Labor Investigations Heating Up

According to an article in the Wall Street Journal last week, “The Labor Department is investigating pay practices at many of the top companies in home building, hitting them with a broad demand for records that has led to complaints of regulatory overreach.”

In the move, the Labor Department is “opening a probe under the Fair Labor Standards Act, which governs matters such as overtime pay and limits on using teen workers”.

The Department, as part of its investigations, recently sent letters that, “instructed the home builder to immediately turn over the names, addresses, Social Security numbers, pay rates and hours worked for all employees over the past two years.  It asked the names of all contractors hired in the past year. The letter didn't allege any specific violations of law.”

Many of the larger homebuilders hire independent contractors and they in turn hire subcontractors and a labor force to do the work.  Those homebuilders typically don’t collect the information on their labor force and they are complaining that this is a major overreach of government responsibility.

“Some industry officials said they thought the Labor Department might be trying to establish that a general construction contractor, such as a large home builder, is a ‘joint employer’ of a subcontractor.  That would make the general contractor liable for wage-and-hour violations [committed by] its subcontractor.”

This “joint employer” concept is the basis for the suit in Austin against Greater Metroplex Interiors (GMI) over the underpayment of wages to a group of workers on one of their projects.

The Homebuilders organizations claim that this move is another step toward organizing the labor force so that they can be unionized.  The article quotes Gerald Howard of the National Association of Homebuilders:

"There has been a movement afoot in many instances fueled by the unions to force the subcontractors to be employees of the builders, because the next step is to unionize them.”

This is a major issue among a number of homebuilders and multifamily contractors, especially where the market has deteriorated to the point that low bid is the only criteria that owners are using for the selection of the contractors.