Motion by Supervisor Zev Yaroslavsky

October 19, 1999

MOTION BY SUPERVISOR ZEV YAROSLAVSKY

During development of the County’s Living Wage Ordinance, this Board initiated audits of some of its custodial contractors. The audits focused on two contractors who were alleged to have engaged in payroll and employment improprieties.

The auditors reported some disturbing and potentially illegal employment practices, including:

workers misclassified as independent contractors to avoid payment of state and federal taxes, including workers compensation and unemployment insurance;
workers paid through subcontractors not listed in the original bids nor properly approved by the County;
workers paid with personal checks;
workers not paid for all hours worked, or paid straight time instead of overtime for hours in excess of forty in one week;
improper recordation of hours worked;
workers not receiving health care and paid holidays as promised in contractors’ bids to the County;
workers not supplied with necessary protective gear and cleaning supplies; and
failure of contractors to perform background checks on custodial workers who have access to County facilities including courthouses during evening hours.

Both investigated contracts have been discontinued since completion of the Board audit. The Board has approved the Living Wage Ordinance and required County departments to increase their oversight of custodial contractors’ compliance with state and federal employment laws.

Unfortunately, despite these efforts, problems continue to mount. Recent investigations by the Maintenance Cooperation Task Force, a joint effort of SEIU Local 1877 and a group of unionized custodial contractors, suggest that the questionable employment practices uncovered during the recent audit are in fact widespread among custodial contractors in the Los Angeles area. The cover story in an October, 1998 building service industry publication entitled "Stopping the Industry’s Dirty Deals" indicated that this is in fact a nationwide problem, with the worst offenses occurring in states like California with large populations of immigrants. According to this article,

"…honest building service contractors are finding it even harder to compete for accounts as competitors cut their prices as much as 30% to capture business. How can they afford to? By avoiding social security taxes; state, local and federal income taxes; workman’s compensation costs; health benefits; and overtime pay. Some even utilize illegal immigrants in order to pay less than minimum wage. ‘It’s certainly getting to the point where legitimate contractors can no longer compete,’ says Byron Rogan, president, Rogan Building Services."

According to the editor of this publication, "(t)he people winning these accounts are blatantly exploiting immigrants and ignoring tax, insurance and federal safety laws to make a quick buck."

The County should not allow its Proposition A contracting law, nor its preference for low bids, to put us in the position of embracing contractors who cut costs by willfully violating worker protection laws. The County’s Living Wage Ordinance, which becomes effective October 22, will raise the salary floor for custodial contract employees. This Ordinance will not avail the workers, however, if their employers continually underreport their hours, fail to pay overtime, fail to make proper deductions, and so forth. The County should audit its custodial contractors to plug this loophole. The Auditor-Controller reports that he can audit the twenty-one firms now under contract over an eighteen-month period, using budgeted resources.

As a public entity, Los Angeles County should serve as both a model and standard for the business community in its use, oversight of and concern for the labor conditions affecting our vital and under-appreciated custodial labor force.

I THEREFORE MOVE that the Auditor-Controller, in conjunction with the County Counsel’s office, be instructed to conduct an audit of all County custodial service contracts to verify that every such contractor is complying with all relevant state and federal labor and employment laws as well as the terms of each contract with the County. Such audits should include reviews of wages, hours, benefits, taxes, payment of workers’ compensation insurance, record-keeping and background verifications where required; utilization of full and part time work shifts; working conditions and equipment; utilization of subcontractors; and other relevant issues.

I FURTHER MOVE that the results of the audit of each contractor be forwarded by the County Counsel and the Auditor-Controller to the contracting department and the Board upon completion.