A New Orleans City Council committee on Wednesday heard presentations from labor union leaders, officials with the Louisiana Workforce Commission and other labor advocates about a proposal for the the city to pass a “responsible bidders ordinance” in order to hold current and prospective city contractors accountable for the treatment and safety of their employees.
While the details have yet to be worked out, proponents of such an ordinance called for a requirement that companies seeking city work disclose past safety violations and labor complaints as part of their bids.
Public calls for such an ordinance have grown in the months following the October collapse of the Hard Rock Hotel on Canal Street. The incident killed three workers and injured over a dozen more.
Labor advocates told the council’s Economic Development & Special Development Projects Committee on Wednesday that such a disaster was inevitable given the current climate of construction contracting in the city. They argued that public bid laws that apply to construction contracts, which require the city to choose the firm offering the lowest price, drive companies to cut costs wherever possible to the detriment of their employees.
“This has been going on for a really long time,” said Chip Fleetwood, director of business development for the local chapter of the Painters and and Allied Trades International Union. “We’re to a point where it’s almost like the wild, wild west. It was only a matter of time before something like that happened. In the building trade’s opinion, we knew there was going to be a breaking point. And we’re at the breaking point now. If something isn’t done, if we don’t really hold contractor’s accountable, it’s going to happen again.”
Council members appeared to be on board with the plan, at least in spirit.
“I think the Hard Rock has really opened our eyes,” Councilwoman Cyndi Nguyen said. “This is something that needs to be done in the city of New Orleans. This is our responsibility.”
She said that the council plans to have a draft of the ordinance ready within two months. The three other council members present — Jay Banks, Jared Brossett and Joe Giarrusso — also said they were in support. A spokesperson for Mayor LaToya Cantrell’s office said that she was working with the council to draft the ordinance.
The details of the ordinance remain largely undefined. Nguyen said council members would be having meetings with stakeholders in the coming weeks to come up with something concrete. She encouraged people to contact her office if they want to be involved in that process.
Erika Zucker, policy advocate at the Workplace Justice Project at the Loyola College of Law, argued that transparency, monitoring and enforcement should all be part of the equation. She said that major changes should be made to how the city considers and chooses contractors. Instead of just relying on the lowest quote, she said that contractors should have to disclose much more info, such as past labor law and safety violations.
She also said the city should create a fair contracting task force to implement and enforce the new rules.
The Hard Rock Hotel was a private development, not a public one, so the city wasn’t party to the construction contracts. Even so, Zucker argued that a responsible bidders ordinance would still have an effect on private developments.
“The city becomes overall the most responsible contracting entity and sets an example for the region,” she said.
Zucker also argued that the ordinance should be applied to any project that are either “wholly public projects or projects that use public money that looks more like a public-private partnership, which can look like anything from a tax incentive to joint operation.”
‘Outright fraud’
Wednesday’s presentation stressed two central issues when it comes to holding contractors accountable: misclassification of employees and the lack of responsibility that general contractors take for the actions of their subcontractors.
The problem of employee misclassification commonly occurs when a company registers an employee as an independent contractor with a 1099 tax form instead of a full-time employee with a W-2 tax form. The difference is major both for the worker and for government tax collections.
“When a worker is classified as an independent contractor, a company does not have to provide benefits and protections as outlined by law, such as minimum wage, overtime compensation, family and medical leave, unemployment insurance and safe workplaces,” says a 2017 press release from the Louisiana Workforce Commission.
Several speakers at Wednesday’s meeting cited a 2008 study from Michigan State University that found that employers can save between 20 and 40 percent on labor costs by misclassifying their workers.
Avoiding unemployment insurance payments can reduce costs by two percent, the study said. “If, as is likely, they are also not paying workers compensation, the employer share of social security, and pension or medical insurance, they are reducing their labor costs by at least 20 % and possibly as much as 40 %.”
Since cost is the primary consideration in city construction contracts, labor advocates said that staying competitive means cutting costs, making it difficult for some companies to resist those reductions.
“You can either go out of business or cheat yourself,” Fleetwood said. “That is the current landscape of New Orleans construction.”
The problem isn’t a minor one, either in Louisiana or the country.
“I can tell you that we have found companies in every line in every industry and this is probably $100 million in fraud,” said Ava Dejoie, Secretary of the Louisiana Workforce Commission. “Fraud. Just outright fraud.”
Advocates for the responsible bidders ordinance also argued that the ordinance needs to include a way to hold primary contractors accountable for what their subcontractors do. It can be difficult, they said, to force subcontractors to abide by the city’s contracting rules since the city isn’t actually a party to those subcontracts.
“A rational logical mind would think that those things were already in place,” Banks said. “The fact that we don’t, it’s hard to contemplate. But I’m glad you all brought it to the line and I’m proud to stand here and support this.”