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Senate Bills Underscore Insurance Fraud, Safety Concerns

Local Matters


Published April 18, 2007 at 1:45 a.m.

MONTPELIER - Toiling atop steel girders is dangerous work, and the crews who take these risks working in Vermont are often deliberately under-insured by their employers. That's the allegation of an "industry analyst" for the New England-wide Ironworkers Local 7 union. Two bills designed to address this problem are working their way through the Vermont General Assembly. But even if they do pass, recent workers' claims suggest that the problem goes well beyond the scope of the legislation.

On April 5, the Senate passed S.196, which is designed to combat workers' compensation insurance fraud on the part of employers. Now in the House, the bill includes a provision that would impose up to $5000 in weekly fines on contractors who falsify workers' compensation insurance claims. A second bill, S.193, would require employers who work on state construction projects to offer their employees safety education. That bill is now in the House Transportation Committee.

According to the National Council on Compensation Insurance, Vermont steel-erecting companies that do business under an "assigned risk" designation must pay insurers either $58.34 or $74 for every $100 they pay in ironworkers' wages. (No, that's not a typo.) The higher rate is for employees who work more than two stories above ground level.

Damon Hall, an ironworkers union analyst, alleges that the majority of non-unionized subcontractors and independent contractors are subverting this policy by under-reporting payroll, and by misclassifying workers on insurance claims. Hall contends, "If no one gets hurt on a job, subcontractors are able to make lower bids. . . That's where it's killing the honest contractors."

John Webber, 29, says he worked two jobs last fall for Québec-based Enterprises Precision, one of which was in Enosburg Falls. He claims his employer "paid cash under the table so it didn't have to pay [higher] workers' comp [rates]." Webber also claims he never received overtime pay he was due.

According to a November pay stub Webber provided Seven Days, Enterprises Precision paid Webber $21 per hour for 20 hours of labor - a total of $420, before taxes. The pay stub also includes a payment of $510 in "travel reimbursement." Webber claims that he worked 40 hours during the week in question, and that his travel costs only amounted to $175. He maintains that Enterprises Precision paid the remaining $335 as "travel reimbursement" in order to avoid paying both time-and-a-half labor costs and workers' comp insurance fees.

"It's a big numbers game - I'm losing overtime, workers' comp is losing its money," Webber charges. He estimates that Enterprises Precision owner Andre Brochu typically pocketed $10,000 on a weekly basis through what Webber claims is wage fraud. The employee gets a higher net, however, since travel reimbursement is not subject to FICA deductions.

After a lengthy telephone interview, Brochu declined to comment for the record on Webber's allegations.

Jason Bowers and a colleague (who requested anonymity) worked on a construction site in North Conway, New Hampshire, for Theodore Mayo, of the Northeast Erectors Association, based in Eden Mills, Vermont. According to a November pay stub provided to Seven Days, Bowers, 29, was officially paid $12 per hour. At the bottom of his stub, a handwritten note reads, "Next week is your last week at $22 [per hour]. I will give you $25 [per hour] TM" - evidence, Bowers claims, that approximately half of his wages were paid "under the table." A similar stub suggests that his colleague was paid $15 on the books. But that worker says he received separate checks for the balance - at $10 per hour - of his $25-per-hour rate. Seven Days was unable to verify or disprove this claim.

Bowers, who says he worked an average of 40 to 50 hours per week for Mayo during the period in question, claims the subcontractor paid him half his wages off the books to avoid paying overtime and workers' compensation fees. "Teddy Mayo's one of many independent contractors that try to make the big dollar," Bowers claims. "Independents and the unions are different sides of the business: One looks out for the worker, the other looks out for profit."

In response to Bowers' allegations, Mayo provided Seven Days with an undated New Hampshire workers' compensation liability form that indicates he classified his workers under three categories, one of which - "iron or steel erection" - appears to comply with the federal $58.34 "assigned risk" requirement. Mayo claims he regularly pays his entire seven- to eight-member crew under this category, except for those who are legally excepted. Two of the exemption categories appear on the document: "supervisor," and "cleaner" in charge of "debris removal." Mayo also supplied an affidavit signed by his construction supervisor, Ross Davis, which includes the allegation that Bowers "appeared to be using drugs during the work hours" on Mayo's construction sites in New Hampshire and Massachusetts.

"We're doing business to the letter of the law that I have the knowledge of," was Mayo's response to the allegations from Hall and Bowers. In addition, he claims he only started paying workers "per diem" - which Hall indicates is shorthand terminology for "on top of normal wages" - on July 28, 2006. Mayo adds that he's only supervised two construction sites in Vermont over the last several years.

Hall, for his part, claims Mayo "can't be paying his workers $10 an hour [in "per diem" wages] and remain in compliance with the law." He points out, "Ted goes way back with us a long ways. If he can under-bid people to get the job, that's what he's gonna do." According to Hall, Mayo appears in this case to have "the right quotes on his insurance." However, Hall says, "That means absolutely nothing until S.196 goes through."

Jason Bowers characterizes Mayo's drug-abuse accusations as "a personal attack. . . He's completely wrong." But both Bowers and Hall concede that drug use is prevalent among ironworkers.

Bowers' colleague, a Stowe resident who claims to have worked for independent contractors for "between 20 and 30 years," says Mayo's behavior is par for the industry. In the late 1980s, this worker says he broke his neck in a car accident on the way to a construction site, where he had been working as an under-insured employee for another Vermont construction company. He says he had trouble collecting on workers' compensation claims after that accident. "I have no insurance," the worker notes of his current situation. "I got screwed big-time, and now I'm messed up for the rest of my life."

Ironworkers representative Damon Hall claims that the fault for these wage and insurance violations lies not only with employers, but also with state agencies. Hall says that in the fall of 2006, he supplied the Vermont Department of Housing and Community Affairs with four videotapes of John Webber and two other ironworkers discussing wage fraud. "There's federal money involved," Hall says of Brochu's Enosburg Falls job. The department "has a responsibility to make sure that work is being done in accordance with the rules." But according to Hall, the department hasn't taken any action. "An investigation needs to happen, and they won't do it."

Reached by telephone, Ray Marzbani, the department's senior grants management specialist, said he was unaware of workers' comp fraud in general. He referred this reporter to Ann Karlene Kroll, the department's director of grants management.

Seven Days left a message for Kroll, requesting a comment. She suggested a call to the Department of Labor.

Labor Commissioner Patricia Moulton Powden, the official who would be directly responsible for enforcing workers' compensation violations should S.196 become law, returned a phone call too late for inclusion in this story.

According to Damon Hall, ironworkers "are so job-scared that for a lot of them, it's hard to get them to come forward" about wage violations and unsafe working conditions. Bowers, who now commutes 240 round-trip miles every day to a union job in Ludlow from his home in Wolcott, agrees that "guys aren't gonna say anything when they're busting their ass to take care of their family." Bowers adds, "I've watched friends and people I've grown up with not getting the hint. They'll get fired in 20 years without anything, pouring money into a career that bottoms out."

His 45-year-old Stowe colleague, who says he was laid off from Theodore Mayo's crew in February, now claims to collect $208 per week in unemployment benefits, and indicates he plans to start a new union job as soon as the weather turns. "The ironworkers are not looked out for that well as far as I'm concerned," he comments. "If I was going back into it, I'd go union with Damon."

This worker, who guesses he'll be in a wheelchair within 10 to 15 years, says that, like some other "old-time" Vermonters, he's morally opposed to collecting free benefits from the system. He asserts, "I won't take welfare; I'm too proud. If I can't make [the money] myself, I won't let the state pay my rent, food stamps." He concludes, "Ted Mayo pays his guys well. But no one's asking, 'What am I gonna do when I'm 60 years old and crippled up? What am I gonna do then?' I'm hoping the younger generation is gonna realize that."