Contract to Cheat: Followup

Raleigh contractor left dozens of workers unpaid

Robert Charleton Miller describes his story as one of bootstraps and determination.

But for dozens of Hispanic immigrants his company, NC Contracting Inc., has hired over the past decade, Miller’s history is one of theft and exploitation.

Federal and state regulators could have stopped Miller, but instead they have allowed him to continue recruiting immigrants desperate for work.

For years, regulators have examined complaints from workers who spent weeks toiling under Miller’s contracts without getting paid. Records show that workers complained at least 15 times since 2002 that Miller, a Raleigh-based contractor, failed to pay them for framing, painting or hanging drywall across the Southeast.

Federal labor investigators concluded in 2011 and 2013 that Miller failed to pay 18 workers on housing construction projects in Wilmington and Raleigh. At least four more workers were unpaid for their labor on a Durham project. A News & Observer story coming Monday will focus on a court case involving the Wilmington project, where a judge has tried to make Miller pay an additional seven workers.

Each time, Miller has escaped with impunity.

He has paid no fines. He has faced no criminal charges. And, although two federal labor investigators suggested his tactics should get him shut out of federally funded work, he has yet to be banned.

In some instances, Miller himself was not required to pay back the workers. Instead, federal labor investigations show, the general contracting firms that hired him paid tens of thousands of dollars to workers Miller had recruited, then shortchanged.

“He’s getting away scot-free,” said Maggie Davis, a Durham attorney who helped some of the workers collect their wages. “You can’t take advantage of someone like that. You got the advantage of their work, and now, you aren’t going to pay them?”

Miller, 42, sees himself as a victim, hounded unfairly by lawyers and investigators. He says the scrutiny has put his business in jeopardy and that he has struggled recently to find work.

“It has demonized me,” Miller said in a telephone interview. “It’s cost me everything.”

In September, The News & Observer and McClatchy reported widespread labor violations on federally funded projects across the country in a series called “ Contract to Cheat.”

Tens of thousands of pages of payroll records reviewed by reporters show that workers who should have been given the protections and security guaranteed to employees were treated, instead, as independent contractors. Government officials did little to stop this misclassification. The scheme undercuts honest employers, cheats workers and costs the government billions each year in lost tax revenue.

Still eligible for contracts

The case of NC Contracting Inc. shows that even when the labor violations cut deeper than misclassification – with workers robbed of wages for days or weeks – regulators sometimes avoid taking a hard stand. While evidence of Miller’s practices mounted, he continued to operate, recruiting other unsuspecting laborers and securing contracts worth hundreds of thousands of dollars from general contractors.

Federal labor officials are supposed to be the workers’ defense against unscrupulous company owners. They can force payment, fine a company, and even push for criminal or civil prosecution.

But documents show federal officials have done little to stop Miller’s pattern of hiring workers he then robs of pay. Once, a federal labor investigator closed a case after Miller and his attorney said they understood and would obey labor laws.

Twelve times since 2002, state labor investigators in North Carolina heard complaints about NC Contracting failing to pay workers. In some of those cases, state officials dropped their investigations after the worker withdrew his complaint because he was paid or he failed to respond to the agency’s inquiry. In a few instances, state officials determined the worker was a contractor, not an employee.

On a federally backed Durham project in 2013, a contractor from the U.S. Department of Housing and Urban Development worked with an attorney to help collect wages owed by Miller but eventually paid to the workers by the general contractor. The agency did not notify the U.S. Labor Department about any problems with NC Contracting.

Just months earlier, federal labor investigators had had another run-in with NC Contracting on a federally backed project in Raleigh. In that case, the general contractor paid at least four workers more than $14,000 in uncollected wages. The labor investigator said in his report that it was time for Miller to be shut out of federal work.

But the Labor Department later decided against stripping NC Contracting Inc. of its right to work on federal projects. A department spokesman declined last week to say why labor officials declined to pursue the case against Miller further.

The prosecutors who could have pursued Miller on criminal charges were left in the dark. None of the labor investigators alerted officials at the state Attorney General’s Office or the U.S. Department of Justice about Miller.

Catherine Ruckelshaus, a lawyer who works on labor issues for the National Employment Law Project, a nonprofit in New York City, wasn’t surprised that regulators did not pursue NC Contracting more intensely.

“That’s why there is so much wage theft,” Ruckelshaus said. “The enforcement, even when it does happen, is not very robust.”

Thomas Walker, U.S. attorney for the Eastern District of North Carolina, said that his door is open to hearing about contractors such as NC Contracting Inc.

“These cases can involve federal dollars,” Walker said. “It is incumbent that these matters be investigated and referred for prosecution when appropriate.”

‘It would drive prices up’

Miller has been under the nose of government investigators for the majority of the time he has been in business. Miller, a North Carolina native who lives in Wake County, started NC Contracting Inc. in 1999. He soon began bidding on large apartment projects, delivering crews of dozens of men to frame, hang drywall and paint.

Miller built his business with layers of Hispanic workers who flocked to North Carolina in the 1990s and 2000s. Many of the workers were here illegally.

He described his business methods in a 2012 deposition taken for a lawsuit against him. Miller said he recruited workers by placing advertisements on Hispanic radio stations or on Craigslist. Sometimes, he posted fliers at Hispanic grocers. The workers who answered the ads were assigned to a crew run by a foreman he hired.

But at every level, Miller considered the workers to be independent contractors, not employees under his control. His decision not to have employees was a business strategy.

“It would complicate things, and it would drive my prices up,” Miller said in an interview. “I don’t hire individuals as (employees).”

Because he treated employees as independent contractors, Miller may have saved 20 percent or more in labor costs by failing to provide workers’ compensation and unemployment insurance, and by failing to pay the employer’s portion of Social Security and Medicare taxes.

He also broke the law, according to records provided by the federal Department of Labor. At least twice, federal labor investigators found Miller had skirted federal labor law and IRS codes that dictate who must be classified as an employee.

Though Miller’s company had been on the radar of state labor officials through the 2000s, his practices first came across the desk of federal labor investigators in 2011, when his company stopped paying workers on a stimulus-funded housing project in Wilmington.

After two weeks of not being paid, more than a dozen workers complained to federal labor officials. According to an investigator’s report, Miller had told the workers he didn’t have any money to pay them and that he would make good on their payments when he could.

By the time federal labor investigator Linda Wilkerson arrived at the project to speak with workers, NC Contracting Inc. had been fired from the project by Clancy & Theys, a general contracting firm in Raleigh in charge of the Wilmington project.

“Once they showed us who they were, we terminated their contract,” said Scott Cutler, vice president of Clancy & Theys. “They didn’t perform, and they exploited their workers.”

Wilkerson found several problems involving NC Contracting Inc.’s work. One of the obvious ones: The workers should have been treated as employees, not contractors.

“The subject misclassified many of the employees as independent contractors,” Wilkerson wrote in her report. “They did not represent themselves as business owners, and they had no part in the negotiation of wages and hours. They worked dependently for (NC Contracting).”

For months, Wilkerson pressed Miller to pay the workers. He didn’t.

When a subcontractor on a federal project fails to pay workers, the responsibility falls to the company that hired him. In late summer 2011, Clancy & Theys paid nearly $16,000 in unpaid wages and overtime pay to 14 workers.

Miller said in an interview that he was broke because Clancy & Theys owed him hundreds of thousands of dollars. Cutler said Clancy & Theys paid Miller what it owed him before termination, and regardless, that shouldn’t have kept him from making payroll.

“If he didn’t pay his workers, that was his choice,” Cutler said.

Wilkerson also found evidence of falsified payroll reports. Each week, Miller certified on federal payroll records that he had paid the workers in full when he had not, the investigator concluded. The payroll records warn that providing false information on the reports can result in criminal or civil prosecution.

Wilkerson stopped short of involving prosecutors. Instead, she educated Miller and his attorney about labor laws. Wilkerson then closed her investigation.

Defaulting on payments

Eighteen months later, Miller did exactly what he and his lawyer had indicated to Wilkerson that they wouldn’t do again, according to a second labor investigation.

He treated each member of a crew he recruited to build a government-backed apartment project in Raleigh as an independent contractor, not an employee. Then at the end of the project, as he had done before, he stopped paying the workers. He owed them six weeks’ worth of pay. The payroll reports he filed with the federal government certified he had paid them.

The federal labor investigator assigned to this case quickly noticed Miller’s pattern.

Miller had been fired from the project after the general contractor started hearing reports Miller wasn’t paying workers. The complaints involved at least four workers. Miller said he couldn’t pay them because he had been shortchanged by the general contractor, CF Evans & Company Construction Services of Orangeburg, S.C. Evans & Company declined comment.

“The violations were identical to this new ongoing investigation of the same subcontractor,” the investigator wrote.

The investigator’s report detailed why Miller should be banned from getting federal work.

“(Miller) has a history of obtaining government contracts, and then defaulting on payments to workers,” the report states.

“There was culpable neglect and disregard on the part of the firm and its owner, as to the firm’s compliance: The fact that the firm was previously found in violation of the exact same practices indicates that he was and is aware of this violation. The investigation determined that the firm has continued this practice of illegal non-payment,” the investigator wrote.

Confident about future

NC Contracting Inc. has stalled in recent years, but not because regulators hampered its operations.

Miller has run afoul of tax obligations, and state revenue officials instructed the North Carolina secretary of state to suspend NC Contracting’s certificate to operate in the state. Another group of workers shortchanged on pay has filed a private lawsuit against NC Contracting.

Despite the scrutiny from investigators, Miller is confident he will rebound.

He said he has worked too hard, and for too long, to quit. And, when he builds his business back, Miller says he is bound for big multifamily housing developments like the federally funded ones where he ran afoul of labor obligations.

Miller vows to be the largest framing, painting and drywall subcontractor for multifamily housing developments along the East Coast by the time he is 50 years old, in another eight years.

“NC Contracting will rise again,” Miller said. “Somehow, some way, I will persevere.”

Coming Monday: One worker fights in court for years to be paid for three weeks of work.

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