By Kenric Ward | Watchdog.org Virginia Bureau
RICHMOND, Va. — On paper, Virginia’s laws against rogue contractors appear ironclad. In reality, the regulations look more like Swiss cheese — and taxpayers are losing out.
Spotty oversight of construction trades enables unlicensed subcontractors to exploit the cheap labor of illegal immigrants and undercut law-abiding builders, taking jobs from U.S. citizens. The results range from shoddy work to lost tax revenue.
Eric Olson, executive director of the Virginia Board for Contractors, acknowledged in an email “there is no statutory requirement” for state and local licensing agencies to share information or coordinate enforcement efforts.
Olson said this week that illegal and unlicensed subcontractors have been the subject of 599 disciplinary cases since 2003.
Contractors interviewed for this article say 599 is a drop in the bucket. Indeed, more than 200 violations were found in the Lynchburg area alone.
Outcomes range from warnings to license revocation. Fines up to $2,500 are commonly levied against contractors that “assist” other firms to violate the law, Olson said.
Olson said his board “has taken steps to ensure that everyone who is licensed is given the opportunity to learn the requirements in the regulations.” But he admits educational efforts “do not, of course, stop contractors from violating the regulations.”
Public contracts stipulate that contractors “do not, and shall not knowingly employ an illegal alien during the performance of the contract for goods and services in Virginia.” But contractors can dodge responsibility because they don’t control who their subcontractors employ.
Profiting in the shadow economy
The state contractor board is a wing of the Department of Professional and Occupational Regulation. DPOR has 200 employees and operates on the fees and fines it collects. The department ran a $2.9 million surplus in fiscal 2012, the latest year for which figures were available.
A consultant’s analysis concluded in 2013 that “DPOR’s purpose was unclear to its employees, hindering their ability to prioritize activities and communicate effectively with the public.”
Use of illegal immigrants in the building trades is widespread, with most workers paid in cash. Under-the-table deals allow laborers and their employers to duck tax obligations, disability coverage and Obamacare mandates.
Catherine Ruckelshaus, general counsel and program director at the National Employment Law Project, calls unlicensed operators “a huge drain on workers’ comp programs.”
The Pew Hispanic Center estimates nearly one in five construction workers nationally are undocumented. Up to 40 percent of brick masons and drywall installers are believed to be in the country illegally.
“This is a sharp rise from 10 percent in 2003,” the Pew report stated.
Olson says unlicensed-contractor cases have flattened in Virginia, but he adds that “complaint-driven” enforcement is problematic.
“We get complaints all the time, but the (state) board has no legal authority to walk onto a job site. Only local permit officers do, and they’re limited. We don’t have the manpower to be everywhere,” he said.
“Everything is driven by price, and people don’t care (about quality). This is why we are stressing consumer education,” Olson added.
David Williams, president of the Taxpayers Protection Alliance, would like to see more effort.
“We would always support enforcement of labor laws and making sure that workers pay taxes on the work that is being done,” he said. “Agencies need to do their job, whether it’s enforcing labor laws or any other law. When citizens pay their taxes, they expect all laws to be enforced.”
Depending on Uncle Sam
Virginia is one of 20 states that require certain contractors to use the federal E-Verify program to vet workers’ legal status, but there are gaping loopholes.
First, the state only requires E-Verify to be used in public-works and public-services contracts. Second, it only covers contractors with an average of 50 or more employees.
Six states — Arizona, Mississippi, South Carolina, Alabama, Georgia and North Carolina — require all or nearly all businesses to use E-Verify, according to a 2012 survey by the Center for Immigration Studies.
Other states have moved in the opposite direction. The most notorious example, California, prohibits all its jurisdictions from requiring private employers to use E-Verify.
While Virginia licensing agencies say they randomly audit contractors and subcontractors, CIS researcher Jon Feere said South Carolina is the only state with an “active audit process.”
Yet state-level enforcement is stymied when crucial data is held in Washington, D.C., where Obama administration policies invite an ongoing influx of foreign labor.
“An audit process necessarily requires a state to obtain a list of employers using E-Verify. Such lists are only available from the federal government. It is clear that better cooperation from federal agencies would make state E-Verify efforts much more effective,” Feere wrote.
Ruckelshaus said 20 states have agreements with the U.S. Department of Labor and the Internal Revenue Service to help sweep up unlicensed operators. But Virginia is not one of them.
Neither the Virginia chapter nor the national office of the American Building Contractors responded to Watchdog.org’s request for an interview.
Attorney General Mark Herring’s office did not comment by deadline.
Kenric Ward is a national reporter for Watchdog.org and chief of its Virginia Bureau. Contact him at (571) 319-9824. @Kenricward