Construction Compliance Watchdog Charges Contractor With Multi-Million Dollar Scheme to Cheat Workers out of Wages
Case Marks a test of 2013 law enabling Labor-Management Organizations to Sue Employers for Violations of State Prevailing Wage Law
Sacramento: Sierra National, a construction contractor that has been awarded at least 43 public works contracts across 8 different Northern California Counties since 2020 is facing allegations that it repeatedly violated state prevailing wage requirements and underpaid workers by millions of dollars. The allegations were detailed in a complaint filed by NorCal Construction Industry Compliance (NCIC)—a labor management regulatory compliance organization—in Sacramento Superior Court on September 30th.
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The complaint alleges “willful and deliberate” violations of California’s prevailing wage law, which requires that craft workers on publicly funded construction projects be paid wage and benefit rates set by the Department of Industrial Relations. These rates are based on local market rates for comparable workers performing similar jobs, and are designed to protect honest contractors from dishonest competitors who seek to artificially lower their bids at their employees’ expense.
“Cheating workers out of the pay they’ve earned—or wage theft–is a multi-billion problem in today’s construction industry, and a core operating principle of too many unscrupulous contractors,” said NCIC Executive Director Dina Morsi. “If we fail to hold bad actors accountable, it not only hurts workers, it cheats our communities out of the tax revenues and economic activity that’s tied to paychecks, and puts responsible local businesses who play by the rules at a competitive disadvantage.”
Based on a review of Sierra National’s Certified Payroll Records filed with the Department of Industrial Relations and its IRS Form 5500s NCIC’s complaint alleges that Sierra National inflated claims about its benefit costs in order to reduce the wages it would be required to pay to operating engineers, cement masons and laborers working on projects across Sacramento, Placer, El Dorado, Yolo, Yuba, Butte and Solano and San Mateo Counties.
All told, the NCIC complaint alleges that in every year since 2020, more than 50 of Sierra National’s construction craft employees were paid approximately $7/per hour less than they were owed on publicly funded projects. It seeks over $5 million in damages and $4.5 million in liquidated damages to make affected workers whole, alongside $75,000 in penalties that would be paid back to public awarding bodies.
In 2021, a Pennsylvania contractor was found to have defrauded more than a thousand workers out of $20 million using a similar benefits fraud scheme. It stands as the largest prevailing wage theft case in US history, and ultimately resulted in a criminal prosecution.
Researchers have estimated that nationally, wage theft and misclassification affects as many as one in five construction workers, cheats them out of as much as $12 billion in wages every year, and costs taxpayers as much as $6 billion in tax revenues. In California, research has pegged the cost of the wage theft problem at more than a billion dollars for taxpayers alone.
The suit will be the first to test systematic benefits-fraud allegations under a 2013 California Law (A.B. 1336) that empowers Labor-Management Organizations, like NCIC, to sue individual contractors for unpaid prevailing wage benefits.
“The sheer scale of the wage theft epidemic in the low-bid construction industry, matched with a time of historic public construction investment the limited regulatory enforcement resources of state and local governments is what makes AB 1336, and this case in particular, so important,” Morsi added. “The State Legislature rightly recognized the need for more tools, and more partners, to protect workers, honest businesses and taxpayers from fraudsters. We are determined put bad actors on notice that not only is our state tired of the serial cheating in the construction marketplace, but that labor organizations and responsible employers are going to be eager partners in a statewide effort to hold lawbreakers accountable.”
NorCal Construction Industry Compliance (NCIC) is a joint labor management organization committed to paving the way to a level playing field for contractors and workers by promoting equitable contracting, and ensuring compliance with all applicable state and federal labor laws governing the construction industry.