Temp Agency Gets Caught At Its Core Game—Chiseling

June 2001 IBEW Journal

The state government in Washington has brought charges of chiseling on workers’ compensation payments against Labor Ready, Inc., the nation’s largest manual blue-collar temporary employment service. Construction workers and their unions have been monitoring temp agency activities in 26 states to expose their cheating on labor law, wages and a wide variety of benefits like workers’ comp.

In Washington, Labor Ready is charged with underpaying the state by $740,000 on workers’ compensation premiums in 1998 by classifying construction site cleanup jobs as “ground maintenance,” cutting the workers’ comp payment insurance from $1.20 to 40 cents an hour. The state’s Department of Labor and Industries (L&I) plans to continue the audit for the years 1999 and 2000.

In an earlier case in Ohio, Labor Ready was charged both with misclassifying workers and underreporting the number of employees in construction, according to the Ohio Bureau of Workers’ Compensation.

The AFL-CIO Building and Construction Trades Department said a first quarter 2001 financial analysis of Labor Ready shows “earnings are down, debt is up, 10 percent of its offices have been closed and its national advertising budget has been curtailed.” Filings with the Securities and Exchange commission (SEC) also show $15 million had to be set aside for future workers’ compensation claims at Labor Ready, whose accident rate is three times the national average for construction.

The temporary agencies, which call themselves the hiring hall without a union, grew phenomenally during the construction boom of the 1990s, when some 450 firms sprouted up, increasing their volume from $4 billion to $15 billion a year. They provide protection from labor law charges against the anti-union Associated Builders and Contractors, who use their services, then claim the agency, not the ABC, is the employer.

Operations like Labor Ready pay their employees about one-third less than prevailing construction wages, but charge the contractor 130 to 150 percent of the wage rate employees are paid (see “Trades Put Heat on Nonunion Hiring Halls,” p.22, IBEW Journal, July/August 2000).

Monitoring by the IBEW and the AFL-CIO has turned up evidence that the temp firms also circumvent safety laws. Ron Burke, director of the IBEW Construction Organizing Department, is a member of the BCTD National Temp Campaign Steering Committee that does the monitoring, files the charges and brings illegal acts to the attention of federal and state labor officials.