Labor leaders and activists reacted positively to Governor Gina Raimondo‘s announcement yesterday that a “new Workplace Fraud Unit within the Department of Labor and Training‘s (DLT) Workplace Regulation and Safety division recently reached a settlement with a company that admitted to violating worker protection laws. Cardoso Construction LLC agreed to pay more than $730,000 in back wages, interest and penalties. This is the first significant action of this new unit.”
According to the press release, “DLT officials found the violation on a drywall job at the University of Rhode Island. After investigating, they determined that the company should have characterized the workers as ‘employees,’ but they were mischaracterized as ‘independent contractors.'”
Cardoso Construction will, “pay a total of $351,812 in back wages to the workers, pay DLT an identical penalty of $351,812, and pay a fine of $27,000 – $1,000 per worker – for violating the state misclassification law.”
In a statement, the RI AFL-CIO wrote, “Big News and a very important step forward with a clear and strong message from Governor Gina Raimondo and DLT Director Scott Jensen that employers perpetuating fraud and deception will not be tolerated in the State of Rhode Island any longer.”
Jesse Strecker, executive director of RI Jobs With Justice, told me, “Seems to be a great step forward as far as I can tell. The DLT has definitely suffered from underfunding in the past, and it’s great to see some more resources being directed to wage and hour violations and miss-classification, all of which are hugely pervasive problems.”
Wage theft allegations have been made against several local restaurants in Rhode Island. Fuerza Laboral has protested outside Gourmet Heaven several times over the last year and protested outside the home of Cafe Atlantic owner Juan Noboa.
In the Governor’s press release, the seriousness of misclassification was outlined:
When employers misclassify employees as independent contractors, they harm workers, hurt other companies that play by the rules, and cheat taxpayers. By misclassifying workers, companies:
• Deny employees access to critical benefits such as Unemployment Insurance (UI), workers’ compensation insurance, overtime pay, and family and medical leave;
• Hurt law-abiding employers who play by the rules but are unfairly under-bid for work; and
• Cheat taxpayers by lowering tax revenues and robbing UI and workers’ compensation funds of much-needed dollars.
To combat this, the Governor has outlined a “four-point action plan”:
1. Using existing funding to create a new Workplace Fraud Unit to focus DLT’s efforts on dishonest companies
2. Coordinating state agency efforts and pooling resources to conduct investigations and bring enforcement actions with maximum impact
3. Enforcing worker protection laws to the fullest extent and spotlighting businesses that cheat
4. Fostering compliance with the law through employer outreach and education
From the Governor’s press release:
“It’s only fair to repay the employees who were underpaid for months on the job, and this agreement will achieve that,” said Raimondo. “Everyone must compete by the same rules on public projects in Rhode Island, and this settlement is sending the clear message that we will be cracking down on abuse.”
“Following the same rules as everyone else is not a barrier to success,” said DLT Director Scott Jensen. “We will continue to protect our community’s investment in our workforce, and we remain committed to helping Rhode Island companies grow their businesses and play by the rules. I also applaud the work of the Joint Task Force on the Underground Economy and Employee Misclassification, who along with the new Workplace Fraud unit, moved this case forward.”
The DLT Director leads this Task Force, which was established in 2014, and consists of DLT, the Office of the Attorney General, Division of Taxation, Department of Business Regulation, Department of Public Safety and Workers’ Compensation Court.