Latest Study Shows Wage Theft Still Rampant in District of Columbia

A study by Catholic Labor Network shows that:

• Nearly half of the workers surveyed (47%) were part of the underground economy, either paid with a check without required payroll tax deductions or paid in cash.

• The underground economy was a major component of the private sector of the construction market. Of the 64 survey participants employed on private sector construction projects, 37 (58%) were part of the underground economy. In contrast, all 15 workers surveyed who were employed on public construction contracts received paychecks with legally required pay stubs and payroll tax deductions.

• The underground economy was concentrated in the non-union sector of the construction market. Among the 68 workers surveyed who did not belong to a union, 37 (54%) were part of the underground economy. All 11 union members surveyed received checks with legally required paystubs and payroll tax deductions.

• There was a strong association between the underground economy and minimum wage violations. Eight workers in the sample (10%) were paid less than the DC minimum wage; all 8 were part of the underground economy. None of the workers issued a proper paycheck with a pay stub and tax deductions received less than the DC minimum wage.

• There was a strong association between the underground economy and overtime violations. Twenty-nine workers in the sample reported that they were not paid required overtime rates when they worked more than 40 hours per week. Of these, 28 (97%) were part of the underground economy.

• About half the interview participants employed by electrical contractors, and majority of workers employed by mechanical contractors (plumbing and HVAC) and drywall contractors, participated in the underground economy. A well-developed system of “labor brokers” – employers of record who pay employees on behalf of specialty contractors – has sprung up in these segments between the established firms and their workforce to facilitate payroll violations. Most of the workers recruited by these labor brokers were immigrants unfamiliar with their rights or hesitant to exercise them.

• The heavy concentration of payroll violations and wage theft on the District’s large commercial construction projects, especially among employees of mechanical, electrical and drywall contractors, offers good opportunities for strategic enforcement initiatives targeting these specific sectors within the broader construction industry.

CLN_2021WageReport-1

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