PROJECT MANAGEMENT SOFTWARE has begun an effort to set new rules for companies that the thành phố hires to complete construction projects.

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Rebecca Sasnett / Arizona Daily Star has begun an effort to lớn stop companies that receive sầu đô thị construction contracts from paying their workers with cash và “misclassifying” employees — two practices that can allow companies to dodge taxes, dominate local markets and deprive workers of fair pay.

The issue is a national one that starts at the government-cấp độ where officials dole out hundreds of millions of dollars khổng lồ contractors who are charged with completing projects like new buildings or roads. Cities like often bởi little to traông chồng how that taxpayer money is actually used after it’s been awarded lớn construction companies, labor union officials said.

The laông chồng of oversight allows contractors khổng lồ get away with practices that help them work around employment-related taxes while skirting labor laws, including minimum wage rules, according lớn đô thị & union representatives.

“Nobody’s regulating or looking into lớn this at all,” said Fabian Sandez of the United Brotherhood of Carpenters & Joiners of America, which has been lobbying for more thành phố enforcement. “It’s a problem, we have sầu billions of dollars lost nationally that could have sầu gone to lớn our roads, bridges, infrastructure, schools, police departments.”

The “concerning” practices also help some companies win government contracts because they have less expenses, so they can vị the work at a lower cost. Legitimate contractors then have lớn keep salaries low if they want khổng lồ compete, reducing pay for blue-collar workers across the board.

City Council members voted to lớn crack down on the problem late last month by introducing new payroll reporting requirements for contractors, penalties for companies that break the rules and new contract language that explicitly bans the pay practices.

But the new system is far from fully developed and important details — lượt thích how the đô thị will catch and penalize rule breakers — have yet khổng lồ be figured out, making it unclear whether the plan will have the teeth to combat the problem.

“This is both about the city’s pocketbook, as well as the pockets of working families,” Mayor Regimãng cầu Romero said. “When we can’t protect the rights of workers to lớn earn a living wage và support themselves and their families, we all thua kém.” awards contracts after companies make “bids,” which is a breakdown of how much they will charge lớn do the work. Those with the cheapest offer usually have a better chance of winning the thành phố contract và becoming the “general contractor” on a project.

General contractors — who manage the projects rather than having the manpower lớn get the job done on their own — then repeat the bid process, using a chunk of the government funding to hire “subcontractors” khổng lồ vì tasks lượt thích electric work or plumbing.

Sandez said cash pay typically happens after subcontractors come on board and seek out workers who will accept under-the-table payments, most of whom are undocumented immigrants or individuals who don’t want their pay khổng lồ be on record.

“You have sầu a lot of people that look for cash pay because they’re either collecting unemployment, they have alimony or child tư vấn or anything they’re trying lớn avoid,” the union representative sầu said. “They’ll have a tendency khổng lồ look for a job that is cash pay so they can keep collecting unemployment until it runs out.”

Cash-pay workers don’t receive benefits such as workers compensation và they may not be paid fair wages, but it’s their only option lớn get around certain regulations và labor laws.

At the same time, employers benefit from the cheap labor and save money they would have sầu otherwise spent on things like Social Security taxes for legitimate employees.

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Companies achieve sầu essentially the same thing when they misclassify employees as “independent contractors,” which is a legal designation that means that a worker is considered lớn be self-employed.

Those workers then have khổng lồ cover portions of their taxes that are the responsibility of their employer, taking a chunk out of their earnings while they thất bại out on virtually all benefits.

Companies also don’t have sầu to verify the citizenship status of employees labeled as independent contractors — và they aren’t subject to minimum wage rules, so employers can exploit people who would have trouble finding legitimate work & pay them next to lớn nothing.

“If you are a sole proprietor subcontractor then the minimum wage doesn’t apply lớn you because you run your own business & you don’t have sầu to pay yourself a minimum wage,” said Jeff Yates, the city’s director of business services.


The illegal cost-cutting, regardless of where it happens in the contracting process, allows all of the companies involved to offer lower bids than those that work above-board while also lining their pockets with extra taxpayer dollars.

“They’re also costing the đô thị of money,” Romero said. “The contractor is able to lớn pocket the surplus, và then leave sầu taxpaying to the worker.” officials plan khổng lồ “strengthen” the language in thành phố contracts lớn prohibit companies from taking part in the pay schemes, though it’s not clear how it will actually enforce those rules.

The thành phố doesn’t yet have a way lớn monitor whether the rules are actually being followed, for example. Officials plan to lớn create new “payroll reporting requirements” khổng lồ trachồng contractor pay, but it’s unclear what those requirements will be or when that system will go into effect.

Officials also don’t expect to consistently monitor each contract even after the reporting requirements are in place. They said enforcement will still be driven by individuals who submit formal complaints — something that hasn’t happened in at least the past two years.

“Enforcement will be largely complaint-driven, then also probably some random spot audits, that kind of thing,” said Yates from the Business Services Department. “The two steps that we’ll have sầu on the city’s side is the strengthening of that language in our contracts and then from time-to-time, we will vày some random spot audit of payrolls.”

Yates added that the enforcement efforts could be folded into the new Department of Labor Standards, which is being established lớn enforce the new $15 minimum wage recently approved by voters through Proposition 206.

“We haven’t stood up a unit necessarily to follow that up,” he said. “That’s probably the big difference is we’re standing up that labor division to lớn enforce Prop. 206, this in my mind might be a little bit of an offshoot of that.”

Once the monitoring process is fleshed out, thành phố officials will still have sầu to figure out whether they can punish contractors who are caught breaking the rules, something that’s in a legal gray area because of frequently changing state laws.

The state has consistently passed legislation that restricts the city’s ability to make contractor-related policies since at least 2010. Lawmakers have sầu barred from setting certain employee pay requirements on construction projects, for example, and more restrictions might be coming down the chute in this year’s legislative sầu session, which began Monday..

Regardless of any new restrictions that may crop up, Yates said “there will be more coming out” about the city’s plan in the near future. In the meantime, residents can still tệp tin complaints about illegal pay practices with the state’s Labor Department.