D.C. Construction Giant CBG Is Being Sued For Wage Theft

Nov 12, 2020

By Ally Schweitzer

Maria Perez began to suspect she was underpaid only a couple of months after starting her new job.

In September, Perez was working for a Virginia-based drywall company, cleaning up dust and debris at D.C. construction sites overseen by the large general contractor CBG Building Company. One day at work, she says, she spotted a flyer advising laborers to speak up if they thought their rights were being violated on the job. That got her thinking about her paycheck.

Perez, an immigrant from Mexico, says she often worked more than 40 hours a week, but was never paid overtime. Also, her pay seemed low — $12 an hour, in a city where the minimum wage is $15. She began talking to other foreign-born workers for the company, which is called Charly Drywall. They, too, had noticed “irregularities” in their compensation, she says. But they worried that raising the issue with their bosses would backfire.

“They would just say, ‘If you don’t like it, look for another job,’” says Perez, speaking through an interpreter. She used a pseudonym because she’s still working for the company.

Now Perez is among potentially hundreds of workers represented in a class action lawsuit accusing CBG, the company that hired Charly Drywall to perform site work, of wage theft.

The suit, filed in August by law firm Handley Farah & Anderson, alleges that CBG and several of its subcontractors — including Charly Drywall — engaged in misclassification, a form of payroll fraud that D.C.’s Office of the Attorney General has called “disturbingly common” in the local construction industry. (Charly Drywall itself is not named as a defendant in the lawsuit.)

Representatives for CBG and Charly Drywall did not return WAMU/DCist’s requests for comment. CBG has not filed a response to the lawsuit.

Instead of paying workers as full-time employees, the suit alleges, CBG subcontractors wrongly classified them as independent contractors, denying them minimum wages, overtime pay, paid sick leave and workers’ compensation, in addition to leaving them on the hook for taxes and Social Security payments.

In addition to illustrating the way foreign-born workers are often exploited in the construction industry, the suit also highlights how difficult it can be to hold general contracting companies — which receive millions of public dollars to manage large development projects — accountable for their subcontractors’ behavior. But D.C. law also requires subcontractors to compensate general contractors for wages, penalties and other costs if they violate wage and hour laws, unless the two parties have an alternative agreement.

Laborers can only be classified as independent contractors if they perform work free from their employer’s “control and direction,” and if their work is beyond the employer’s “usual course of business,” per D.C. law. Workers for CBG contractors did not meet this standard, the suit alleges, arguing CBG is liable for its subcontractors’ behavior because D.C. holds general contractors equally responsible when their subcontractors violate the city’s wage and hour laws.

CBG, or Clark Builders Group, calls itself the third-largest multifamily builder in the country. The Arlington-based company has an extensive portfolio in the D.C. region, having built numerous luxury and affordable apartment buildings in the District, Maryland, and Virginia.

CBG is currently constructing The Hartley, a 323-unit development on the former site of Walter Reed Army Medical Center in Northwest D.C. It has also constructed luxury apartment buildings in neighborhoods ranging from Eckington and H Street NE to Buzzard Point.

A company brochure says the firm has earned a reputation for “fair and equitable business dealings across the nation.”

Misclassification has attracted national attention because of tech companies like Uber and DoorDash, which have faced legal challenges for classifying their drivers as independent contractors. Tech firms notched a massive win in California this month with the passage of Proposition 22, a ballot measure that will allow “app-based” drivers and couriers to be treated as independent contractors, not employees.

There is no such exception for construction workers in the District of Columbia. But companies continue to violate the law because there is a powerful economic incentive to do so, says attorney Matthew Handley, whose firm brought the suit against CBG. In the construction industry, subcontractors compete for work by submitting a bid to a general contractor. The cheaper their bid, the more likely they are to win the contract, he says.

“It’s a cost-cutting measure,” Handley says. “The way they make the bids they’ve won profitable is by cutting on labor costs.”

A 2019 report from D.C.’s Office of the Attorney General says companies can lower their expenses by as much as 48.1% by misclassifying employees as independent contractors. As a result, wage theft has reached “epidemic proportions” in D.C., Handley says.

But there’s still a lack of data on how common misclassification is in the District because many affected workers don’t report it, says Clayton Sinyai, executive director of the Catholic Labor Network, an association of Catholic union activists based in Falls Church.

“These are mostly immigrants employed in the industry who are being taken advantage of,” Sinyai says. “The workers say their employers believe that because they’re immigrants, they don’t know how to navigate the system or they’ll be afraid to file a complaint.”

Sinyai says that’s why his organization started documenting workers’ experiences with wage theft. For the last year and a half, the Catholic Labor Network has been interviewing laborers on D.C. job sites about their compensation. What they’ve found is disturbing, says Ernesto Galeas, a field representative for the association.

Roughly half the workers Galeas has interviewed say they’re being paid improperly. Many receive a personal check or cash with no explanation of their wages, no overtime pay and no withholding — a clear sign of misclassification, he says.

“They’re getting paid $12, $13, $14 an hour, with no deductions taken out,” Galeas says. “It’s shameful.”

Ivan Castillo, one of the laborers suing CBG for wage theft, says he relocated to Northern Virginia from Texas in search of good-paying work. “I thought the economy was a little better [in D.C.],” he says in Spanish, with Galeas providing translation.

Castillo soon discovered that didn’t matter. In February, Castillo took a job installing air conditioning ductwork at Eckington Place, a luxury development in Northeast D.C. where CBG is the general contractor. He says he was hired by a labor broker affiliated with CBG who paid him $12 an hour, with a promise that if he learned quickly, he’d get a raise. But over four months of work, he says, a raise never came.

Castillo relayed his story to the Catholic Labor Network, and they brought their findings to Handley Farah & Anderson.

The firm’s class action against CBG is only the most recent suit targeting wage theft in the District. The city’s attorney general, Karl Racine, has aggressively pursued allegations of misclassification over the last three years, recovering more than $1 million for workers, says Ali Hinga Nevitt, an assistant attorney general in the office’s social justice section.

Nevitt says it’s important to crack down on wage theft not only because it exploits vulnerable workers, but also because it has damaging ripple effects across the construction industry. “It undercuts law-abiding businesses,” she says. “It’s difficult for them to compete with a company that’s illegally lowering their costs by shifting the cost to their workers.”

But Nevitt says more construction workers are becoming aware of the issue, and her office has received dozens of wage theft complaints this year. “It’s becoming more of an issue known in the District, both to workers, but also to employers who now know they’re on notice,” she says. “If they’re cheating workers, there will be large penalties to pay.”

Employers who violate D.C.’s Workplace Fraud Act are subject to civil penalties ranging from $1,000 to $5,000 per violation.

Castillo says he’s no longer working on construction sites, but he decided to join the lawsuit because he believes many more immigrant laborers — like Maria Perez — continue to be exploited. Employers must be held accountable for the practice to stop, he says.

“It’s important not just for me, but for other Latinos, too,” he says.

We are lawyers who seek to improve the world. We fight for: workers deprived of wages, consumers deceived about products, tenants denied access to housing, farmers mistreated by processors, parents deprived of adequate parental leave, investors who were defrauded, small businesses harmed by antitrust violations, persons with disabilities denied access, whistleblowers who uncover fraud, and women and communities of color subject to discrimination.

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