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Let’s Count the Ways Union Contractors Cheat Their Union – The Dirty Seven
1.) Straight Time Cash for O.T. and Weekend Work
The easiest and most common way contractors cheat both union benefits and Payroll Taxes is to pay their workers straight time cash
for overtime and weekend work. This is usually done with a select group of “trusted” employees who love their job and love the cash however, I have seen companies tell perspective employees that “it’s straight time cash for overtime and weekends” from the opening bell. Some walk out but in this market most don’t. Let’s clarify, the worker works 40 hours a week and the contractor pays on those 40 hours, their benefits are paid all year. Anytime the employee works over 8 hours or on weekends they are paid in cash with no benefits.
How does the union catch this scheme? There are a few ways and none are completely foolproof. The first is that a group of workers from the same company can write a log of all hours worked and document cash payments made. The union can then demand an audit. They would then ask to look at their estimates and compare hours estimated against actual hours worked. If the actual hours are obnoxiously low against the estimate that is a telltale sign. They can also look at cash disbursements made to the owner. Either way the employer is usually a master of misinformation or lacks accurate time sheets. No information is better for the cheating contractor. It is a common business practice for some contractors in fact I have heard of several contractors in multiple trades get caught every audit, Most times these contractors set up a payment plan, pay each month for several months then pay it off in one large lump sum. I have a question for the readership, If I asked you to invest in a business with me and I told you that every three years we would make $3,000,000 but we may have to give back $1,000,000 for a net of $2,000,000 would you take me up on that investment? You bet you would and that is exactly what these contractors do and it’s how they think.
2.) Pre-Paid Cash Cards for O.T. and Weekend Work
This is a pretty new scheme and incredibly difficult to track. A union auditor told me that it was almost impossible to prove unless
you used a private investigator to tail the owner or accountant to see the transactions taking place, or to witness the employee receiving the Cash Card. Even with a detailed employee journal it’s tough to make any fines stick because there are no bank deposits and usually the contractor buys the cards from a new store every week.
How does the union catch this scheme? With a combination of detailed records and by comparing estimates to actuals but honestly this is a tough one to prove. The union will sometimes ask a respected contractor to go over an estimate from an audited company to see if they can spot inconsistencies.
3.) Claiming the Hours as Vacation, Sick or Holiday Pay
This is usually a desperate act by a contractor who got his union audit back and found that they flagged the 5 weeks paid vacation he or she paid to 3 union employees. In most unions the contractor is not required to pay benefits on paid vacations, sick days or paid holidays. So in an effort to save some money they slip in several weeks of vacation time per employee per year. Most times the employee never knows it because their coverage never lapses. Word to the wise, if you’re an employee keep an eye out for your pension and 401K deposits.
This is also real easy for the contractor to fight and it’s usually handled during the audit. The auditor asks to see a time sheet for those missing hours and if one is in the employee file marked Vacation it’s usually dropped. They can also check with the employee to confirm. You may ask why a contractor would nickel and dime their union. 5 weeks of work at about 4K per employee in most general trades. If you had 5 employees that you played this scheme with……..you get the picture right? Who has two thumbs that wants an extra 20K? THIS GUY!
4.) Another Non-Union Company is Set-up to Signatory Work
This is technically called double breasting, owning two companies in the same trade, one is union the other is non-union. However, most contractors are smarter than this, they have an accountant/friend/family member start a non union staffing type company that just happens to hire only non union plumbers or electricians, etc. So here is how this works, union labor will begin the job on a Monday they will stop at a certain point when the workday is complete. When they get back to work the next day or after a weekend the work they started is magically completed or it’s significantly further along than it was left. The contractor tells the worker that he had a night crew come in to push the job along. Most union contracts have a stipulation that workers who start a job are entitled to work overtime on that job unless they turn the work down. Most tradesman that are working 40 hours/week after week never bother to question the company they work for and employees that do ask questions are suddenly laid off due to lack of work.
How does the union catch on to this scheme? There are few ways. The trades are a funny industry; we all hear what is going on in the field. The union gets wind of jobs that are being completed at night by non-union labor. It is the responsibility of the union Business Agents to watch the job to see who is coming and going. They can walk up to the job and walk in to see who is doing the work. If the job is locked they can call the contractor to see who is working. If they cooperate and the men/women are upstanding union employees all is well. If not a union audit is just over the horizon.
True Example of This Scheme at Work
Here is a real story related to us by a union auditor. So two Eastern European gentlemen entered a local UA plumbers union one day and ask that they be organized as union plumbers (Organizing takes an experienced non-union plumber and makes him union. The level of apprenticeship or even placing he or she as a journeyman is based upon testing. If the worker is already licensed it’s usually a no brainer). The person in charge of organizing asked the two gentlemen what experience they had and if they were currently employed. When the two gentlemen related to the union organizer who they worked for he almost fell out of his chair. They had been working for a union contractor for three years. The union official asked them to bring in pay stubs. The pay stubs were written from a completely different company. The union then went to work on identifying the jobs they were on and what they had done. It turns out that the contractor’s accountant set up and owned a non-union staffing company and was paying the workers out of it and a significantly lower cost per hour. The sad part about this is, it becomes a negotiation. The union wants 2 million the contractor fights it and the number gets significantly reduced and the process starts all over again.