Dive Brief:

• The Eastern Atlantic States Regional Council of Carpenters has announced the completion of its investigation into subcontractor payment practices on several Amazon projects in Virginia near the company's future second North American headquarters in Crystal City, and the resulting report presents evidence of alleged payroll and other labor violations. 
• The union focused on drywall subcontractors and the lower-tier subcontractors they reportedly hired to perform work on six projects involving four owners — including Amazon HQ2 partner JBG Smith — four general contractors, seven drywall contractors and four alleged "labor brokers." It accused the labor brokers of such violations as misclassification of employees as independent contractors — a largely immigrant workforce — giving the entire project team an unfair financial advantage of between 16.8% and 40% over those who follow proper employment practices.
• By engaging in the practice of misclassification, the union said, contractors are committing acts of tax, social security, Medicare and unemployment insurance fraud, as well as committing workers' compensation and federal labor law violations. 

Dive Insight:

The union did not present evidence of wrongdoing by project owners or general contractors, but said there was no indication that they monitored the projects to make sure lower-tier contractors were abiding by federal and state regulations.

JBG Smith issued the following statement. “JBG Smith takes matters of compliance and fairness very seriously.  When made aware of these types of claims, JBG Smith works closely with its general contracting partners to ensure they are rectified.”

Hitt Contracting Inc., the general contractor for three of the projects in the report, had no comment in response to a request from Construction Dive. 

Lee DeLong, division president at Clark Construction Group, which is the general contractor for one of the Amazon projects in the report, told Construction Dive that "Clark Construction Group is committed to fair and ethical practices. We have been working with our subcontractor to gather information and data related to the report and are working closely with organizations that are looking into this matter. Should we determine that there is merit to the alleged violations, we will take steps to rectify the situation."

The Arlington County (Virginia) Board on Saturday approved Amazon's and JBG Smith's plans for their Metropolitan Park development that includes two high-rises in the Pentagon City neighborhood of the county. This is the internet retailing giant’s new HQ2.

After addressing the community benefits aspect of the project, John Schoettler, Amazon's vice president of global real estate and facilities, did not speak to the union's report directly during his presentation to the board but did mention to the same topic. 

"Amazon is focused on making sure the entire community shares in the opportunities that come with our new headquarters, and for me, that starts with the construction of our buildings to ensure high labor standards on our projects," Schoettler said. "The importance of the project's labor standards cannot be understated. We are confident the high labor standards we have set and the auditing and compliance mechanisms we have put in place will support a well-compensated, high-quality and diverse construction workforce.

"We are firmly committed to getting this right," he added.

Schoettler told the board that unfair labor practices were something that Amazon had never dealt with, despite having constructed more than 40 buildings in Seattle. He added that wage theft, worker misclassification and other forms of payroll fraud were new issues for him. 

"We have come to understand, however, the troubling history of such practices in the construction industry in this region," he said, "and we have, therefore, taken significant steps to prevent these types of activities from occurring on our projects and to swiftly address them should they occur. " 

Schoettler said that Amazon will require in all contractor and subcontractor contracts that nonsalaried workers be paid Davis-Bacon wage and fringe benefit rates. "This provides a minimum wage standard for all bidders and ensures the payment of competitive wages," he said. No independent or 1099 contractors will be allowed to work on the H2Q project unless Amazon approves it.

Amazon has also hired a third-party labor administration team to make sure contractors and subcontractors are in compliance. That team will be responsible for:

• Operation and oversight of an online compliance portal.
• Real-time payment.
• Compliance monitoring.
• Jobsite visits.
• Investigation and audit procedures.
• Being a resource should any related issues come up during construction.

Amazon plans on notifying local trade unions when large contracts for the project come up for bid in order to encourage union participation. "We're committed to developing a constructive working relationship with the unions, and we value their participation on this project," the firm said.