A state investigation has uncovered numerous tax and labor law violations were committed by at least 15 construction companies in the $18 million renovation of the Boston Marriott Copley Place. A state task force targeted toward investigating the underground economy has found that the hotel’s contractors illegally classified employees and failed to report wages, which ultimately deprived the state of almost $86,000 in taxes.
These violations were first revealed by The Boston Globe last month, when it reported that the source of one contractor’s workers was a drug rehabilitation ministry in Philadelphia called Victory Outreach. These employees were not only paid significantly less than minimum wage-at $4 an hour-but also worked 12 hours a day, six days a week. The hotel’s owners have claimed that they were unaware of the alleged violations until State Police came to the hotel in January to personally interview the aforementioned workers.
However, investigators also discovered that a multitude of other companies were involved in the repeat violations uncovered by the task force, which stemmed largely from the employment of “shadow workforce” over a period of many months. Six companies were accused of misclassifying workers, and seven for failure to report wages or register to pay for unemployment taxes. The misclassification of employees as independent contractors is an attempt to avoid paying unemployment taxes or sponsoring other benefits. The failure to report wages is another method of attempting to avoid paying unemployment taxes.
According to the Globe, one company misclassified 28 workers and failed to report over $410,000 in wages. Host Hotels and Resorts Inc., the company that owns the Marriott, has claimed that it had no prior knowledge and did in fact attempt to correct the issues with its contractors. Kevin Gallagher, an attorney for Host, said in a statement that the company acted “quickly and aggressively to gather information and make it clear to all the parties involved that we will not tolerate violations of the law on any Host project.” Attorneys representing other companies that were allegedly involved also claimed they were unaware.
Interestingly, the bid of Baystate Services, the general contractor responsible for the renovations, for the contract was actually significantly lower than those of similar, but unionized, companies which also bid for the contract. Earlier this year, Attorney General Martha Coakley of Massachusetts investigated Baystate for underpaying 37 Victory Outreach workers. The company never admitted any wrongdoing but agreed to pay $31,000 in overdue compensation to the employees.
Perhaps most concerning in this case is the fact that state law prevents investigators from pressing charges against contractors and property owners. The law is designed to protect the privacy of companies accused of these types of crimes, but it also means that even if companies are found to have committed wage fraud, tax violations, etc., it will not be made public. With state officials reporting that the number of violations found at Massachusetts worksites is increasing, it is perhaps more important than ever that we reconsider these laws and how they affect the greater public.
Investigators find widespread labor violations at Copley Marriott renovation, The Boston Globe, September 4, 2012