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Inspections by the state Department of Labor have turned up about 300 workers who lacked Workers' Comp coverage because
they were either being paid in cash or misclassified as independent contractors.
About half of the subcontractors cited were based in Connecticut and half were from other states, some as distant as
Arizona, New Mexico and Colorado.
The crackdown follows the enactment last year of a law that gives labor department officials the authority to issue stop
work orders when they identify violations. The legislation was backed by construction and business trade groups in an
effort to protect contractors who play by the rules from those who may be underbidding them because they pay workers in
cash to cut costs.
Since the law went into effect, a team of 30 investigators have been visiting construction sites across the state. Tips
about possible violations have come in from labor unions, contractors and competing firms, said Gary Pechie, director of
the DOL's Wage and Workplace Standards Division.
Once a company is shut down, it must provide documentation to Pechie's division proving it has taken steps to secure
compliance. A company faces a $1,000 fine for each day it operates on the site where it was issued a work stoppage order.
"In most cases, the companies scramble and they're back on the site the next day after they get their ducks in a row,"
Pechie said.
In an on-site investigation conducted July 25, labor officials discovered that 24 employees of Champagne Drywall, a
subcontractor based in Agawam, Mass., lacked proper insurance for their workers on Killingly Commons, a retail plaza
project in Killingly.
Officials for Champagne Drywall were not available for comment at press time. But Konover Construction, the general
contractor for the Killingly job, issued the following statement:
"To the best of Konover Construction's knowledge, the subcontractors cooperated with the DOL and were promptly permitted
to return to the project after any issues were resolved."
Konover was not the subject of the inquiry by the DOL. "Konover Construction strictly adheres to all DOL rules and
guidelines and subcontractors who work on our projects are equally obligated to comply," the company said.
In other cases, subcontractors who were caught abandoned the job site, said Kia Murrell, assistant counsel for the
Connecticut Business & Industry Association, which helped draft the 2007 law.
"It's cheaper for them to bid on a job because they're not paying insurance," Murrell said. "If they get caught, they
move on."
On March 19, DOL inspectors found that 30 workers at a construction site in East Haven lacked proper Workers' Comp
insurance. They were employed by CGM Construction, which listed its address as an apartment in Hamden. Efforts to reach
company officials were unsuccessful. Its listed phone number had been disconnected.
More Enforcement Powers
When contractors fail to pay Workers' Comp premiums, the benefits for uninsured workers injured or killed are paid for
by the state's Second Injury Fund, which is funded through assessments of all Connecticut employers.
The rub for companies paying Workers' Comp premiums is that they ultimately subsidize companies that don't play by the
rules.
Before the 2007 law was enacted, the power of state officials was limited. If a company was not in compliance with
Workers' Compensation guidelines, its sole remedy was to request an arrest warrant against the general contractor on the
job site. "No arrests were ever made, and we weren't able to get out to the degree we thought we should," Pechi said.
"With this law, it seems we can take some immediate action and make some impact."
Don Schubert, the director of regulatory affairs for the Connecticut Construction Industries Association, said steady
enforcement of workers' comp regulations is a "critical factor" in allowing companies to stay competitive. "The construction
industry thinks it's great Gary Pechie and his department are putting this legislation to good use," Schubert said. "It
keeps a level playing field."
Murrell of the CBIA said she consulted with construction companies as the CBIA helped draft the legislation.
Next, Restaurants & Hotels
Construction accounted for the most fatal work injuries of any industry sector in 2006, according to U.S. Department of
Labor statistics. Construction laborers had the fourth highest number of nonfatal injuries in the same year, 488 per
10,000 workers.
As construction season slows down, Pechie said his division will begin to set its sights on other industries, notably
restaurants and hotels. Already, the division has received tips about violations in those sectors. "We found a hotel
using all independent contractors," Pechie said. "How can you run a hotel with no employees?"
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State officials have issued stop work orders against more than 60 subcontractors at 30 construction sites across
Connecticut in recent months in a bid to crack down on those that sidestep paying required workers' compensation
premiums and taxes.