Rochester case is first test of new wage theft law

ROCHESTER – A group of construction workers allege they were shorted thousands of dollars in pay after working much of last year on a $40 million, city-supported affordable housing project that's now filling with residents.

Their complaint, which stems from work performed on the 208-unit River Glen Apartments in Rochester, has triggered a state Department of Labor and Industry investigation of Ed Lunn Construction, a well-known southeast Minnesota firm that's built thousands of apartments and homes over 48 years.

In a recent interview, Lunn said the men were not his employees, but worked instead for a subcontractor who, he alleges, took the wages and left the state.

"He took off with their money and now they're chasing me," he said.

The dispute is a fresh test of a new wage theft law that recently took effect in Minnesota. That law, on the books as of July 1, doubles the number of state investigators examining wage theft cases and will mean more site visits, said state labor Commissioner Nancy Leppink. That could make a dent in the estimated $11.9 million of wages kept from 39,000 Minnesotans each year.

But Rochester City Council Member Shaun Palmer, who's spent 40 years in the construction industry and now represents the area where the River Glen project is located, said plotting out the employer-employee relationships within a construction site is notoriously difficult work.

"It's horrible to try to figure out who works for who," he said.

For some of the six workers claiming they're owed money in Rochester, what happened isn't new. In fact, it happens about once a year to Jose Lopez, he said.

"You don't get your paycheck on time, and you go to the boss and ask him for money, and he says he didn't get paid by the guy who owes him money, so you have to wait," he said.

Lopez worked for Ricardo E. Batres, who was charged last fall with felony counts of labor trafficking, theft by swindle and insurance fraud. Lopez started working on the River Glen project in April 2018 and stayed there until November. For framing, he's normally paid about $25 an hour, he said.

Trouble began, he said, when the men didn't get paid and approached Lunn's representative, Josh Tinker. Tinker told them they had to finish building garages first, Lopez said, but agreed to give the men $1,000 each to tide them over. Later, the men were told they had to finish some porches, but when they finished the work, they still didn't get their money, Lopez said.

"So then we went back to the job site and we were kind of angry because there had been so many lies up to that point, and we said 'We want you to pay us and we don't want any more lies,' " he said.

The men allege that Tinker left and took a large amount of tools the men were buying.

The men initially said they were owed $11,000 in back pay, but after consulting with a worker's rights group in Minneapolis, they added overtime pay and came up with $29,000, plus another $12,000 for the tools.

Lunn has twice offered the men $29,000, promising to pay back wages and overtime. But he's also asked them to sign an agreement that includes a nondisparagement clause. The workers have so far refused.

Lunn disputed the workers' version, saying he felt he was being taken advantage of. Some of the problems, he said, might have been caused by bad weather, which interrupted the work schedule.

Lunn said he hired a contractor, A-1 Grace, to handle some River Glen framing work. That contractor then hired Jose Mejia, who hired the six men alleging wage theft, Lunn said.

Lunn said that when problems arose, he had Tinker pay the men $1,000 each even though they hadn't finished their work. Lunn said he believes Mejia has since moved to Honduras with the rest of the men's earnings.

He added that the men did sloppy work and cost him tens of thousands of dollars because they shot nails through plumbing pipes, requiring yet more work to repair the walls. He said he knew about the tools, but added that the men still owe him money. The tools were worth nearly $7,900, and the men also had to pay about $6,000 for the nails they used, he said. His company withheld about $9,500 from payments to Mejia, leaving a tab of about $4,400 for the tools and nails, he said. The men eventually took all the tools except for two compressors and a broken circular saw. Subtracting the value of those items, Lunn said he's still owed $3,100.

"The bottom line is they're trying to extort me out of a bunch of extra money," he said.

The crux of some wage theft cases is whether the workers are employees, and that's where the River Glen workers have been pushing their case. Assisted by the Minneapolis workers' rights group Centro de Trabajadores Unidos en la Lucha (CTUL), the men have cataloged instances where they were treated as Lunn employees and presented those to the state.

One worker said a Lunn employee asked him to work on another project nearby; that's the sort of thing an employer would do, said Ruth Schultz of CTUL. Another worker said a Lunn employee fined him $500 when he used a ladder on a porch without first tying himself into a safety harness. That sort of violation is typically levied by an inspector with the Occupational Safety and Health Administration, but Cristian Gomez said when it happened to him, he considered it a sign that he was a Lunn employee.

The men said they were offered a trailer home owned by Tinker as a place to live while working in Rochester. The trailer was close to the job site, but was infested with cockroaches and mold, lacked hot water and leaked when it rained, the men claimed. The workers said they were among up to 10 men living there for about a month before they found other housing. The trailer, located in the Oak Terrace Mobile Home Park, is owned by Tinker, property records show. Lunn said the men never lived there.

In addition to the River Glen workers, CTUL has assisted three other groups who alleged they weren't paid a portion of their wages while working on Lunn projects. None, however, has filed a complaint with the Department of Labor. Lunn's attorney argued that none of the workers were ever employed or contracted by Lunn, but were subcontractors one or two levels below A-1 Grace.

"It is confusing to Ed Lunn Construction why it is being singled out by CTUL primarily when there was no contractual relationship with any of the above entities or individuals," Lunn's attorney, Adam Houck, wrote in an e-mail.

Lunn said that not only has he offered settlements, but he was willing to mediate or arbitrate the wage disputes. So far just one of the groups has agreed to a settlement, Houck said.

The wage theft law commits more money to enforcement and, on Aug. 1, makes wage theft violations a felony. The Department of Labor and Industry has eight investigators now, but funds allocated in the new law will make it possible for it to hire six to eight more, and the agency plans more site investigations, Leppink said.

The inspectors will likely focus on industries known for generating wage theft claims, such as restaurants, low-wage work or construction. This usually happens when employers don't pay overtime, pay less than the minimum wage, deduct pay for short breaks or damage to property, or misclassify employees as independent contractors.

One trouble spot in construction revolves around the role of labor brokers — someone who rounds up workers for an employer, and then acts as a pass-through for wages, Leppink said. That person will sometimes call themselves a contractor, or act as if they have their own company, even if they don't.

"Which then creates issues as to who is the employer of those workers and who has the obligations?" Leppink said. "Some of these have a further argument that the workers are independent contractors and so no one is employing anyone."

Despite its prevalence, wage theft claims often go unnoticed. Even after staging a public protest in downtown Rochester two months ago, the River Glen workers failed to get the attention of Palmer, the City Council member.

Palmer said he knows people who worked on the River Glen project, including Lunn, but he didn't learn about the wage dispute until recently. He said he's "literally never heard of one" case of wage theft in the construction industry, despite what state officials say.

"I can't believe that on a commercial site like this that somebody could get away with that," he said.