TRADES & UNION DIGEST > In The Spotlight > Fighting The Underground Economy!

Fighting The Underground Economy!

3 years ago
Chris Ferrari


By: Richard E. Tolson, Director NJ BAC

‘Wealthy developers are taking advantage of labor laws and outdated regulation and enforcement to increase profit margins’

National civil rights and economic justice leaders gathered in New Brunswick late last week for the 2019 Summit for Civil Rights, and I was honored to join legendary leader Congressman Jim Clyburn on a panel at the event. It was privilege for New Jersey to host this event, but it was also ironic considering the injustices happening in our own backyard, and in plain sight. 

It’s not often thought of as top-tier issue, but the gross, widespread and often crippling injustices imposed on working men and women in the construction industry in our state measure up as significant abuse and perpetuate structural inequality. While we purport to stand for fairness, all across our state, wealthy developers are taking advantage of labor laws and outdated regulation and enforcement to increase profit margins by abusing workers. And it has to stop.

These are millionaires utilizing middlemen to break state and federal laws by misclassifying full-time workers as contractors — denying them basic benefits and rights like healthcare, committing wage theft by paying below the required living wage, establishing illegal work weeks, paying cash and evading taxes — all to increase already record profits from rents and property sales. 

A 2016 Stockton University report conservatively estimated that the developers are stealing more than $25 million in state tax revenue annually via these illegal tactics. But far worse, this theft involves approximately 35,000 workers who are off the books or illegally misclassified as independent contractors. An entire underground economy has been allowed to fester, all built on the abuse of workers, for the benefit of multimillionaires. 

Not exactly a high-water mark for civil rights, huh?

With a new governor, New Jersey is making progress in cracking down on this form of injustice. Gov. Phil Murphy signed an executive order last year creating a task force on the issue, and three subsequent public meetings revealed ample evidence of widespread abuse. Last summer, the Hudson County Board of Freeholders passed a resolution decrying these practices as “not only unconscionable, but illegal.” And Attorney General Gurbir Grewal announced late last month that an Ocean County construction contractor pled guilty to purposely not paying prevailing wages. 

Fines viewed as acceptable cost of doing business

This is progress, but only a pittance. To put it in baseball terms, the state is hitting singles, and we need home runs.

Right now, there are more than 12 major development sites active in Hudson County alone that are using an illegal business model and cheating workers. There is much more we can do to create basic fairness and economic justice and collect all of the tax revenue the state is owed. 

Large development and construction companies view the paltry fines the state levies as an acceptable cost of doing business, so on the rare occasion they are caught, these abusive actors are comfortable with paying the fines and continuing to cheat workers and taxpayers. Not only is this a large loss of revenue for the state, it creates no deterrent for criminal actors in the industry. 

The Department of Labor and Workforce Development has recently been given additional tools to take a stronger approach to penalties and license suspensions to protect working men and women. These resources include more investigative and enforcement staff and increased penalties for violations. And the governor will soon have an opportunity to sign a bill empowering the Department of Labor to issue more stop-work orders against developers who are unmoved by fines. 

All this progress is a result of the Governor’s Task Force on Employee Classification, which has brought together the departments of Labor, Treasury, and Banking and Insurance as well as the Attorney General’s Office and other Cabinet-level positions.

After years of seeing elected officials at the highest level turn away from the issue of employee misclassification, we are glad to see the beginnings of leadership from Trenton. For the sake of blue-collar workers across the state — and for the sake of New Jersey’s reputation on civil rights — that action must continue and become far more aggressive.

Richard E. Tolson is director of the International Union of Bricklayers and Allied Craftworkers Administrative District Council of New Jersey, Locals 4 & 5, which represents craftworkers in the masonry trades across the state.