Office of the Comptroller v. Craft Fence, Inc., Robert Guido, & Craft Contracting Group, Inc. OATH Index No. 494/14 (May 6, 2014)

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1 Office of the Comptroller v. Craft Fence, Inc., Robert Guido, & Craft Contracting Group, Inc. OATH Index No. 494/14 (May 6, 2014) Following respondents default, petitioner proved violation of Labor Law, where respondents failed to pay prevailing wages and supplemental benefits to five employees on public works contracts. Respondents are liable for underpayment plus interest. Based upon willfulness of underpayment and falsification of payroll records, 25% civil penalty and five-year debarment also recommended. NEW YORK CITY OFFICE OF ADMINISTRATIVE TRIALS AND HEARINGS In the Matter of OFFICE OF THE COMPTROLLER Petitioner - against - CRAFT FENCE, INC., ROBERT GUIDO, & CRAFT CONTRACTING GROUP, INC. Respondent REPORT AND RECOMMENDATION KEVIN F. CASEY, Administrative Law Judge Petitioner, the Office of the Comptroller, brought this proceeding under section 220(8) of the Labor Law and Title 44, Chapter 2 of the Rules of the City of New York (RCNY), alleging that respondents, Craft Fence, Inc. (Craft Fence), Robert Guido, and Craft Contracting Group, Inc. (Craft Contracting), did not pay prevailing rate of wages and benefits to five employees for work on contracts with the Department of Parks and Recreation and the Department of Transportation (ALJ Ex. 1). At a pre-hearing conference on October 8, 2013, Mr. Guido appeared with counsel and a hearing was scheduled for January 13, On January 8, 2014, respondents newly retained counsel requested an adjournment to become more familiar with the charges. With petitioner s consent the matter was adjourned to April 7, On April 3, 2014, respondents counsel moved to be relieved on the grounds that respondents did not intend to appear for the hearing and Mr. Guido had instructed counsel not to

2 - 2 - appear. Counsel submitted an affidavit from Mr. Guido stating that he was the president of both corporate respondents, which were no longer in business, and neither he nor the corporate respondents would attend the hearing (ALJ Ex. 3). In a phone conference with Mr. Guido on April 4, 2014, he confirmed that he would not be attending the hearing and he had been advised that he could be found personally liable for the underpayment, interest, and civil penalty requested in the petition. Based on Mr. Guido s affidavit and statements during the phone conference, I relieved respondents counsel (Tr. 7-9). Respondents did not appear at the hearing which began April 7, Petitioner presented proof of service of the petition and notice of hearing, by regular and certified mail, at respondents' last known business address of record, as required by statute and the Comptroller's regulations (Tr. 19; Pet. Exs. 1-3). See Labor Law 220(8) (Lexis 2014); 44 RCNY 2-02(b)(1)(Lexis 2014). Service was reasonably calculated to achieve actual notice of the proceedings. Based on Mr. Guido s attendance at the pre-hearing conference, his subsequent affidavit, and the phone conference with him, I also find that he, personally and as an officer of the corporate respondents, had actual notice of the proceedings and voluntarily defaulted. Thus, petitioner could proceed in respondents absence. See Office of the Comptroller v. Decoma Building Corp., OATH Index No. 2154/13 at 2 (Nov. 18, 2013), adopted, Comptroller's Dec. (Dec. 30, 2013). At the two-day hearing, which ended April 8, 2014, petitioner relied on documentary evidence and testimony of six witnesses. On the first day of the hearing, I granted petitioner s motion to amend the petition to conform to the proof, to reflect revisions to the audit (Tr , 168). There was no prejudice to respondents because petitioner provided them with the revised audit at least two months prior to the hearing and it reduced respondents total liability by more than $40,000 (ALJ Ex. 6; Pet. Ex. 29). See Office of Comptroller v. Mackey Reed Electric, Inc., OATH Index No. 1950/13 at 3 (Jan. 3, 2014) (petitioner s motion to amend complaint to conform to the proof may be granted where there is no prejudice to respondent). For the reasons below, the petition should be granted and respondents found liable for failing to pay the prevailing rate of wages and benefits, plus interest. Because the underpayment was willful, I recommend a 25% civil penalty and debarment for five years.

3 - 3 - ANALYSIS New York public works contractors must pay prevailing wages and benefits to their employees. N.Y. Const. art. I, 17; see Labor Law 220(3)(a),(b) (Lexis 2014). To prove a violation, petitioner must show by a preponderance of evidence that respondents failed to pay employees prevailing wages and benefits performed on public works contracts. See Office of the Comptroller v. G.A. Energy Maintenance, Inc., OATH Index No. 411/92 at 20, 24 (Feb. 26, 1992), adopted, Comptroller s Determination (Apr. 2, 1992). Petitioner met that burden here. The evidence established that Craft Fence entered into public works contracts with city agencies to construct fencing, guardrails, and backstops in parks and to install signs on streets (ALJ Ex. 1; Pet. Exs. 8, 10, 12, 14, 16, 18, 20, 22). From December 2005 to December 2009, Craft Fence employed laborers, sign erectors, and ornamental ironworkers to perform the work required by these contracts. At the time, the prevailing regular hourly wage and benefit rates were $52.28 for laborers, $63.92 for sign erectors, and $70.65 for ornamental ironworkers (Tr. 91; Pet. Exs. 28, 30, 31, 32). Petitioner proved that, instead of paying prevailing rates, respondent paid workers from $100 to $120 a day, without benefits. Petitioner received complaints from five workers Adolfo Guizar Figueroa, Jorge Alvarado Torres, Miguel Munguia, Raul Alvarez, and Elman Sorto (Pet. Exs. 1, 2, 4, 5, 6). All of them testified credibly at the hearing. Their undisputed testimony was consistent and compelling. Each recalled specific details about the hours worked, the job sites, the type of work performed, the tools used, and the method of payment. For example, Mr. Alvarez recalled that he worked for Craft Fence from 1996 to 2010 (Tr ). He described digging holes, cementing poles, and installing chain link or iron fences in city parks (Tr ). And he recalled working alongside Mr. Figueroa, Mr. Munguia, and Mr. Torres when they installed fences (Tr ). Mr. Alvarez testified that the fifth complaint, Mr. Sorto, worked as a welder in the Craft Fence headquarters for several years and he did not go into the field to install street signs until 2009 (Tr. 142). The other complainants offered similar details. Mr. Figueroa, who was hired by Mr. Guido in November 2005, worked for Craft Fence until September 2007, mostly installing fences

4 - 4 - in parks (Tr. 211, ). His starting pay was $100 per day, and it later went up to $120 per day (Tr. 217). Mr. Torres testified that, from December 2005 to September 2007, he was paid $110 per day (Tr. 181, ). Following an accident at a job site, Mr. Guido paid him by check for three months, which enabled Mr. Torres to receive worker s compensation to help pay for hospital bills; the rest of the time he was paid in cash (Tr. 184). Mr. Munguia testified that he worked for Craft Fence from November 2005 to March 2007 and was paid $100 a day to install fences around baseball fields, basketball courts, and pools in city parks (Tr. 197, 205). He also spent about 20% of his time installing and replacing street signs (Tr. 198). Mr. Sorto testified that from 2004 until 2010 he worked for Craft Fence, later referred to as Craft Contracting, and he was paid $100 per day (Tr. 158). He worked as a welder in the shop and did not go to job sites, installing street signs, until 2009 (Tr. 154, 158, 160). The witnesses differed on minor details. That was understandable in light of the passage of time. But they all agreed on the core details. They usually showed up for work at the Craft Fence yard at 6:00 a.m., where they loaded supplies on trucks; they arrived at the job sites at about 7:00 a.m.; they worked at the site for eight hours, with a 30-minute lunch break; they left the job site at about 3:30 p.m. to return to the yard; they worked five or six days a week; they were usually paid in cash, distributed in envelopes on Wednesdays; and none of them received any supplemental benefits, such as medical insurance or pensions (Alvarez: Tr ; Figueroa: Tr ; Torres: Tr ; Munguia: Tr ; Sorto: Tr ). After receiving some of the complaints in December 2007, petitioner s outreach director, Michelle Centeno, requested payroll records from respondents, including a payroll journal listing the names of workers, the hours and locations worked, the rate of pay, and the pay that they received (Tr. 12, 25, 27-28). Mr. Guido responded but did not provide the requested documents (Tr. 27). Ms. Centeno continued to request the documents until 2012 (Tr. 27). Craft Fence never submitted any payroll records reflecting hours worked and hourly rate of pay (Tr. 28). In light of the refusal to cooperate and the failure to testify at the hearing, it can be inferred that such evidence would have been unfavorable to respondents. Office of the Comptroller v. A & R Paterno Construction, Inc., OATH Index No. 2248/00 at 8 (Oct. 19, 2000).

5 - 5 - The documents that were provided were incomplete and false. For example, Craft Fence provided petitioner with pay stubs for Mr. Torres and Mr. Alvarez (Tr. 35, 47-48, 79; Pet. Exs. 3, 6, 24). Those documents show gross and net pay, but they do not reflect hours worked each week or hourly rate of pay (Tr ; Pet. Ex. 6). Notably, Mr. Figueroa and Mr. Munguia are omitted and the pay stubs corroborate Mr. Torres s testimony that he was only paid by check for three months (Tr. Pet. Ex. 3). The stubs also show that Mr. Torres s weekly pay was about $440 or $550, consistent with his testimony that he was paid $110 per day (Tr. 227; Pet. Ex. 3). Earning reports provided by Craft Fence from December 2005 to September 2009, and for Craft Contracting from October to December 2009, purportedly represent monthly, quarterly, and annual gross pay, but they do not show weekly wages, hours worked per week, or hourly rate of pay (Tr ; Pet. Ex. 24). Petitioner proved that those earning reports were incomplete. The reports included Mr. Alvarez, but omitted Mr. Figueroa and Mr. Munguia, even though the testimony demonstrated that both men worked on city contracts (Tr. 81; Pet. Ex. 24). Similarly, the earning reports showed that Mr. Torres worked for Craft Fence for three months at the end of 2006, consistent with his testimony that he was on the books for three months, but the records did not show that he worked before and afterwards (Tr ; Pet. Ex. 24). And the reports did not show that Mr. Sorto worked for Craft Fence in May and June 2009, even though he produced pay stubs showing that he earned from $300 to $600 per week, corroborating his testimony that he was paid $100 per day (Tr. 158; Pet. Exs. 7a, 24). Certified payroll records that Craft Fence submitted to city agencies indicated that workers received prevailing rate of wages and benefits (Tr ; Pet. Ex. 9, 11, 13, 15, 17, 19, 21, 23). Those records were also false. For example, the certified payroll for the week ending December 10, 2006, signed by Mr. Guido, reflected work performed in city parks (Tr. 63; Pet. Ex. 15). It listed Mr. Torres as a painter who worked two days, five and one-half hours per day, or eleven hours for the week, at a wage rate of $33.50 per hour, with supplemental benefits of $18.90 per hour, for a total of more than $52 per hour, with gross wages of $ (Tr. 65). But the testimonial evidence and pay stub for that week showed that his gross wages were $440, or $110 per day for four days, and he received no supplemental benefits.

6 - 6 - Moreover, the evidence showed that the certified payrolls under-reported the number of employees and the hours worked. Mr. Munguia and Mr. Figueroa were not on any of the payrolls. Mr. Sorto is listed as a sign erector on October 4, 2009, but he was not on any prior payrolls and Mr. Torres was only on the payrolls for three months near the end of For employees who were listed, respondents claimed that they normally worked five and one-half hours per day, which would be from 8:00 a.m. to 2:00 p.m., with one-half hour for lunch. The credible evidence established that all of the complainants should have been listed on the certified payrolls and they routinely worked more than five and one-half hours per day. Based upon the sworn complaints and the records provided by respondents, an auditor from petitioner s Bureau of Labor Law prepared a report estimating the amount that the five complainants were underpaid (Tr. 101; Pet. Ex. 29). Among other things, the audit deemed the certified payrolls to be an admission that prevailing wage work was performed on the days listed (Tr. 108, 118). Petitioner assumed that prevailing wage work was performed only on those days but the workers and hours worked were under-reported (Tr ; ). Thus, where the certified payroll shows that Mr. Alvarez worked a five and one-half hour day, petitioner assumed that he had worked an eight-hour day (Tr. 108, 111). Petitioner also assumed that Mr. Munguia, Mr. Figueroa, and Mr. Torres, who were off-the-books, worked the same days as Mr. Alvarez and others who worked on public contracts. For Mr. Sorto, who did not work in the field until 2009, petitioner assumed that he only performed prevailing wage work on the days where Craft Fence installed and repaired street signs (Tr. 234). Petitioner s estimate of the underpayment was, perhaps, too low. There was evidence that some of the workers worked six days per week and would have been entitled to overtime for Saturday hours. In an abundance of caution, petitioner excluded Saturday wages from its calculations (Tr. 235). Having reviewed the audit and supporting documentation, I find that the audit provides a reasonable estimate of the amounts due to the five complainants. Office of the Comptroller v. Kallo Building Construction Co., Inc., OATH Index No. 868/97 at 5 (Mar. 11, 1997) (statements from workers were best available evidence of underpayment); see also Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, (1946).

7 - 7 - The audit is summarized as follows: Employee Violation 16% Total Alvarez $ 58, $ 35, $ 93, Torres 131, , , Figueroa 109, , , Munguia 117, , , Sorto 12, , , Subtotals $428, $278, $707, Civil Penalty 25% 176, Total $883, Petitioner was entitled to seek accrued interest from the filing of the complaints to date. Kallo Building Construction Co., Inc., OATH 868/97 at 5. Due to its delay in bringing this case, petitioner only requested interest for three years from the filing of the complaints until December 2010 (Tr , ; ). The evidence also supports a finding that respondents underpayments were willful, under section 220(7-a) of the Labor Law. Petitioner proved that respondents knowingly failed to pay workers at the rates mandated by law. Respondents lack of cooperation with the investigation further showed an awareness of the unlawful actions. See Hull-Hazard, Inc. v. Roberts, 129 A.D.2d 348, 352 (3rd Dep t 1987), aff d 72 N.Y.2d 900 (1988) (violation of Labor Law deemed willful where employer knew or should have known of violation); A & R Paterno Construction, Inc., OATH 2248/00 at 10. Section 220 (8) of the Labor Law also permits a civil penalty of up to 25% of the total underpayments, plus interest, to be imposed for prevailing wage violations. The factors to be considered are: the size of the employer s business, the good faith of the employer, the gravity of the violation, the history of previous violations and the failure to comply with record keeping or other non-wage requirements. Labor Law 220(8) (Lexis 2014). All of those factors weighed heavily against respondents.

8 - 8 - The contracts at issue were cumulatively worth millions of dollars. There was a lack of good faith by respondents as shown by the fabricated payroll records and non-cooperation with petitioner s investigation. The underpayment was substantial, spanning several years. And the financial impact on the complainants was significant they were grossly underpaid and none of them received any fringe benefits. Petitioner also presented evidence of a prior finding of a prevailing wage violation. Craft Fence and Mr. Guido, individually and as president, signed a stipulation in 2009 with New York State s Department of Labor, acknowledged that they had willfully underpaid prevailing wages to Mr. Figueroa, Mr. Torres, and Mr. Munguia, and agreeing to pay over $31,000 in restitution, interest, and penalties (Tr ; Pet. Exs. 25, 26). On this record, the maximum civil penalty of 25% is appropriate. See Office of the Comptroller v. Causeway Construction Corp., OATH Index No. 1694/02 at 7 (Aug. 21, 2002) (employer s failure to cooperate or finding of violations on different public work projects justifies maximum civil penalty). In accordance with section 220-b of the Labor Law, petitioner is also entitled to a finding that respondent should be debarred from bidding on future public works contracts within New York State for five years. The Labor Law allows for debarment where two final determinations of willful prevailing wage violations have been rendered against a contractor. Finally, the evidence established that all three respondents should be held liable for the violations (Tr. 15, 237). See Labor Law 220-b(2)(a)(2)(i), (iii) (Lexis 2014) (any successor of contractor or officer who knowingly participated in violation may be held liable for underpayment, interest, and civil penalty). As owner and president of Craft Fence, who hired the workers and signed fraudulent certified payrolls, Mr. Guido knew of the prevailing wage violations (Tr. 44, 90, 237; Pet. Exs. 25, 27). The evidence also showed that Craft Contracting is a successor corporation of Craft Fence. Both corporations operate from the same address, performed work under the same contracts, employed the same workers, and were run by Mr. Guido (Tr. 21, 44; ALJ Exs. 1, 3; Pet. Exs. 24, 27). See Labor Law 220(5)(k) (Lexis 2014) ( successor includes an entity engaged in work substantially similar to that of the predecessor, where there is substantial continuity of operation with that of the predecessor ).

9 - 9 - FINDINGS AND CONCLUSIONS 1. Respondents were properly served with the petition and notice of hearing, and also had actual notice of the proceedings. 2. Respondent violated Labor Law section 220 by failing to pay the prevailing rate of wages and benefits to five of its workers on public works contracts. 3. Petitioner is entitled to interest, at the annual rate of 16 percent. 4. Because respondents failure to pay these amounts was willful, it should be assessed a civil penalty of 25% of the violation. 5. The total underpayment, interest, and civil penalty is $883,891.94, as set forth in petitioner s audit (Pet. Ex. 29). 6. For its deliberate falsification of payroll records, respondents should be debarred from all governmental contracts within New York State for five years. RECOMMENDATION I recommend that the petition be granted. May 6, 2014 Kevin F. Casey Administrative Law Judge SUBMITTED TO: SCOTT M. STRINGER Comptroller APPEARANCES: MICHAEL TURILLI, ESQ. Attorney for Petitioner No Appearance for Respondents