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Learning from the Past, Looking Towards the Future

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This year both the United Brotherhood of Carpenters and Southwest Ohio’s own Local 2 celebrate their 140th birthday.  In 1880, carpenters in Cincinnati were making just $1.50 a day for their over ten-hour days.  The founding members realized their strength as a joint body was no match for “scabs” without a national union’s support.  During the formation of the UBC at the Chicago convention in 1881, Local 2 was granted a charter with the second most delegates in attendance – making it the longest continuous carpenters local charter in the UBC today.

 

Cincinnati was settled by a majority of German immigrants in the early-mid 1800s so every other meeting’s minutes were transcribed in both English and German language, according to Art Galea Junior. The former Local 2 President and former Southwest Ohio’s training center director spoke about what the history means to him, “it means quite a lot…some of the strife those guys went through made me really appreciate what we had.” “I appreciate it, I’ve been a member over 50 years…I’ve got a lot of memories.”

 

Art, one of seven in his family who would eventually join the Carpenter’s Union, started his apprenticeship program in 1968. Upon graduation he served in the Vietnam War, returned home, and led the apprenticeship program into where it’s at today. They transitioned from classes at the college to the hands-on facilities you see today.   He led the programs through several buildings until it landed in its current home.

 

Thanks to these advanced training centers, even one of the oldest unions can build projects with the newest technology. Multiple union contractors landed the project to install a state-of-the-art grid system for a Kroger Co. Fulfillment Center. Right in Monroe Ohio, UBC Millwrights installed a robotic vertical grid system in the 375,000 square feet facility. The first of its kind, the grid or “The Hive”, has over 1,000 robots flying through the air, up and down, to pick online grocery orders for deliveries up to 90 miles from the hub location. Up to 100 Millwrights were on the project at a time.

 

Growing Membership & Market Share in Warsaw

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The United Brotherhood of Carpenters was founded with the mission to stand strong with our members and business partners to help them achieve success. When it comes to focusing on this core goal, the Warsaw hub is thriving.

 

Not only has the Warsaw hub increased membership, they’ve also worked with contractors and increased manhours. They expect to see an additional seven percent increase in manhours in 2022.

 

To grow the Infection Control Risk Assessment (ICRA) market share in the area, the Warsaw team hosted ICRA Awareness trainings and signed a new ICRA partnership with Concord Community Schools. This adds an ICRA agreement to eight schools, ensuring that contractors who perform the work in schools are properly trained to control contaminants and students are protected during school construction.

 

To grow and protect market share in the area, the team has focused on increasing Responsible Bidder Ordinances and getting contractor licensing in place. They successfully signed an RBO in Gas City, Indiana and with Concord Community Schools, bringing the total RBOs in the area to nine, which includes four municipalities and five school corporations.

 

In another win for union members and contractors, the South Bend/Saint Joseph County Building Department has recently hired a compliance officer to visit job sites, inspect and gather information regarding licenses and permits, issue violation notices and follow up to ensure future compliance. The officer will also track and report results to the Building Commissioner, legal department and others to help with compliance issues. This new role will help protect workers and level the playing field for signatory contractors.

 

Finally, the Warsaw team has worked hard to develop the next generation of IKORCC members through strategic partnerships throughout the area. The team has worked with high school and 8th graders to promote our trades through Junior Achievement’s programs. In addition, they’ve continued to work with the Fort Wayne Boys and Girls Club on Project Blueprint. Project Blueprint exposes kids to careers in skilled trades. The idea is to show kids career options after high school other than the traditional four-year college pathway.

 

Four Questions Interview with Matthew Capece

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America is rife with complex plots by businesses to illegally dodge workers-comp premiums. The flourishing underground economy that exists in many urban centers adds more kindling to the fraud fire, especially in construction. FraudWire reached out to Matthew Capece, senior executive with the United Brotherhood of Carpenters, for his thoughts. He’s been a specialist in employer payroll fraud in construction since 1989.

Workers compensation insurers have long dealt with premium-avoidance schemes. Among the ploys are lowballing workforce size and payroll, and misclassifying employees as independent contractors. How prevalent are premium scams in construction trades, and are any variations unique to construction?

Workers-compensation premium scams involving construction projects are alarmingly commonplace. They regularly occur on residential projects. We even find them on large commercial sites, schools, hospitals, high-rise condos and government jobs like military bases. Fraud has become standard operating procedure in a number of states, including Colorado, Florida, Georgia and Tennessee. But it is happening all across the country.

The schemes vary in sophistication, but the growing practice is using subcontract labor brokers. For instance, interior-systems specialty subcontractors install metal studs, sheetrock and ceilings. They also provide supervision and, maybe, some hands-on labor.

The bulk of their labor comes from brokers. Yet the specialty subcontractor supervises and treats the labor brokers’ workers like their own employees. Labor brokers aren’t staffing companies; they are individuals who can muster a handful to hundreds of construction workers. They may have a business office, but much of the time they operate out of a residence. They can either be incorporated or be dba’s.

Labor brokers will misclassify employees as 1099 subcontractors, but most pay employees under the table in cash or with a check. Some labor brokers are uninsured and use fake certificates of insurance, but many have policies. The problem is they pay premiums on a fraction of their true payrolls. There is a case in Florida where an insurance broker issued 450 insurance certificates to a labor broker, claiming $43,000 in payroll for four workers. Sophisticated schemes like those in Florida involve insurance brokers, accountants, upper-tier contractors, shell companies and check-cashing stores.

These schemes work well for specialty subcontractors. They use the lower labor costs from the brokers to underbid law-abiding competitors, while brandishing the subcontract relationship with brokers and insurance certificate to shield against liability. That is how they drive full-premium-paying contractors out of business and take control of markets.

I am not as familiar with other industries as I am with construction. I do know that the labor-broker system grew from the agricultural industry. In general, the practice of subcontracting labor has been growing. Still, the various studies of fraudulent employment practices universally list construction as a leading abuser.

We know it’s hard to measure workers compensation fraud nationally. Still, do you have any sense of how big premium scheming is (including lost revenues), and how it compares to bogus work injury claims in overall size?

I haven’t found a national study on the degree of workers-compensation premium fraud in the construction industry, but there are state studies. In Tennessee, carriers lost $91.6 million in 2006 and in California they lost $264 million in 2011. We think those estimates are low. Consider the 2008 West Palm Beach, Florida Grand Jury report on illicit use of check-cashing stores. The report described how just 10 contractors moved $1 billion in cash pay through check cashers in less than three years. You can find these studies and reports on our informational website.

Claimant fraud is less costly than employer premium fraud. A California report, though, shows premium fraud losses to carriers are much greater than claimant fraud. Total fraud losses from cases with the Department of Insurance amounted to $8 million in the first six months of 2013. Of that, $6.7 million came from premium fraud and $1.3 million from false claims. Those numbers were not broken down by industry. It’s noteworthy that claimant fraudsters were more likely to get jailed than employers.

Carriers are losing a shocking amount of premiums. Still, despite the significant dollars lost, premium fraud doesn’t get the attention it should. If we could double the premium-fraud losses caught by California it would mean a yearly number of $13.4 million. That’s just 5 percent of the $264 million lost in the construction industry alone.

How are key states identifying premium schemes and strengthening laws or other enforcement tools to combat them?

A number of states are taking innovative actions against premium fraud. The California insurance department gives grants to county district attorneys to fund insurance fraud prosecutions.

Washington is a monopolistic state. It uses fraud-detection software that compares information in various databases to identify likely abusers for premium-fraud audits. Tennessee is a private-market state. It has just installed a similar system. The legislature funded the system and additional compliance investigators. They also added a law creating civil penalties for premium avoidance.

Florida has dedicated workers-compensation compliance prosecutors in select counties. They also have a new database that gets real-time information about checks cashed at check-cashing stores that they compare to proof-of-coverage information. Both Florida and Connecticut also have demonstrated that they aren’t afraid to use their stop-work-order authority.

States need robust tools for both civil and criminal enforcement. But they can’t just be used against labor brokers. Enforcement must reach all parties involved, including the specialty subcontractors and other upper-tier contractors involved in schemes. Labor brokers are abundant and easily replaced.

How can the anti-fraud community partner with your union to combat workers-comp premium scams?

Because we are a construction union, we know how the industry operates, and specific job-site conditions and cheating employers. We can share that information with carriers and enforcement agencies willing to act. We also welcome others to work with us to strengthen state and federal law- enforcement capabilities. They include union and non-union employers, carriers and community organizations.

But it can’t stop there. We each must examine our own practices that encourage, enable or fail to detect fraud. The construction industry must change course and stop awarding work to scofflaws. Insurance certificates need to be modified so insurers can track the number being issued, and insurance certificates should indicate the amount of payroll and work classifications. Also, insurers should re-evaluate their auditing procedures, and whether premiums truly capture the risk posed by contractors and subcontractors using the labor-broker system.

Also, educating stakeholders is a large part of what we do. For more information, follow us on Twitter @nixpayrollfraud and visit payrollfraud.net.

We are prepared to engage with fellow stakeholders. Action is needed. Contractors who pay their full premiums are being marginalized in significant markets. They face increasing pressure to join in illegal schemes or go out of business. Moreover, insurance carriers are losing millions in premiums daily.

Source: Fraud Wire
Photo: Fraud Wire

Allying with carpenters against workers-comp premium cheaters

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Workers-comp premium scams by employers may steal more money than bogus work injury claims. At least that’s what many experts say. And the problem could be growing. This is especially true in urban centers with deep underground economies.

Firms in the dangerous construction trades are among the largest offenders. The Coalition met recently with a new and unexpected anti-fraud ally: the United Brotherhood of Carpenters. It’s the voice of organized labor in the building trades. Premium-avoidance schemes leave workers exposed without state-required benefits. Federal, state and local governments also lose untold millions in unpaid taxes.

Shady businesses lowball their workforce and payroll size — two important factors in setting comp premiums. The firms misclassify workers as subcontractors, then pay them in cash under the table. A dishonest employer illegally can duck hundreds of thousands of dollars in workers-comp premiums and taxes in a year.

Workers also are cheated out of workers-comp benefits, wages, overtime, unemployment benefits and Social Security. Honest employers lose business because cheaters use the illicit savings to underbid them for contracts. And, workers comp insurers lose premiums.

The Coalition’s recent meeting with the carpenters union revealed disturbing examples of premium-avoidance schemes: A building at the University of Connecticut … Florida hospital … construction at the Atlanta airport … and a building at the Walter Reed military hospital complex in suburban Washington, D.C.

The carpenters’ proposals for comp insurers show how partnerships can help move anti-fraud efforts forward more decisively:

  • Work together on best practices for conducting audits and investigations into premium-avoidance schemes;
  • Adopt procedures to red-flag suspected premium fraud; and
  • Cooperate with stakeholders on investigations.

Workers-comp insurers already do much of this, yet premium cons remain virulent. What’s needed is stepped-up alertness and action by all parties. This becomes a force-multiplier that identifies more schemes, and boosts the entire anti-fraud effort.

Fraud fighters and their allies must team up to educate state policymakers about stopping costly comp scams — premium avoidance and false injury claims. Fraud fighters can speed up progress by enlisting non-traditional allies such as the carpenters union. The more influential allies that join anti-fraud efforts, the stronger our efforts against comp scams will become.

Source: Fraud Wire
Graphic: Fraud Wire
Image: Bernard Pollack

IKORCC Training Ensures Excellence From All Members

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The right people doing the right thing are directly correlated with the amount of training they receive. For the hardworking men and women of the carpentry brotherhood, training never ends.

Training is required on a yearly basis due to the constantly changing environment that carpentry represents. Every year new rules, equipment and technology enter the field requiring everyone to be up to date on the latest trends.

“It’s not just us who go to training but everyone,” says IKORCC Senior Manager Thomas Dorsey. “There is always something new to learn or something that is updated that we all have to be aware and knowledgeable of.”

Every year carpenters from across the country make a visit to Las Vegas to visit the Carpenter’s International Center. This million square foot, over 300 room facility is considered the hub of all things IKORCC and provides state-of-the-art training facilities and classrooms to ensure that both new and current generations of carpenters are properly prepared to face all challenges in the field.

“The IKORCC pays to have us fly down to the center for training,” says IKORCC Dorsey. “Just as they pay to create yearly up-to-date textbooks for students, they are always ensuring that those wanting to follow the carpentry path are knowledgeable, have plenty of learning materials in front of them and above all, are always prepared to enter the workforce to the best of their ability.”

Along with carpentry and construction skills, the ITC is also equipped to teach classes for specialty areas. While courses for interior systems and commercial work are offered, plenty of certified courses such as gas- and steam turbine installation are also offered.

“There are plenty of speciality courses offered for those learning and refining their craft but there’s even more offered on top of that,” says Dorsey. “There are courses designed to teach project management, productivity and communication, all of which essential skills for carpenters and leaders to remain successful in their field.

The ITC is not only an investment for the IKORCC but for every carpenter who works within the field of carpentry. In this ever changing field it’s more important to stay up to date and knowledgeable in order to provide only the best when it comes to building the places we live, work and enjoy.

Source: ValpoLife.com

INSTALL Contractor Featured in Case Study

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TOLEDO, Ohio – Earlier this year, American Flooring & Interiors (AF&I) was featured in a case study showcasing their rising position in the industry. The case study touted AF&I’s 2014 number one ranking from Initiative for a Competitive Inner City (ICIC) as the fastest growing company in the construction industry and the number 11 fastest growing company overall. The companies chosen annually represent innovative, diverse companies that produce jobs in their local communities and generate over half of their revenues from regional, national and international sales.

As part of their impressive credentials, AF&I has received a special certification with the International Standards & Training Alliance (INSTALL) flooring program. INSTALL has certified AF&I as an INSTALL Warranty Contractor. Contractors like AF&I must reach elevated standards in exemplary installation performance history, demonstrate and maintain good business standards and bonding credentials, and all of their journeyperson installers are required to be INSTALL certified. The INSTALL Warranty is the only free, extended, additional, third-party installation warranty in the floor covering industry.

AF&I owner Gary Johnson attributes the company’s success to investing in skilled, professional people and providing them with comprehensive INSTALL training and certification. Local floor coverers working for the AF&I are members of the Indiana/Kentucky/Ohio Regional Council of Carpenters (IKORCC), a regional council of the United Brotherhood of Carpenters (UBC).

AF&I is joined by seven other IKORCC INSTALL Contractors and 23 US and Canadian INSTALL Contractors that have achieved this distinction from over 400 INSTALL Contractors across the US and Canada.

INSTALL is a North American alliance of flooring mills, manufacturers, consultants and contractors who work together to ensure superior flooring installations.

For more information, please contact Ray Laraby at rlaraby@ikorcc.com.