After courthouse raids, scrutiny now on hiring
After courthouse raids, scrutiny now on hiring
01:49 PM EDT on Sunday, August 3, 2008Early one morning in June, along a quiet street in East Providence, a knot of demonstrators gathered outside the home of Lucilia Ramos and hoisted signs reading “Pay Your Workers — Stop Wage Robbery.”
The demonstrators posted leaflets around the neighborhood of former summer cottages about Ramos and her cleaning company, Lucy’s Cleaning Service.
If neighbors were puzzled by a job action at 6 a.m. in their peaceful quarter, their confusion was matched by the janitorial workers who were demanding payment.
ExtraCharts: Growth in executive branch contracts for:
TriState / Falcon
Note: The list of payments to TriState and Falcon includes payments under the courts contractsThough they were being paid by Lucy’s, Ramos had given them shirts to wear on the job with the name TriState Enterprises, the North Providence cleaning company where Ramos serves as manager of operations. The janitors didn’t ask for an explanation; they wanted work. But they wanted to be paid, too.
The demonstration, led by the workers’ rights group Fuerza Laboral (Power of Workers) on behalf of three workers who said Ramos had not paid them for weeks, ended peacefully. Weeks later the workers received lump-sum paychecks from her company. But for a fleeting moment, the heated issues of immigration, cheap labor and charges of exploitation had played out on a public sidewalk.Then last month, TriState, its work force and that of another cleaning company, Falcon Maintenance, were thrust glaringly into public view when immigration agents and state police arrested 31 suspected illegal immigrants working as janitors in the state courthouses.
The arrests — and subsequent no-shows of custodians in other state buildings, including the Department of Administration complex at One Capitol Hill and the attorney general’s office — illustrated how dependent government is on a virtually invisible pool of low-paid workers, many believed to be here illegally.
The events launched an ongoing criminal investigation and also shed light on a questionable employment practice unknown to many of the janitors themselves: They may not be employees of TriState or Falcon, but rather “independent contractors.”
20The arrangement would save the companies from having to withhold unemployment taxes or paying workers’ compensation to any of the janitors. And it puts the onus of paying Social Security and other tax obligations on the workers — whether they know it or not.
Several workers, including two who were detained in the sweeps, told The Providence Journal last week that they had no idea whether they were hired as independent contractors or employees. Some said they got their jobs through friends, had never visited the company offices and had never, to their knowledge, signed anything that detailed their employment classification.
Their employment status, however, might explain why the workers said they never received pay stubs with their checks, which detail how much money has been deducted for federal and state taxes.
TRI-STATE AND Falcon have declined several requests to discuss their hiring arrangements. Ramos also declined to discuss her arrangements.
20The spotlight is more on TriState for several reasons. It appears to have a bigger work force, it holds more state contracts than Falcon, and it has left a paper trail through at least three court cases which shed light on its employment practices. And further, TriState executives have been willing to answer some questions from reporters.
In an interview with TriState’s president, Anthony E. DeSimone Jr., and vice president David A. Civetti, a week after the arrests, both men defended the company and its actions.
“The public thinks that this company hires anybody off the street, doesn’t care if they’re legal or illegal, and that we know nothing about them,” said Civetti. “Well, they got a [driver’s] license, issued by the State of Rhode Island, and they got a Social Security card, issued apparently by the Social Security Administration. ... If those things are fraudulent, well that’s the [criminal’s fault] not the employer.”
Said DeSimone, “Other than have an immigration officer here every day, I don’t know what else I can do.”
After the arrests of the 31 suspected illegal immigrants, however, the Carcieri administration terminated up to 50 executive-branch contracts with TriState and Falcon for cleaning state buildings.
Department of Administration Director Jerome Williams said that the companies had not provided the state with documents confirming the immigration status of its employees and that an internal review found the companies had been reporting many fewer employees to the Department of Labor and Training than they had told the state they had available.
For instance, Falcon told state labor officials it had eight employees in January and five in both February and March, and TriState reported having only six employees during each of those months. But the companies have at least 63 workers collectively cleaning=2 0the state’s courthouses now. (The Judiciary decided last week to continue its arrangements with the companies since, it said, no criminal charges had been filed against either company.)
Companies are required by law to withhold payroll taxes from their employees. Also workers’ compensation insurance premiums are based on the size of the company’s payroll.
TriState holds the majority of state cleaning contracts. Between 2002 and last year, the dollar value of those contracts with the courts and the Carcieri administration grew from $126,860 to $720,912 a year. In that six-year period, the state paid the company $2.4 million. The administration has not yet fully responded to questions about how many TriState workers were assigned to each state building, but it has acknowledged that not one of the seven who had been working the night shift at the main state office building at One Capitol Hill showed up after the raid.
But questions about how many people TriState had on its payroll have dogged the company in court cases and resulted in charges of fraud and “intentional misre presentation” by a former insurer.
In 2002, Providence Washington Insurance Co. sued TriState after it said an audit turned up a larger payroll than the company had reported as a basis for obtaining general liability coverage.
As a result, the insurance company said TriState owed them not $9,700, as initially billed, but $56,284. TriState balked at paying.
In its defense, TriState blamed the insurance broker who quoted them a price and sold them the policy: A.W. Bucci & Associates.
In April 2004 a judge ordered TriState to pay the $56,284. But the case did not officially end for another year when Providence Washington, having spent the last 12 months trying to collect the money, struck an undisclosed settlement with TriState.
In an interview last week, Anthony Bucci, the president of what is now called the Bucci Insurance Group, said: “Of course it’s not our fault. It was an issue of their having to verify their payroll of employees versus their independent contractors….”
“From an industry standpoint, we do see employers from time to time try to avoid having ‘employees’ because it is less costly for them,” said Bucci, stressing that he was talking in generalities and was not talking about TriState.
By designating them as independent contractors, instead of employees, Bucci said, “you’ll avoid paying insurance, you’ll avoid paying payroll tax and any benefits you pass on to them.”
QUESTIONS ABOUT the size of TriState’s work force also arose in 2005 when Beacon Mutual Insurance Co. sued to collect $229,000 in disputed workers’ compensation premiums.
According to court files, Beacon charged the company a $740 annual premium based on its “representation that it employed only seven employees.”
During an audit of its 2002-’03 policy, a Beacon auditor found that the company had 72 employees performing janit orial services for the company, more than 10 times the number reflected in the policy.
In court filings, TriState’s parent company, DECI Inc., described itself as nothing more than a “management company/billing agent for a number of franchisees/subcontractors.”
“TriState Enterprises sells cleaning contracts to subcontractors,” wrote the company’s lawyer, Thomas DeSimone. “These individuals are more often than not husbands and wives who operate their own cleaning companies. They deal directly with the customers as to when, where and how often a building is to be cleaned. DECI Inc. collects the money, pays the individual contractor bi-weekly and each individual contractor has its own liability insurance.
“They are all individual business owners who have their own customers as well as the customers that DECI Inc. sells to them,” said Thomas DeSimone, the brother of TriState’s president. Their brother is sta te Rep. John DeSimone.
As far as workers’ compensation insurance, required of all employers in Rhode Island for their employees, an affidavit from company vice president and CFO Civetti said each of the TriState’s workers was required to file a “DWC-11-1C form declaring himself/herself to be an independent contractor and waiving any and all rights to workers’ compensation and its benefits.”
But after Beacon’s in-house auditors looked at the company’s payroll book, general ledger, and state and federal tax returns, Beacon’s auditors rejected the company’s argument and its lawyers asserted the “intentional” misrepresentation was a ruse to minimize the company’s workers’ compensation liability.
The lawyers said without these workers, TriState would have no cleaning business. TriState provided their equipment and controlled every aspect of their job, including the products they were allowed to use. They were under 10-year “subcontractor agreements” that contained a “no-compete provision” prohibiting them from working for anyone else for the duration of the agreement, and gave the company “the right to have all checks and other forms of remittance for services performed by the individual endorsed to DECI.”
“Nowhere in the cleaning contract is there an indication that the cleaning is performed by independent third-party contractors,” Beacon lawyers noted in their legal brief.
Beacon lost its bid for a summary judgment in spring 2007 but is still “actively pursuing” the case, said Beacon spokesman William Fischer.
In Tri-State’s case, the potential for a lawsuit was more than hypothetical. On Nov. 7, 2000, an employee of VSA Arts allegedly slipped and fell on a just-mopped floor on her way to the ladies room in the Independence Square Foundation’s Prospect Street building in Pawtucket.
She eventually sued the cleaning company, TriState, arguing that her injuries “were caused by the failure of [TriState] to clean the floor in a reasonable prudent manner or to warn tenants, their employees and others of the wet, slippery condition of the floor adjacent to the ladies room … [or] properly supervise its employees.”
To bolster her case, Jeannine Chartier submitted copies of a number of cleaning bills that TriState submitted to Independence Square Foundation during this period, for what was described as two-and-a-half hours a night of $12.50-an-hour porter service.
In TriState’s defense, however, lawyer Thomas DeSimone said the company was “not the employer of any individual who may have cleaned … the premises,” and “did not have an employer/employee relationship” with anyone who did the cleaning. The case was eventually dismissed for unknown reasons.
Though questions have been raised since the sweeps through the Rhode Island courthouses as to how many employees TriState has and their status, the Web site of the Department of Labor & Training hints at the company’s heavy dependency on independent contractors.
The Web site carries the names of 75 people who have identified themselves, for workers’ compensation purposes, as independent contractors working for TriState. Most of their declarations of independent contractor status were filed on the same day: Nov. 25, 2002.
Each of the declarations carries a warning: “No one can force you to sign this form. When you sign this form, you are stating that you are an independent contractor and in the event of injury, are not entitled to workers’ compensation.” There is also the warning of potential prosecution for any employer who “conspires with or coerces an employee to misrepresent” his or her status.
Company officials have not explained why, after years in business, they hired so many independent contractors at once.
The two detainees The Journal spoke with were not on the list.
ONE WEEK after the courthouse sweeps, hopeful job applicants crowded TriState’s office on Mineral Spring Avenue, in North Providence.
Many said they had heard about the raids and correctly anticipated the company would need to hire replacements.
Inside the office, Civetti said the publicity of the arrests had produced “the best job fair we’ve ever had,” with more than 150 applicants arriving in the days since.
Carlos Perez, 39, of Providence, was one of the applicants.
A U.S. citizen who arrived from Guatemala in 1985, Perez said he and his wife “pay our taxes, we do everything, but we can’t find a job.”
Perez said he had arrived at TriState’s office in the morning, filled out an application and provided the company with his driver’s license and Social Security card. Company representatives photocopied his documents and then told him to go to the attorney general’s20office in Providence and pay $5 for a criminal background check at the Bureau of Criminal Identification.
But he said it wasn’t until he returned later that afternoon to TriState that the company told him he would be cleaning toilets — starting that evening — for $7.40 an hour with no health insurance or other benefits.
Perez chose not to take the job.
Perez said the company “never said anything about workers’ compensation or unemployment” or that he would be working as an independent contractor.
“We would be employees. They were going to put everyone to work that same day. That’s why they said show up at 5 p.m.”
With reports by staff writer Jennifer Jordan.
The Internal Revenue Service states that it “is critical that employers correctly determine whether workers providing services are employees or independent contractors (self-employed).”
Determining that can be complicated, but basic criteria include “evidence of the degree of control and independence” of a worker.
Facts providing evidence of the degree of control and independence fall into three categories: “behavioral,” “financial” and “type of relationship.”
In that order:
20•Does the company control, or have the right to control what the worker does and how the worker does his or her job?•Does the payer control the business aspects of a worker’s job? (Such as how a worker is paid, whether expenses are reimbursed, and who provides tools, supplies, et cetera).•Do written contracts exist? Are there employee benefits, such as pension plan, insurance, vacation pay? Will the relationship continue? Is the work performed a key aspect of the business?
The IRS states: “There is no ‘magic’ or set number of factors that ‘makes’ the worker an employee or an independent contractor … and no one factor stands alone in making this determination. Factors that may be relevant in one situation may not be relevant in another.”
The key involves examining the entire relationship, weighing the above factors and documenting each of the factors used in making the determination.
20 For more information, go to the IRS Web site, www.irs.gov.
Over the past years, the State of Rhode Island has paid more than $6.5 million to TriState Enterprises and Falcon Maintenance Co. for cleaning services at 50 state buildings and 7 courthouses. Here is the spending by fiscal years 2002 to 2009, which begin July 1:
0 712,265,84 2008 720,912.24 576,297.07 2009 3,066.82 1,537.19 Total $2,386,822.42 $4,129,402.63
> TriState Falcon 2002 20 $126,860.79 $409,568.45 2003 171,974.69 427,876.35 2004 212,695.83 507,542.75 2005 245,620.03 667,720.25 2006 241,172.44 826,594.73 2007 664,519.58=2© 2008 , Published by The Providence Journal Co.,http://www.projo.co m/news/content/sunday_immigration_story_08-03-08_O1B2P1S_v54.3e8394a.html