The old bridge

Thanks to a decision made by the government of the state of Vermont – mostly the Douglas Administration but with the support of leading legislators – the new Lake Champlain bridge will cost Vermont taxpayers somewhat more than it might.

Thanks to that same decision, no Vermont worker is guaranteed to get one of the 150 or more jobs – some paying more than $47 an hour including benefits – on the $61 million project, the largest construction project in the state in some time.

Finally, thanks to the decision, strikes, labor jurisdictional disputes, or other work stoppages could interrupt progress on the new bridge, scheduled to be completed by July of 2011.

The decision was the state’s refusal to participate in a Project Labor Agreement (PLA). Under a PLA, construction unions agree to certain concessions, such as surrendering premium pay for late shifts and allowing flexibility in computing overtime. This holds down the price of the project.

They also agree not to stage strikes, slowdowns or other work delays, a provision especially important when officials – and the public – are impatient to finish the job.

In return, most of the workers are selected from union hiring halls, meaning union members get priority, though non-union workers are commonly chosen also, simply because the job requires more workers than there are union members in any area.

In this case, the federal government signaled its approval of using a PLA. The state of New York agreed. The unions made the necessary concessions.

Vermont said no.

To recap: The PLA would (1) Not cost anyone a penny; (2) Save the state and its taxpayers some hundreds of thousands of dollars according to the one study devoted to the question; (3) guarantee scores of Vermont workers high-paying jobs for 15 months.

And the state said no?

“It’s a philosophical opposition to unions,” said Sen. Vince Illuzzi, the Orleans County Republican who supports the PLA.

Not so, said John Zicconi, the spokesman for the Agency of Transportation, who said Vermont officials “didn’t think one (PLA) was necessary.”

Zicconi said Transportation Secretary David Dill told New York officials Vermont would consider the PLA if “nonunion shops were treated completely equally with the union shops,” a condition that he said was not met.

“Our non-union shops should have been on a level playing field,” Zicconi said. “That was the key issue to us.”

It was the key issue, Zicconi acknowledged, because the Agency was subject to “strong lobbying” by Vermont’s construction firms, organized as the Associated General Contractors of Vermont. Almost all of Vermont’s contractors are non-union shops, and obviously intent on staying that way. Both Zicconi and AGC officials said that under a PLA no non-union Vermont contractor could possibly get chosen as a subcontractor to do any work on the bridge.

But according to the “Due Diligence” report on the advisability of the PLA done by Arace & Co. consulting firm of Warwick, N.Y., non-union contractors win at leas”t 30 percent of all (contracts) under PLAs.”

The report also concluded that a PLA on the bridge “has the  potential to produce cost savings for the Federal government and the taxpayers of New York State and Vermont.  We estimate potential savings of approximately $1,756,032.”

Vermont’s share of that would presumably be several hundred-thousand dollars.

Besides, there do not seem to be any Vermont firms that could possibly win a subcontract for any of the work that would have been covered by the PLA. Zicconi and AGC sources said they hoped Vermont firms might get subcontracts for line-striping the road, installing the guard rails, or providing concrete.

But according to Michael Morelli of the Ironworkers union and other union officials, the less expensive contracts for line-striping and guard rails were not part of the draft PLA. And the concrete material, which is likely to be handled by a non-union Vermont firm, is considered supply, not construction contracting. It isn’t part of the PLA, either.

In fact, so many of the arguments in opposition to the PLA are so demonstrably incorrect that Illuzzi’s contention that state officials are motivated by “philosophical opposition” can’t be dismissed out of hand.

For instance, both builders and state officials repeatedly told lawmakers and reporters that the PLA would force non-union Vermont workers to “join a union.”

It would not. The workers would have to pay union dues while on this particular job. But they would not have to become union members, and they could stipulate that none of their dues money go for political activity. In the meanwhile, they and their families would enjoy the generous health benefits of the union plans.

And in disputing the consultant’s estimate of $1.7 million in savings, Zicconi said that would depend on whether the unions made concessions, and on the report’s assumption that union workers were more efficient, “and I don’t buy that.”

But the unions have already made the concessions. And the efficiency issue, according to Ed Acer of the consulting firm, based on findings that union workers are “more likely to be more productive and safety-conscious” because they are “graduates of rigorous state-certified apprentice programs,” accounted for $112,000, or .005 percent of the projected savings.

“That’s a rounding error,” he said.

A PLA would not have cost Vermont contractors a penny. All workers on the job will have to be paid the New York State prevailing wage, which is much higher than Vermont’s. A Vermont laborer, said, John Donahue of the Laborer’s union, earns about $12 an hour, usually with no benefits. The New York prevailing wage, he said, is $37 an hour, $23 in pay and the rest benefits. Even after deducting union dues (about $2.22 an hour) the worker earns a lot more under the New York system.

That, of course, could reveal a practical, rather than a “philosophical” reason Vermont contractors oppose the PLA. They may not want their workers to get a taste of the higher wages and benefits that unionization brings.

Labor leaders could be exaggerating when they say that without the PLA no Vermont worker might be hired. The general contractor, Flatiron Constructors of Colorado, is not likely to bring all 150 or more skilled workers with it. But Morelli of the Ironworkers said Flatiron was known for “self-performing” a great deal of its work and bringing some of its work force with it.

Efforts to reach Flatiron were not successful.

And Donahue might have been bluffing when he threatened labor unrest.

“We’re not going to stand by,” he said. “There could be picket lines and everything.”

But they are correct when they say that without the PLA there is no guarantee either that Vermonters will get any of these good-paying jobs or that there will be no delays because of labor squabbles. Under the draft PLA, 84 percent of the jobs would have been apportioned through local hiring halls in New York and Vermont, though non-union contractors could “drag-along” their own employes to make up the rest.

The final irony here is that there could be a PLA after all. Vermont’s refusal only scuttled plans for a public PLA. But the unions and Flatiron could negotiate a private agreement. Flatiron has operated under PLAs in the past. It was the general contractor for the replacement of the Mississippi River bridge in Minneapolis that collapsed in 2007. That jog was finished ahead of schedule and under budget, and it was conducted under a PLA.

A Flatiron official was in the Albany area yesterday,  perhaps negotiating.

Under a private PLA, though, the taxpayers will not save the money. Flatiron will add it to its bottom line.

On July 30, 2007, Celso Mena, a 57-year-old  construction worker who was helping put up a school building site in Hinsdale, N.H., fell from scaffolding and broke his ankle.

It was a serious injury, and tough luck for the hard-working Panamanian immigrant, a legal resident of the United States. Not only was he in pain; he was on the hook for tens of thousands of dollars in medical bills, and he had to scrounge some way to try to make a living now that he could no longer do construction work. No Workers Compensation benefits for him.

He had agreed to work for a drywall subcontractor, GNPB/Kal-Vin, of Hudson, N.H., not as an employee but as an independent contractor, apparently because he could earn a higher wage that way.

A GBPB/Kal-Vin supervisor told him what to do every day. His starting time and quitting time were determined by the firm. He used the company’s tools. But both he and the subcontractor considered him an independent contractor.

The law did not. Eight months later, the New Hampshire Department of Labor ruled that Mena had been an employee of the company and eligible for Workers Compensation. He was awarded eight months of back pay and the company was ordered to continue to pay him 60 percent of his wages until he could return to work .

Though all this took place east of the Connecticut River, for two inter-related reasons – one general and one particular – there is a Vermont connection.

The general reason is that this misclassification of workers as independent contractors is widespread everywhere, including in Vermont, where some 14 percent of workers appear to be misclassified, according to Steve Monahan, the director of Workers Compensation and Safety for the Vermont Labor Department.

The practice – scorned as “1099ing,” by construction union officials (for the Internal Revenue Service form that freelance workers fill out) -short-changes Worker Compensation, Unemployment Insurance and Social Security funds. It also “creates an unlevel playing field,” in the words of Vermont Labor Commissioner Patricia Moulton Powden. Businesses that play by the rules can be underbid by their competitors who do not.

The specific reason is the company, GNPB/Kal-Vin , which sometimes goes by only one or the other of those names, and which is known by contractors, union leaders, and government officials as a company with a spotty labor law record.

The five illegal aliens seized while working at the Loewe’s store in Essex last November were working on a job for Kal-Vin. They, too, were classified as independent contractors, rather than company employees.

The company is also the dry-wall subcontractor for the  $55.7 million James Jeffords Hall (pictured above) now under construction at the University of Vermont. Last year, construction unions led by the New England Regional Council of Carpenters wrote to UVM officials informing them about Kal-Vin’s record and urging the university to find another dry wall firm.

UVM spokesman Enrique Corredera said the university took the labor objection seriously, but “we had already entered into contract with our main contractor (who) had already developed a list of subcontractors . We didn’t feel we were in a position to break our contract, but we (made it clear to) the contractor…that we were not going to stand for any kind of violation on our job.”

According to Commissioner Powden, Vermont has no “responsible employer” statute, as some states do, which bans firms which repeatedly violate labor laws from working on publicly funded projects.

“We find it very disturbing that UVM, a socially responsible college, is allowing companies like this to work on their sites,” said Damon Hall of the Ironworkers Union. “We want it in law that companies that break the law get penalized.”

In response to a telephone message to the company, Val-Kin Faxed a message saying, “the information you intend to publish is false (though the message left with the company did not explain what information might be published). You should refrain from publishing those comments. If you do so, you do so at your own risk.”

In August of 2007, Norman Pomerleau, one of the firm’s two principle owners (the other is Gino Bernard) told the Brattleboro Reformer that “the unions don’t like us because we’re an open shop. And we’re very big.”

A plausible complaint. But almost all construction firms in northern New England, big and small are “open shops” (non-union) and the others have not aroused similar antipathy from organized labor.

But the employee misclassification problem is hardly limited to one company, or to the construction industry. It is found in trucking, hotels, and restaurants, officials said, and in one way or another can cost the public millions of dollars a year.

In the last year or so several states, including New York, Massachusetts, and New Hampshire, have strengthened their laws and intensified enforcement of worker classification. At least in the view of trade union officials, Vermont has not.

“There’s no enforcement,” said Bryan Bouchard,  the South Burlington-based regional manager of the Council of Carpenters. “There’s nobody out there looking at this issue. Nobody is assigned to employee misclassification.”

Actually, one person is assigned to such enforcement, according to Rep. Warren Kitzmiller, the Montpelier Democrat who heads a task force on the issue set up by the Legislature last year.

“We have one enforcement officer for all fraud other than Unemployment Insurance,” he said. New Hampshire has 16 just for Workers Comp. One of the reasons fraud is so prevalent is the bad actors know they can get away it. We’re losing an unknown amount of money. By extrapolation, I can say we’re losing several million dollars. If everybody were fairly paying the cost would go down.”

But Steve Monahan of the Labor Department said the ten Unemployment Insurance enforcement officers come across evidence of Workers Compensation violations, and can tip off the fraud investigator. Unfortunately, he said, the law forbids that investigator from using that information “for prosecution purposes.” He can only use it as a tip. Then he has to make the misclassification case separately.

The task force is made up of two legislators, representatives from business  and labor, and Commissioner Powden. They all seem to agree that the problem is serious and that enforcement should be strengthened. Even the task force’s member from the Association General Contractors,  Ernie Smalley of Rutland, said, “Our association’s take is there has to be insurance across the board. End of the story.

What the task force members do not agree on is how to get from here to there, and, not surprisingly, politics seems to have entered the equation.

Powden said that before adding more enforcement officers, the state should streamline its laws, which now include “no fewer than three definitions” of how to distinguish between employees and independent contractors, so that “it can be  very confusing for small business to know which way (it is) supposed to go.”

With her boss, Gov. Jim Douglas, intent on cutting the state work-force, Powden could hardly support adding more workers to her own department. Bouchard of the Carpenters Union said Powden was too concerned with being considered “anti-business” if her department cracked down on labor law violators. But Powden said one step she favored was increasing the fines that companies in violation now pay.

“Some firms may look at this (fines for misclassifying) as the cost of doing business. A $5,000 fine. Well, whoopee,  I’m saving $35,000. Hitting folks where it hurts is going to have a greater impact on them.”

Two months ago Celso Mena reached a settlement with the Workers Compensation insurance company providing him with a lump sum payment, according to his lawyer, Terrence Daley of Manchester, N.H. Daley, who called employee misclassification, “the biggest fraud in the Workers Compensation System, said Mena is now “able to do a little work,” but did not know whether he had yet found a job.

LATE UPDATE: A comment (since removed) purporting to be from Gino Bernard, one of the owners of Kal-Vin Construction, was deleted after I was unable to confirm that the message was in fact from Mr. Bernard.

LATER UPDATE: Well, it seems really to have been he, and though the comment once deleted can not be restored under “comments,” here it is, word-for-word verbatim as they like to say in Congress: “thank for shoing me my job look nice.”

Fortified by  the contents of  three boxes of pizza, which “works wonders” in the words of one speaker,  about 20 members of the Vermont House of Representatives and several labor union officials convened the year’s first meeting of the “Working Vermonters Caucus” at the Capitol at noon yesterday.

Not exactly a household term, the Working Vermonters Caucus. Googling it turns up all of eight results, none of them from a daily newspaper. Though at least one legislative leader – House Majority Leader Floyd Nease – is one of its members, the organization  can’t  claim a long list of accomplishments, or even a short one.

No wonder. It isn’t even sure of its own name. Opening the meeting, Rep. John Moran, a Windham County Democrat, called it the “Working Vermonters Caucus,” as did others during the one-hour session. But a list of “labor-related legislative bills” introduced so far was released under the rubric of the “Working Vermont Caucus.”

Under either name, the organization seems to have had some difficulty holding onto the interest, or at least the enthusiasm, of some of its own members.

“That was a good turnout we had today,” one legislator said after the meeting. “But over the last few years attendance has been up and down.”

Besides, it’s no secret that Organized Labor doesn’t have the clout it once had. Nationwide, only about eight percent of private sector workers belong to unions these days, and if anything, the figure in Vermont is probably lower

Still, there are 17 private sector unions in Vermont according to the web site of an organization called  Unions.org. An official of the state AFL-CIO said his organization has about 11,000 members. Add in the state workers and the school-teachers and perhaps 20,000 Vermonters are active or retired union members.  In unison, that could be a potent voting bloc.

Unity has not always prevailed. It did at yesterday’s meeting, though, perhaps because adversity breeds harmony, and from the perspective of the union officials and their legislative supporters, adversity was the order of the day.

Joel Cook of the teachers union (the Vermont chapter of the  National Education Association) decried an “ideologically driven environment” of hostility to workers from Gov. Jim Douglas’s administration. Connor Casey of the Vermont State Employees Association called Douglas’s insistence on cutting 660 state jobs an “anti-stimulus package.” And Nease, while acknowledging “a responsibility to cut some positions,” accused Douglas of engineering “the random deconstruction of government.”

One piece of good news for the caucus was that of the 15 bills listed as “labor-related,” the Caucus opposed only one. That’s H-29, banning school strikes and requiring binding arbitration in some school negotiations, which probably has little chance of passage.

But just because the pro-labor group has little to fear from the Legislature does not mean it has little to fear. Douglas’s budget proposals contain several provisions the unions find repugnant, and while many of those provisions need legislative approval, lawmakers may have to accept some of them – if partially – or find some other way to save the money.

Consider Douglas’s twelve percent tax increase on some workers.

What? Jim Douglas – Mr. Raise-No-Taxes himself – has proposed a big tax hike?

Well, not really. But consider his suggested changes in the Unemployment Compensation system, as described by Dennis LaBounty of the State AFL-CIO and then confirmed from the State Labor Department’s official documents.

A worker receiving unemployment insurance now gets 57 percent of his or her gross pay, up to a cap of $425 a week. Douglas wants to change it to 50 percent of gross pay and lower the cap to $409.

As the Labor Department points out in its “Unemployment Insurance Reform Proposal,” it has to do something to shore up its dwindling  Unemployment Insurance Trust Fund. Unemployment benefits in Vermont are among the more generous in the country. And workers are not the only ones being asked to sacrifice here. Part of the “reform proposal” would increase employer contributions to the Unemployment Insurance Trust Fund.

But look at it from the worker’s perspective. A $750-a-week worker who is laid off now gets the $425 weekly maximum. Under Douglas’s proposal, his weekly check would drop to $409, a cut of almost four percent.

But what about the person laid off from a $500-a-week job. Now that worker gets $285 a week. Under the Douglas proposal, the weekly check would drop to $250, more than a 12 percent reduction.

That’s a big reduction on a small number of people. There are now about 22,700 officially unemployed Vermonters, but only about 15,000 of them are getting unemployment insurance. The Administration is being consistent; it is trying to fix the Unemployment Insurance shortfall through the Unemployment Insurance system, taking a little more from companies, giving a little less to workers. That’s how the system works, the fund is self-supporting from the employer contributions, a small percentage of the first $8,000 of every worker’s pay.

In Vermont, that $8,000 cap has not been changed since 1983.

And money, as the economists never tire of telling us,  is fungible, meaning a dollar anywhere can be substituted for a dollar anywhere else. Unemployment will continue to increase for the next several months, at least. Giving the unemployed a lower benefit is almost certainly “an anti-stimulus package,” not to mention a de facto whopping tax increase on people who make….no, who used to make $500 a week.