$750 million in wage fraud

September 23, 2008 - A report released today by LIUNA outlines systemic underpayment of wages in the residential construction industry, bringing to light the newest victims of the nation’s housing market crisis: workers defrauded out of $750 million in wages a year by conservative estimates.

The report, "The Newest Victims of the Housing Market Crisis: The Men and Women Who Build America's Homes," is based on an investigation into pay practices by LIUNA, the Laborers' International Union of North America.

The report outlines how corporate homebuilders, in a "Wal-Martization" of the industry, created ever greater pressure on their subcontractors to reduce costs to the point where cutting wages – and in some cases eliminating them – was the only way for subcontractors to compete.

"If I worked 60 hours a week, the pay slips stated I only worked 40 hours," said Eduardo Acevedo Nava, a 35-year-old residential construction worker. "The amount of money reflected on the paycheck was never correct and I signed the pay slip because I needed to pay bills and put food on the table."

Nava was a 9-month employee of SelectBuild, a subsidiary of publicly-traded BMHC Corp. and the largest residential construction contractor in the U.S. He is one of several plaintiffs in a suit filed against the company today in Federal District Court by the law-firm of Rothner, Segall and Greenstone in Pasadena, Calif. Nava said he and his co-workers were the "ghosts that build the homes" of America. Plaintiffs, from California, Arizona and Nevada are seeking class action status. SelectBuild employed on average 10,000 workers during the peak housing boom years of 2005-2007, building homes in developments started by major corporate homebuilders. Workers who have come forward so far recount underpayment of 5 to 15 hours each week.

Workers who have come forward seeking help from LIUNA, and who have been referred to legal counsel, have detailed several types of underpayment:

  • Full or partial non-payment of wages.
  • Failure to pay any overtime, or the amount mandated by law.
  • Requiring off-the-clock work, such as requiring workers to begin or continue working outside of their recorded work hours.
  • Not paying for time spent traveling between jobsites or for being required to be at work while awaiting deliveries or completion of work performed by other employees.

Across the country, there are about 1 million workers like Nava working in the residential construction industry. According to LIUNA’s report, if underpayment for those workers amounted to only one hour per week of overtime, based on $10 an hour over 50 weeks a year, the amount of shorted wages would be $750 million - or for the top 10 corporate homebuilders, 2.2 percent of their profits.

"It becomes clearer daily that our economy cannot withstand a major industry built on fraud or unsustainable practices," O'Sullivan said. “As we address the current crisis, we must propose solutions that prevent a recurrence of this crisis and its victimization of homeowners and those who build the homes."

The report was released in news conferences in Los Angeles, where the suit was filed, and in Phoenix and Las Vegas, where other plaintiffs worked. Markets in those states are among SelectBuild's strongest, and also where overheating of the housing market - and the following decline – have been greatest.

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