Rocky Mountain News (Denver, CO), February 27, 2007, Tuesday

Copyright 2007 Denver Publishing Company

Rocky Mountain News (Denver, CO)

February 27, 2007 Tuesday

Final Edition

SECTION: NEWS; Pg. 18NEWS

HEADLINE: Some firms play loose with the law;

But usually it's the workers who get burned

BYLINE: Myung Oak Kim, Fernando Quintero and Laura Frank, Rocky Mountain News

BODY:

SECOND OF TWO PARTS

It's the worst-kept secret in construction.

The industry is addicted to illegal immigrant labor - and many companies are using questionable, if not illegal, methods to feed the habit.

In some trades, such as drywalling, roofing and concrete work, at least a third of Colorado workers are believed to be illegal immigrants, according to local construction trade organizations and unions.

Many contractors are taking advantage of this labor force by hiring them off the books and paying them less than their U.S.-born co-workers - and sometimes not at all - say those in the industry.

The system is often fueled by labor brokers - middlemen who arrange deals with contractors to provide cheaper workers on short notice. These workers commonly are paid cash and rarely get workers compensation coverage or other benefits, even though state law says all workers, regardless of legal status, are entitled to workers comp benefits.

Companies also reduce their costs by classifying workers as independent contractors. That allows employers to avoid paying workers compensation insurance and payroll taxes. It also means they don't have to check the workers' identification and immigration status, according to federal immigration law.

In many cases, however, these workers don't fit the legal definition of an independent contractor.

"These companies are getting rich on the backs of undocumented workers," said Gustavo Maldonado, a local union organizer with the Carpenters' District Council of Kansas City & Vicinity, which includes Colorado.

"The workers are seen as the problem, but it's the companies that lure them to these construction jobs, pay them cash, or not pay them at all. It's not fair to the industry, and it's not fair to the workers," he said.

Losers in the system

In Colorado and across the country, the construction industry is booming while the percentage of U.S.-born construction workers is dropping, federal labor studies show. As a result, employers are struggling to find workers to keep pace with the demand.

The gap is filled largely by a steady influx of young men from Mexico and Central America, many of whom are in the country illegally.

When employers take advantage of workers' undocumented status to withhold pay, the employees often have little recourse.

Lucas, a 45-year-old Denver father of five, said he was paid only half what he was promised for installing roofs at housing projects in the Denver area in 2005.

Lucas, an illegal immigrant who spoke to the Rocky Mountain News on the condition that his last name not be used, is more fortunate than many. After an unsuccessful attempt to take the employer to small claims court, he found lawyers through Centro Humanitario Para Los Trabajadores, a Denver day labor center, who sued in Douglas County Court. The lawyers negotiated a $9,000 settlement in December.

"I didn't really know what to expect, and I didn't completely understand the legal process in the beginning," said Lucas. "But in the end, I'm glad I went through with it. I've always believed in justice and in the basic civil rights of people and workers."

Harold Lasso, who runs the center's legal clinic, said about 75 percent of those who seek help are construction workers who report being underpaid or not paid at all. He takes about 10 such cases a month.

Workers are not the only victims of this off-the-books system. Communities miss out on tax dollars. Hospitals wind up treating injured workers who otherwise would be covered by workers compensation, and those costs get passed along to taxpayers or to insured patients through higher premiums.

The system also puts legitimate businesses at a disadvantage. Companies who don't pay taxes and workers compensation insurance can bid lower on projects and still make a sizable profit.

Lax enforcement

Labor unions, businesses that follow the law and construction trade organizations have been crying foul for years. They say they've reported shady firms to government agencies. But enforcement has been weak.

The U.S. Department of Labor can pursue, on its own, civil violations of labor laws and commonly nabs companies for failure to pay overtime wages. The agency also can seek criminal charges with the help of the U.S. Attorney's Office and, in immigration cases, with U.S. Immigrations and Customs Enforcement.

No criminal charges related to labor practices have been filed against Colorado construction firms in at least a half-decade, according to a spokesman for the Denver U.S. Attorney's Office.

Last year, the federal Labor Department completed six civil investigations against Colorado companies accused of wage violations. One involved a construction firm.

In October, the agency ordered Discount Max Construction, a residential and commercial builder in Pueblo, to pay $123,927 in back overtime wages to 52 low-wage workers. It's unclear whether those workers were immigrants.

The state Department of Labor and Employment recently referred the investigation of a construction firm that has been the target of repeated complaints about wage violations to a local district attorney's office for possible prosecution, a spokesman said.

The department said it cannot give details because of the pending action. It is not clear whether the complaints involve immigrant workers.

Alex Salaiz, district director of the U.S. Department of Labor's Wage and Hour Division in Denver, said it's unreasonable to monitor every employer.

"It works on an honor system. Not everybody gets their taxes audited. You just expect taxpayers to comply and be truthful," he said.

As with many public agencies, Salaiz said, the Labor Department needs more money to step up enforcement.

"We do the best with the resources we have," he said.

Immigration officials say they rounded up more than 4,300 workers in raids nationwide last year. But only a handful of managers have faced charges. In the few known construction investigations, no top-level general contractors have faced charges.

In Colorado, construction sites have largely escaped immigration crackdowns or scrutiny of their hiring practices. An immigration raid in September at a housing construction site outside Buckley Air Force Base stands out as the exception.

But the Buckley raid illustrates how hard it is to hold employers accountable.

Immigration officials arrested about 120 workers at the Buckley housing site and deported most of them. But five months later, no charges have been filed against any employers, although the federal Labor Department is still investigating.

Legal experts say it is hard to pin charges on employers because prosecutors must prove that the employers knew workers were in the country illegally.

"The big issue here is that there's really no penalty for hiring an undocumented worker," said Muzaffar Chishti, director of the Migration Policy Institute at the New York University law school. "There's only a penalty if you knowingly hire an undocumented worker."

Weak enforcement has allowed the construction industry to become even more dependent on cheap labor.

"If you're not going to crack down on it, then obviously anybody who tries to follow the law is in a perverse way worse off," said Vernon Briggs, a labor economist at Cornell University. "It's like a virus. It just spreads until you address the source. The source is the continuing nonenforcement of our immigration laws."

Middlemen profiting

Maldonado, the carpenters union organizer, sees the shady hiring of illegal immigrants almost every day.

He visits commercial construction sites, such as malls and office buildings, and talks to Spanish-speaking workers. Time and again, workers say they're being paid cash and got the job through someone they know only by a first name. The Rocky heard the same from more than a dozen workers interviewed at three sites over the past six months.

Maldonado estimates that brokers, who take a share of the workers' hourly wage, make thousands of dollars per day at a job site. He said brokers generally make $10-$15 an hour per worker. For lining up 20 men who work 10-hour days, that's at least $2,000 a day, he said.

"It's better to do this labor broker job than to sell cocaine," he said, noting that the labor broker's profit comes without much danger.

Ken Sanchez, a former organizer with the carpenters union, said he's fed up with the emphasis on the worker instead of the unscrupulous employer. He said he expects little to change under new state laws passed last summer in an attempt to crack down on employers.

Sanchez, who also visits construction sites regularly, says after the laws were passed, many employees were suddenly classified as independent contractors.

"It was that easy. Just have them fill out an SS-8 form and the new laws cannot touch you," Sanchez said. "That's how the game is played by many construction trade businesses in this state."

Contractors and trade organizations, however, say the industry would be crippled without immigrant workers.

Richard O'Brecht, executive director of the Associated General Contractors of Colorado, estimates that about 75 percent of workers in some construction sectors in Colorado are Hispanic immigrants. He said employers suspect that many are here illegally and are using forged documents, but employers need the workers.

"If the worst possible remedy to immigration law were to pass (finding and deporting all illegal immigrants), this industry couldn't do the work they're doing," he said.

Nancy Elkind, an immigration attorney and partner with Stern Elkind & Curray in Denver, said she hears from numerous construction firms trying to comply with state and federal laws. She said many want to help illegal immigrant workers become legal residents - something employers cannot do.

"It's a very complex economic question, not just a lot of sleazy people trying to take advantage of the system," she said.

INFOBOX

Employees vs. independent contractors

Local unions and contractors contend that some companies are improperly classifying illegal immigrant workers as independent contractors rather than employees to skirt federal immigration laws.

Employers must pay taxes and workers compensation insurance for employees and check their immigration status. They don't have to do those things for independent contractors.

Here are the general differences between the two, according to state and federal law:

Employees

* Generally provide services or goods for an employer on a continual basis.

* Work according to instructions and a schedule dictated by the employer.

* Get paid by the hour, week or other regular period of time.

* Use the employer's equipment.

Independent contractors

* Generally use their own equipment.

* Are free to work for others.

* Get paid a flat fee for the job.

* Operate under a business name.

* Submit invoices.

* Pay their own taxes and business insurance.

* What the Colorado Workers Compensation Act says:

A person who works for you is an employee unless he is free from control and direction in the performance of his service and is usually engaged in an independent trade or business related to the service provided.

* What an IRS guide says:

"The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result."

An independent contractor "must be able to determine when and where work is performed, be able to work for others, provide own equipment and other factors which are indicative of true independence."

The series

* Monday: Illegal immigrants say they were back working at a military housing construction site just a few days after an immigration raid there in September.

* Today: The construction industry is addicted to illegal labor.

NOTES: frankl@RockyMountainNews.com or 303-954-5091; Headline p.1A - A BIG BOOK OF TRICKS BUOYS AN INDUSTRY ADDICTED TO ILLEGAL LABOR.; ILLEGAL LABOR: CONSTRUCTION INDUSTRY; SECOND OF TWO PARTS; SEE END OF TEXT FOR INFOBOX

GRAPHIC: Photo (2), Those standing vigil Thursday evening at Centro Humanitario Para Los Trabajadores carry candles for janitorial workers swept up in immigration raids in Colorado and 17 other states recently. DARIN MCGREGOR / THE ROCKY, CAPTION: Apprentice framer Gustavo Rios, 24, cuts through a metal stud at the Children's Hospital construction site in Aurora as Bruce Miller, 69, president of Denver Drywall Co., watches. Miller says documentation for all of his employees is checked thoroughly, but concedes some could be presenting forged papers. BARRY GUTIERREZ / THE ROCKY