Economy

When one man’s bootstraps leave his workers dangling

Robert Miller describes his story as one of bootstraps and determination.

But for the dozens of Hispanic immigrants Miller’s company, NC Contracting Inc., has hired over the last decade, Miller’s history is one of theft and exploitation.

For years, state and federal regulators fielded and examined complaints from workers who spent weeks toiling under Miller’s contracts without being paid. Those regulators could have stopped Miller but have not, allowing him to keep recruiting immigrants desperate for work.

Records show that workers have complained at least 15 times times since 2002 that Miller, a contractor in Raleigh, N.C., failed to pay them for work framing, painting or hanging drywall across the Southeast. Twice, federal labor investigators concluded Miller had failed to pay workers; a judge in a separate lawsuit found the same violations for another set of workers. Each time, Miller has escaped with impunity.

He has paid no fines. He has faced no criminal charges. And, though two federal labor investigators suggested his tactics should get him shut out of federally funded work, he has yet to be banned.

In some instances, Miller himself wasn’t even ordered to pay the workers. Instead, the general contracting firms that had hired him paid tens of thousands to workers Miller had recruited and then shortchanged, federal labor investigations show.

“He’s getting away scot-free,” said Maggie Davis, a Durham attorney who helped some of the workers collect their wages. “You can’t take advantage of someone like that. You got the advantage of their work, and now you aren’t going to pay them?”

Last month, McClatchy reported widespread labor violations on federally funded projects across the country in a series called “Contract to Cheat.” Tens of thousands of pages of payroll records reviewed by reporters show that workers who should have been given the protections and security guaranteed to employees were treated instead as independent contractors. Government officials did little, if anything, to stop the practice, called misclassification. The scheme undercuts honest employers, cheats workers and costs taxpayers billions each year in lost tax revenue.

As the case of NC Contracting Inc. shows, even when the labor violations cut deeper, robbing workers of days or weeks of wages, regulators may avoid taking a hard stand. While evidence of his practices mounted, Miller kept operating, recruiting other unsuspecting laborers and securing contracts worth hundreds of thousands of dollars from general contractors. He managed to shield his history of labor violations from the general contractors who hired him.

Miller, 42, sees himself as a victim, hounded unnecessarily by lawyers and investigators. He says the scrutiny has put his business in jeopardy and that he has struggled to find work recently.

“It has demonized me,” Miller said in a telephone interview. “It’s cost me everything.”

Federal labor officials are the workers’ defense against unscrupulous company owners. As such, they wield a lot of power. They can force payment, fine a company and even push for criminal or civil prosecution.

But documents show federal officials have done little to stop Miller’s pattern of hiring workers he then robs of pay. Once, a federal labor investigator closed a case after Miller and his attorney said they understood labor laws and would heed them.

Twelve times since 2002, state labor investigators in North Carolina heard complaints about NC Contracting failing to pay workers. In some of those cases, state investigators moved on after the worker withdrew his complaint because he was paid or he failed to respond to the agency’s inquiry. On a few occasions, state officials determined the worker was a contractor, not an employee.

On a federally backed project in 2013, a contractor from the U.S. Department of Housing and Urban Development worked with an attorney to help collect wages owed to the workers through the general contractor; the agency didn’t file a report with the U.S. Labor Department about any problem with NC Contracting, which was a subcontractor for the project.

Just months before, federal labor investigators had had another run-in with NC Contracting on a federally backed project; the general contractor paid the workers more than $14,000 in uncollected wages. The labor investigator said in his report that it was time for Miller to be shut out of federal work.

But the Labor Department later decided against stripping NC Contracting Inc. of its right to work on federal projects. A spokesman for the department declined last week to say why or to discuss any of Miller’s cases.

The prosecutors who could have pursued Miller on criminal charges were in the dark; none of the labor investigators alerted officials at the North Carolina Attorney General’s Office or the U.S. Department of Justice about him.

Catherine Ruckelshaus, a lawyer who works on labor issues for the National Employment Law Project, a nonprofit in New York, wasn’t surprised that regulators haven’t pursued NC Contracting more intensely.

“That’s why there is so much wage theft,” said Ruckelshaus. “The enforcement, even when it does happen, is not very robust.”

Thomas Walker, the U.S. attorney for the Eastern District of North Carolina, said his door was open to hearing about contractors such as NC Contracting Inc.

“These cases can involve federal dollars,” Walker said. “It is incumbent that these matters be investigated and referred for prosecution when appropriate.”

‘It would drive my prices up’

Miller has been under the nose of government investigators for the majority of the time he’s been in business. A North Carolina native who lives in Wake County, Miller started NC Contracting Inc. in 1999. He soon began bidding on large apartment projects, delivering crews of dozens of men to frame, hang drywall and paint.

Miller built his business with layers of Hispanic workers flocking to North Carolina in the 1990s and 2000s.

He described his business methods in a 2012 deposition taken for a lawsuit against him. Miller said he recruited workers by placing advertisements on Hispanic radio stations or on Craigslist. Sometimes he posted fliers at Hispanic groceries. The workers who answered the ads were assigned to a crew run by a foreman he hired. At every level, though, Miller considered the workers independent contractors, not employees under his control. His decision not to have employees was a business strategy.

“It would complicate things, and it would drive my prices up,” Miller said in an interview. “I don’t hire individuals” as employees.

Treating employees as independent contractors could have saved Miller at least 20 percent in labor costs by failing to provide workers’ compensation or unemployment insurance as well as to pay the employers’ portion of Social Security and Medicare taxes.

It also broke the law, according to records provided by the federal Department of Labor. At least twice, federal labor investigators found Miller had skirted federal labor law and IRS codes that dictate who must be an employee.

Though Miller’s company had been on the radar of state labor officials through the 2000s, his practices first came across the desk of federal labor investigators in 2011, when his company stopped paying workers on a housing project near the coast that was funded by the federal economic stimulus.

After two weeks of not being paid, more than a dozen workers complained to federal labor officials. According to an investigator’s report, Miller had told the workers he didn’t have any money to pay them and that he would make good on their wages when he could.

By the time federal labor investigator Linda Wilkerson arrived at the project to speak with workers, NC Contracting Inc. had been fired from the project by Clancy and Theys, a general contracting firm in Raleigh in charge of the Wilmington project.

“Once they showed us who they were, we terminated their contract,” said Scott Cutler, vice president of Clancy and Theys. “They didn’t perform, and they exploited their workers.”

Wilkerson found in her report several problems involving NC Contracting’s work. One of the obvious ones: Its workers should have been treated as employees, not contractors.

“The subject misclassified many of the employees as independent contractors,” Wilkerson wrote in her report. “They did not represent themselves as business owners, and they had no part in the negotiation of wages and hours. They worked dependently” for NC Contracting.

For months, Wilkerson pressed Miller to pay the workers. He didn’t.

When a subcontractor on a federal project fails to pay workers, the responsibility lands with the company that hired him. In late summer 2011, Clancy and Theys paid nearly $16,000 in back wages and overtime pay to 14 workers.

Miller said in an interview that he was broke because Clancy and Theys owed him hundreds of thousands of dollars; Cutler of Clancy and Theys said the company paid what it owed him before termination, and regardless, that shouldn’t have kept him from making payroll.

“If he didn’t pay his workers, that was his choice,” Cutler said.

Wilkerson also found evidence of falsified payroll reports. Each week, Miller certified on federal payroll records that he had paid the workers in full when he had not, the investigator concluded. The payroll records warn that providing false information on the reports can result in criminal or civil prosecution.

Wilkerson stopped short of involving prosecutors. Instead, she educated Miller and his attorney about labor laws. Wilkinson then closed her investigation.

‘A history . . . of defaulting on payments’

Eighteen months later, Miller did exactly what he and his lawyer had indicated to Wilkerson that they wouldn’t do again, according to a second labor investigation.

He treated each member of a crew he’d recruited to build a government-backed apartment project as an independent contractor, not an employee. And, at the end of the project, as he had done before, he stopped paying the workers. He owed workers six weeks of pay; the payroll reports he filed with the federal government certified he had paid them.

The federal labor investigator assigned to this new case quickly noticed Miller’s pattern.

Miller had been fired from the project after the general contractor started hearing reports Miller wasn’t paying workers. Miller blamed the general contractor, CF Evans & Co. Construction Services of Orangeburg, S.C., for shortchanging him as the reason he couldn’t pay workers. Evans & Co. declined to comment.

“The violations were identical to this new ongoing investigation of the same subcontractor,” the investigator wrote.

The investigator detailed why Miller should be banned from federal work.

Miller “has a history of obtaining government contracts, and then defaulting on payments to workers,” he said.

“There was culpable neglect and disregard on the part of the firm and its owner, as to the firm’s compliance: The fact that the firm was previously found in violation of the exact same practices indicates that he was and is aware of this violation. The investigation determined that the firm has continued this practice of illegal nonpayment,” the investigator wrote.

The agency didn’t pursue the investigator’s recommendation to disqualify NC Contracting Inc. from federal work.

Confident about the future

NC Contracting Inc. has stalled in recent years, but not because regulators hampered its operations.

Miller has run afoul of tax obligations, and state revenue officials instructed the North Carolina secretary of state to suspend NC Contracting’s certificate to operate in the state. Another group of workers shortchanged on pay have filed a private lawsuit against NC Contracting.

Despite the scrutiny from investigators, Miller is confident that he will rebound. He said he’d worked too hard, and for too long, to quit. And, when he builds his business back, Miller says, he’s bound for big multifamily housing developments like the federally funded ones where he ran afoul of labor obligations.

Miller vows to be the largest framing, painting and drywall subcontractor for multifamily housing developments along the East Coast by the time he’s 50 years old.

“NC Contracting will rise again,” Miller said. “Somehow, some way, I will persevere.”

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