reflected this growth, representing nearly one-third of the workforce. The UBC reached its peak membership of 850,000 in 1958 and again in 1973.

Photo source: FreeImages.comChadGore

Beating the Open Shop, The Early 1900s: Part 2

Read Part 1 in case you missed it.

The basic mission of the union–protecting carpenters’ rights on the job–remained the same. With the onset of World War I, the union faced a new challenge. Wartime needs for temporary military housing, shipbuilding, and ammunition factories pushed the federal government into a massive construction spending program. When President Woodrow Wilson allowed open shop contractors on federal construction sites, Hutcheson refused to participate in the government’s oversight boards. “While we have every desire to assist the government in the crisis we are now passing through,” he said, “we have no intention of waiving our rights to maintain for ourselves the conditions we have established.”

Despite extraordinary pressures, the union leadership held firm. On November 7, 1917, 1,300 building trades workers in eastern Massachusetts participated in a general strike on all military work in the area to protest the use of open-shop builders. The strike persisted in the face of threats from the U.S. War Department. Influential preacher Billy Sunday whipped anti-union hysteria to a higher plane, invoking the name of God to denounce Hutcheson’s treason. While that strike was settled within a week, the larger issue remained unresolved until April, 1918 when the federal government approved a new system that guaranteed closed shops in those areas that had them before the war.

Hutcheson’s firmness preserved union standards for carpenters. As the war became a memory, attacks on the patriotism of unionists gave way to a closer examination and subsequent recognition of wartime profiteering by employers. Secretary of War Newton Baker (who had been a vocal critic of the UBC) confirmed many unionists’ suspicions when he admitted that labor had been “more willing to keep in step that capital.”

Peace brought a new and different kind of battle. Employer associations of all kinds initiated a furious assault on union labor under the label of the “American Plan.” Building employers, supported by large industrialists and local Chambers of Commerce, pitched in. They took on construction unions in Detroit, Los Angeles, Milwaukee, Minneapolis, Philadelphia, Salt Lake City, and Seattle.

Contractors in Chicago insisted on a wage cut in January 1921 and locked out workers after the unions rejected their demand. In June, all the crafts except the Carpenters and Painters agreed to submit the dispute to arbitration by federal judge Kenesaw Landis. The judge’s drastic decision slashed wages beyond the initial contractor proposals and weakened long-standing union work rules. The UBC refused to recognize the judgment and let the fight against the “Citizens Committee to Enforce the Landis Award” for five years until union shop conditions finally returned to Chicago.

In San Francisco, the Industrial Association broke the 20-year reign of one of the country’s mightiest union shops in the building trades. Financed to the tune of $1.25 million and in control of the building materials’ suppliers, the Builders’ Exchange refused to call off a lockout even after the city’s Building Trades Council meekly accepted the contractors’ original wage cut demand. Determined to crush the unions, the employers of San Francisco settled for nothing less than open shop and an end to mandatory collective bargaining in the building industry.

While the American Plan did take its toll, the San Francisco experience was unusually severe. The Brotherhood survived the 1920s. The number of union carpenters declined from 400,000 in 1920 to 345,000 in 1928, but this drop in membership compared favorably to the losses of other labor unions in the prevailing anti-labor climate. Wages in the building trades actually rose by roughly five percent a year. The fury of the anti-union campaigns subsided by the end of the decade.

Beating the Open Shop, The Early 1900s: Part 1

During the twenty-one years of McGuire’s stewardship, the UBC succeeded in setting union standards for most carpenters on most construction sites in the U.S. The struggle to achieve these goals was long and difficult. Building contractors used all the tools that employers have typically adopted to drive away unionism—strikebreakers, blacklisting, yellow-dog contracts, and violence. Long after the UBC had established a firm foothold in the industry, contractor associations continued to attempt to undermine the union’s power.

In the first decade of the 20th century, an aggressive nation-wide open-shop attack was mounted against the carpenters’ union. Employers locked out union carpenters in Chicago, New York, Pittsburgh, Louisville, Houston, Milwaukee, and a number of other cities. Frank Duffy, the General Secretary who succeeded McGuire, wrote in a 1904 issue of the Carpenter that building employers had “organized, combined and affiliated with one another, with the avowed purpose and firm determination of putting our local unions out of existence altogether.”

Yet, despite the bitterness of the conflict, the peculiar characteristics of the construction industry made organizing turn-of-the-century carpenters a possibility at a time when many other sectors of the workforce were unable to break through the barriers of anti-unionism.

In 1900, as the Brotherhood was rapidly expanding, no more than 6 percent of the manufacturing workforce was organized—and that group consisted almost exclusively of the small number of highly skilled operatives whose craft had not been diminished by the factory system. The difference between the organizing potential of factory vs. building trades workers is illustrated by the comments of employers in each field. In an era when a U.S. Steel executive could boast: “I have always had one rule–if a workman sticks up his head, hit it.” Otto Eidlitz, one of the nation’s most powerful builders, proclaimed, “It is without question not only the right but the duty of labor to thoroughly organize itself and it. . . is a power of good in the trade.”

The differences in viewpoints were not due to the benevolence of construction employers. Rather, the economics of the industry encouraged fair-minded builders to reach an accommodation with the unions. Short on capital and dependent on monthly progress payments, small and medium-sized contractors were unable to stockpile resources to withstand the financial strain of a long strike. Furthermore, the highly skilled nature of the work made it difficult for anti-union employers to quickly replace competent carpenters with capable strikebreakers. As a result, builders who were faced with the power of a militant and popular union ultimately chose to forego endless battles and instead accepted agreements with local unions.

Additionally, many building employers recognized the potential benefits that unions could provide in terms of apprenticeship training and hiring hall. In a highly volatile industry with boom-and-bust cycles, employers had difficulty making long-range plans with regard to labor requirements. To the extent that unions willingly accepted the responsibility of training and supplying labor, contractors were relieved of a difficult burden. From their perspective, the positive role of the unions often outweighed the added costs of union recognition and above-average wages in the construction field.

The conditions in the industry thus laid the groundwork for McGuire’s brand of democratic and activist unionism to flourish in the late 1800s and early 1900s. Despite the intensive efforts of open shop employers, membership in the Carpenters’ Union reached 200,000 by 1910. A union card became as crucial to a self-respecting carpenter as a complete set of tools. For those who knew the industry, it was a matter of common wisdom that, “the craftsman without a card is a man without a trade.”

McGuire’s successors–Frank Duffy and William Hutcheson (who, as General President, presided over the Brotherhood from 1915 to 1951)–altered the union’s orientation. Less intent on carrying out McGuire’s motto of “organize, agitate, educate,” they emphasized the smooth administration of the union operation.

Less interested in McGuire’s philosophies of social change, the UBC under Hutcheson took on a more conservative political cast. More skeptical of broad working-class movements, Hutcheson’s Brotherhood staked out a tougher position in a relation to other labor unions in and out of the building trades. Conflicts over jurisdictional assignments became one of the primary methods of extending working carpenters’ interests.

Read more in Part 2

Founding A National Union

The Chicago convention was the brainchild of Peter J. McGuire, a 29-year-old carpenter who was to become one of the great labor leaders of the 19th century. A product of the tenements of New York City’s lower East Side, McGuire decided to devote his life to the cause of labor at an early age.

McGuire recognized that the turmoil in the construction industry made conditions ripe for the organization of carpenters. If the carpenter’s trade was under attack, there was only one appropriate response—protect and defend the trade through the collective action of its members. The delegates who gathered in Chicago acknowledged his leadership as a crucial element of the union’s potential for success. While they could not resolve all the debates over the issue raised at the convention, there was no disagreement over who would fill the one full-time position. McGuire was unanimously elected to the post of General Secretary.

The union grew gradually, from a membership of 2,042 in 1881 to 5,789 in 1885. Some cities were well organized while others remained entirely non-union. McGuire worked 18 hours a day to keep the union alive. However, in 1882, both McGuire and the union were penniless. McGuire was forced to borrow $30 from a friend just to print “Carpenter”, the union’s official monthly. McGuire, writing to Gabriel Edmonston, the first UBC General President, for advice and support, vowed to devote his life and wages to keeping the union alive. “I will work at my trade, give up my salary, and kill myself at night to keep things going, if necessary.”

McGuire’s sacrifices eased as the fortunes of the UBC rose with escalating militancy of the American workforce in the 1880s. A general strike initiated and led by the carpenters’ union for the eight-hour work day on May 1, 1886, began what proved to be one of the key political events of 1886, a year that historians refer to as “the great uprising of labor.”

During the spring, McGuire temporarily suspended the regular business of the UBC as he criss-crossed the country speaking to countless audiences about the shorter hours movement. His efforts paid handsome dividends. More than 340,000 workers demonstrated for the reduced working day on May 1. In almost every city, carpenters led striking marchers. As a result, union carpenters won higher wages and/or decreased hours in 53 cities in 1886. Unorganized carpenters flocked to the activist organization as the Brotherhood’s membership swelled to 21,423 by the end of the summer.

The militancy of American workers in 1886 stunned the business world and surprised cautious labor leaders. The hundreds of rallies, walkouts, and strikes demonstrated the appeal of the eight-hour day and prompted the American Federation of Labor to plan a follow-up series of actions for May 1, 1890, under the banner of the nation’s single most effective labor organization. The AFL selected the Carpenters Union because, in the words of President Samuel Gompers, it was the “best disciplined, prepared and determined” force in the labor movement. The UBC lived up to its reputation. As part of a massive national and international effort in 1890, over 23,000 American carpenters in 36 cities won the eight-hour day and 32,000 more gained a nine-hour workday. At the end of the campaign, McGuire was able to describe the 55,000-member UBC as “the largest and most powerful organization, numerically, of any special trade in the whole civilized world.”

A carpenter’s average wage at the time of the union’s birth was $2 a day. Twenty years later it had doubled, and it was as high as $5 in the larger cities. By 1903, union membership had climbed to 167,200. Four years later, eight hours was the standard length of the carpenter’s work day across the country, at a time when ten- and twelve-hour days were still common in many other industries.

Success rarely comes without cost, however. And McGuire’s years of maintaining a grinding schedule took their toll. By the turn of the century, his body was wracked with disease. McGuire resigned at the union’s 1902 convention, looking considerably older than his 50 years. The now-frail leader told the assembled delegates that he could not and would not continue as their leader. “A man wears out like a piece of machinery,” he concluded. The man who founded the Brotherhood and presided over its meteoric growth died four years later at his home in Camden, New Jersey.

McCrory orders new effort to crack down on cheating businesses

Gov. Pat McCrory of North Carolina signed an executive order directing state officials to find and penalize employers committing payroll fraud. The EO comes after a News & Observer series detailed the rampant problem and the failure of the legislature to pass anti-payroll fraud bills. Payroll fraud costs North Carolina and the federal government $467 million a year in lost revenue.

“When unethical employers improperly classify their employees as independent contractors, they not only put our state’s workforce at risk, but also put ethical businesses at a competitive disadvantage and rob taxpayers of significant revenues,” McCrory said.

Photo credit: The News & Observer
Source: The News & Observer