Public Works Wage Settlement Largest in San Francisco History

The Office of Labor Standards Enforcement in San Francisco and attorneys last week negotiated the largest settlement for labor law violations against public works contractors in city history after finding that a local subcontractor defrauded its workers by paying them less than standard public works project hourly rates.

Five general contractors and their surety bond companies -- facing original claims totaling $5.2 million in back wages and penalties for failing to ensure that subcontractor Jin Construction & Electric obeyed prevailing wage laws on numerous San Francisco public works projects -- will now pay out approximately $960,000 to construction workers defrauded by Jin, according to the International Brotherhood of Electrical Workers, Local 6, and the OLSE.

Under the terms of the negotiated settlement, the San Francisco Unified School District, the City and County of San Francisco, and the San Francisco Redevelopment Agency will release funds previously withheld from payments to the public works general contractors pursuant to stop notices filed by six former employees of Jin.

California's Labor Code and San Francisco's city charter require general contractors and their subcontractors to pay the minimum prevailing wage set by law to all qualified workers. While skilled electricians earn up to $62 per hour on public projects, the OLSE investigation revealed that Jin paid its workers as little as $8 per hour, with Jin allegedly pocketing the difference. Since the settlement, Jin has filed for bankruptcy seeking protection from its many creditors. The general contractors were forced to pick up the tab for Jin's labor violations when Jin could not pay. Taxpayers also feel the burden when prevailing wage laws are violated, as construction work may be stopped while contracts must be re-bid, adding significantly to long-term costs, according to the OLSE.

Officials for Jin Construction & Electric were not available for comment.

The OLSE actively worked with Sabrina Hernandez, the prevailing wage compliance officer, IBEW, Local 6, to investigate and uncover the illegal underpayments. Attorneys Lynn Rossman Faris and Christine Hwang, of Leonard Carder LLP, who specialize in prevailing wage enforcement, along with other employment litigation, negotiated the settlement after almost three years of effort.

"Jin not only cheated their immigrant workforce of the wages and benefits due them under prevailing wage laws, but they also denied them their right to state-approved apprenticeship training," said John O'Rourke, business manager for IBEW Local 6. "This settlement sends a message to general contractors and insurers that they can and will be held accountable for enforcing the law and protecting workers from this type of illegal exploitation on public works projects."

The OLSE said that Jin had covered up its violations of the law by misclassifying electricians as lower-skilled workers and falsifying certified payroll records. State apprenticeship records also show that Jin denied entry-level workers access to state-approved apprenticeship programs that provide training needed to perform higher-skilled work.

Language difficulties and worker concerns about retaliatory firings hampered the investigation against Jin and the general contractors.

"It took a lot of courage for these immigrant workers to come forward," said attorney Rossman Faris of Leonard Carder, which represented the workers. "General contractors must understand that they cannot stand idly by while their subcontractors submit bids obviously below the prevailing wage and take advantage of those lower bids from subcontractors that are cheating their workers to make more money. General contractors can prevent these cheaters from unfairly competing against subcontractors who pay what the law requires. The OLSE did a great job but needs more resources to ensure that workers on City construction projects are not abused this way."

In a separate agreement reached between the OLSE and Jin in January, 22 former Jin employees were awarded a portion of a $400,000 settlement.

The negative impact of defrauding workers goes beyond the damage to the employees, according to Donna Levitt, manager of the OLSE. "Contractors who violate prevailing wage laws are able to submit artificially low bids on City contracts," she said. "To create a level playing field for all contractors, it's important that the few contractors who don't abide by the law are held accountable."

Jin Construction & Electric Co., its president Jin Eung Lee, and other company officials and affiliates were disbarred from the City and County of San Francisco's public work projects for a period of three years. The general contractors who failed to monitor Jin may continue to bid on public projects.

In a separate action, Jin employees have filed suit in San Francisco Superior Court against two other general contractors--C.M. Construction Co. and its principal Robert Chang and Transworld Construction Inc. and its principal, Geogmen Liu--seeking similar repayments for jobs on which they worked under the supervision of these general contractors and their surety bond companies, General Insurance Co. and Safeco Insurance Co. of America.

The OLSE was authorized by the San Francisco Board of Supervisors in October 2000 after several years of work by the San Francisco Building and Construction Trades Council, which had been documenting violations of wages and hours statutes. Along with Mayor Willie Brown, the council then set up the office under city and county guidelines.