Some are predicting the company that supplies a full third
of the construction labor in the United States is on its way
out.
"Labor Ready is going to have to change its way of doing
business," said IBEW Construction Organizing Director
Ron Burke. "What theyre doing isnt legitimate and its
not holding water with regulatory agencies."
A Growing Trend
Labor Ready is part of a trend that consumes a larger share
of the labor market every year. The ranks of so-called "contingent
workers" are growing faster than the work force in general,
at a rate of 15 percent a year. Employers have been attracted
to this new generation of middlemen who promise to relieve
them of payroll and paperwork on everything from workers
compensation insurance to Occupational Safety and Health Administration
compliance. Many of these companies are happy to hide behind
a plea of "Were not the employerLabor Ready is,"
when labor law is violated.
The IBEW recognized early on that the rising number of temporary/contingency
workers threatens the unionized construction industry. (See
IBEW Journal, "Trades Put Heat On Nonunion Hiring Halls,"
July/August 2000; and "Temp Agency Gets Caught at Its
Core GameChiseling," June 2001). Consequently, the IBEW
was a catalyst in the widening building trades investigation
of the exploitation of contingency workers. Burke serves on
the special committee formed to track Labor Readys law violations.
"An increasing number of agencies are coming into existence
to make money by cheating workers and to act as a buffer zone
for regulations," Burke said. "Theyre all profiting
off exploited workers. It makes it hard for good union contractors
to compete."
Contingency agencies profit from every hour that the rented
worker is on the job. Wages are rock bottom, benefits are
few, if any, and risk of injuries from negligent safety conditions
is high. Many of the workers have few skills; some are recent
immigrants drawn to companies that do not require documentation.
Fear of deportation makes them excellent targets for exploitation.
"Nonunion workers dont have much of a voice on the
job but temporary workers have even less under the contracting
relationship," Burke said. "The agency isnt on
the jobsite to ensure regulations and rules are being followed.
The temporary agency and the work site supervisors point fingers
at each other and the worker is stuck in the middle."
Will Collette of the AFL-CIO Building and Construction Trades
Department said the triangular relationship deliberately blurs
the lines of responsibility. "If both the employment
agency and the work site company share responsibility, more
often than not, no one takes responsibility. As a result,
more workers are getting injured and more workers are getting
killed."
The Law Catches Up to Labor Ready
Labor Ready is the nations leading provider of temporary
blue-collar workers, sending out 650,000 workers to construction
jobs last year. It also has one of the poorest safety records
in the temporary labor market it dominates. Since January
1999, Labor Ready has been cited 72 times by OSHA, according
to an analysis of data by the Charleston (West Virginia) Gazette.
That number of violations is more than its 10 largest competitors
combined.
In figures released by Labor Ready in June, the company revealed
its worker injury rate has risen to more than three times
the national average for the construction industry. In 2001,
its employees logged 31 injuries per 100 workers. This dismal
showing represents a sharp increase over Labor Readys 1999
rate.
A recent BCTD report revealed Labor Ready has made a widespread
and long-term practice of underpaying workers compensation
funds in some states and not paying into them at all in others,
often through the ruse of not calling a construction worker
a construction worker. Because of the high risk of the job,
occupational insurance rates for construction are among the
highest.
The BCTD found a West Virginia man who worked as a construction
laborer 126 times between 1996 and 2000, and was classified
by Labor Ready as a mail clerk or clerical worker 27 times.
For the remaining 99 jobs, he was coded as a piano tuner/taxidermist.
Not once was he listed for insurance purposes as a construction
worker. The BCTD report on Labor Readys workers compensation
practices found it misclassified its work force to significantly
reduce its insurance burden, cheating states and insurance
companies out of more than $200 million. Copies of the report
were sent to all attorneys general; Collette said investigations
of Labor Readys workers compensation practices are ongoing
in almost every state. (Texas is a notable exception. The
Texas state regulator returned the report to the BCTD, apparently
unread and certainly unheeded.)
Labor Ready also underpaid more than $125 million in claims
to injured workers. "Workers dont know how theyre classified
until they get hurt," Burke said.
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Many of the workers have few skills;
some are recent immigrants drawn to companies that do
not require documentation. Fear of deportation makes
them excellent targets for exploitation.
|
Insurance Burden Hurts Bottom Line
In June, Labor Ready announced it is in trouble with its
insurance providers. Two of its three workers compensation
carriers are bankrupt and might default on paying claims.
Its remaining carrier, Kemper, renewed its coverage but without
a cap on losses and such a huge deductible that it is almost
like having no insurance at all. Its surety bond providers
gave notice their surety bonds would be cancelled without
additional collateral. Even though Labor Ready managed to
borrow $65 million, its CEO reported at the June annual shareholders
meeting that it will try to maintain its self-insured privileges
on its own, without the cancelled surety bonds.
The BCTD is also going after Labor Ready for omitting key
information from a "10-K" report filed with the
federal Securities and Exchange Commission. Among the missing
data on the reports, the BCTD said in a letter to the SEC,
is workers compensation, material safety, revenue and cost
data. Its auditor, Arthur Andersen, approved the companys
10-K report but in June, Andersen notified Labor Ready it
does not stand by its SEC reports. Labor Ready is reporting
dramatically reduced second quarter profits compared to the
same time last year.
Labor Ready has also been caught for failing to pay its workers
prevailing wages on publicly financed projects and filing
inaccurate payroll records. Oregon Labor Commissioner Jack
Roberts proposed imposing a $50,000 fine for the oversights
and barring the company from working on any publicly financed
project for three years. (IBEW member Dan Gardner was elected
as the states next labor commissioner in May. His term begins
in January.)
One of Labor Readys marketing assets is the quick, almost
immediate, availability of workers. Sent out on a first-come,
first-served basis, the workers typically have to be ready
at 5:30 a.m. to wait for a call to come in. Workers are not
paid to wait, nor are they paid for transportation time to
and from the site. Company deductions for tools, equipment,
transportation and cashing daily paychecks make a large dent
in workers earnings. The average Labor Ready worker lasts
an average of 14 days with the firm. During that time, he
might gross $600, but gives back $100 or more in fees for
check-cashing, transportation and safety equipment.
BCTD Urges Resignations
As a result of the mounting problems, BCTD President Edward
Sullivan is calling on Labor Readys management team to step
down. In a letter to Labor Ready investors, he argued the
companys leaders should go, using Labor Readys own words
from its June 6 report to the SEC:
"Labor Ready acknowledges it is at risk for claims of
health and safety, wage and hour and criminal activity. We
have in the past been found, and may in the future be found,
to have violated regulations and there may be fines and other
losses or negative publicity with respect to any such violations
that may give rise to litigation," Labor Ready said.
"Labor Readys own report makes it clear that it is
time for CEO Joe Sambatoro and his management team to step
down," Sullivan wrote. "They are the architects
of this disaster."
Labor Ready is on the defensive now, issuing news releases
in response to the BCTDs findings, calling its conclusions
"distortions" and "misstatements." A list
of the press releases on the Labor Ready web site reveals
nearly 10 advisories the company has issued in the past year
in an attempt to answer the points raised by BCTD investigations.
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