In the Lawless Post-Katrina Cleanup, Construction Companies Are Preying on Workers

After Hurricane Katrina pummeled the Gulf Coast in late August 2005, tens of billions of dollars in federal and private contracts, the largest of which went to companies like Bechtel, Halliburton, and its then-subsidiary Kellogg, Brown, and Root, were dispatched to New Orleans. The alleged goal was to fund a clean-up effort President Bush said would require "a sustained federal commitment to our fellow citizens." That, of course, never came to pass.

Thanks to its initial disastrous rescue effort, today, the Federal Emergency Management Administration (FEMA) receives most of the blame for chaos in New Orleans. But it wasn't just FEMA. The anatomy of the failed reconstruction is complicated, but understanding what went wrong requires examining the Department of Labor (DOL).

The DOL has been in decline for a generation, suffering from long-term decreases in funding even as the number of people whose livelihoods it is supposed to protect has grown. Those problems have been exacerbated through the six and a half years of the Bush administration. But the consequences have never been more appalling than in New Orleans, where the failure of high-level DOL officials to require proactive oversight of reconstruction employers led to an endless string of abuses. After Katrina, employers, unfettered by rules, became less concerned with the task at hand than with profiting at the expense of workers without protection. They became predators in a lawless environment.

In the two years since the disaster, there have been thousands of testimonials -- issued to both government officials and private advocates -- about a wide taxonomy of abuses.The most frequent complaint workers cite is withheld wages, but almost as numerous are accusations of employee intimidation, toxic and hazardous working conditions, immigrant abuse, trafficking, exploitation and monetary extortion.

On June 26, Rep. Dennis Kucinich (D-OH), chairman of the Domestic Policy Subcommittee of the Government Reform and Oversight Committee in the House of Representatives, convened a hearing to investigate the origins of the abuses perpetrated by subcontractors and other employers against those working to clean up New Orleans. The subcommittee heard testimony from advocates, attorneys, organizers, DOL officials, and a man named Jeffrey Steele.

Now 49-years-old, Steele says he traveled from Georgia to New Orleans in the first weeks after the hurricane out of both a sense of duty and the hope that he could earn enough money to cover debts and, perhaps, collect some savings at the same time. A subcontractor he identified as the Reverend Carroll Harrison Braddy had recruited Steele and others in Georgia, promising $10 per hour, free food and lodging. Soon after he arrived, in a van full of similarly minded men, he learned that none of his employers were willing to pay him the full wage, or provide him with the sanitary living conditions, he had been promised.

Steele worked for more than a week before his first employer belatedly provided him the vaccines he needed to avoid illnesses like tetanus and hepatitis B that were idling in the toxic stew fermenting throughout much of the city. Most nights he slept on floors in houses and hotels with about seven other men, sharing a bathroom and scrounging for Meals Ready to Eat (MREs) that the National Guard had trucked in for workers and residents. After his first two weeks on the job -- 12 hour shifts, seven days a week -- he was owed $1,400, not including overtime. He was paid $230.

Steele's story was hardly uncommon. Forty-four year-old Tyrone Wilson, known as "Coach" to his friends, worked for Phoenix & Global, a company subcontracted by a different company called ECC, which was paid in turn by the Army Corps of Engineers to help clean up debris. This sort of subcontracting chain could be of any length and often ran many companies deep, with each additional tier masking more potential fraud and making lost pay harder to reclaim.

Wilson's job with Phoenix & Global entailed removing heavy trash -- refrigerators and other appliances -- from city grounds. The employers of his "foul smelling" job, he said, "would hold pay a week back on us. I worked three weeks and nothing was paid. Twelve hours a day, seven days a week, for three weeks. I got paid less than half of what I deserved. Mexicans got even less. I think they got paid three- or four-hundred dollars." On December 30, 2005, Wilson received $865 in pay for the 94 hours of work he did from November 20, through Dec 7. For a similar stretch between January 5 and January 18, he was paid only $206.10. In each case, he should have been paid about $1,500.

Yet Wilson and Steele are, in some ways, the lucky ones. Unlike many others, they, at least, had jobs. Because the Bush administration suspended affirmative action and immigrant-worker documentation requirements and at the same time stopped requiring employers to pay regionally standard rates (prevailing wages), many local black workers and the out-of-town poor found themselves underbid by foreign workers. These immigrants came from countries as close as Mexico and as far off as Thailand, and were either unaware of standard pay-scales or susceptible to deportation if they complained too loudly.

Saket Soni is a 29-year-old organizer with the New Orleans Workers Center for Racial Justice. He points out that many of the policies the administration adopted vis-à-vis workers were mutually contradictory. Immigration is a perfect example of this. While the federal government did not require employers to demand documentation from their workers, they also, at the request of Sen. Mary Landrieu (D-LA), sent hundreds of Immigration and Customs Enforcement (ICE) agents into town with the authority to deport anybody working without proper papers.

The result was astounding. On payday, subcontractors, faced with undocumented workers seeking cash, often called ICE to report their own operations, causing frightened workers to either scatter or face deportation to their home countries without pay. This, Soni says, was routine practice. His group -- one of several -- fielded at least a dozen such reports.

Likewise, employee recruiters, dispatched by subcontractors to foreign countries, would offer often-destitute men and women the promise of good work and fair wages at any number of reconstruction jobs in New Orleans. Enticed by that promise, the workers would pay the recruiters a flat fee, cover the costs of their own transportation, and then arrive in a city where they were at best exploited, and at worst left abandoned without lodging or jobs.

One female recruiter, according to Soni, approached members of the White Mountain Apache Nation of Arizona, promising jobs to about 20 poor, able-bodied male members of the tribe. "The tribal government raised money to pay her," Soni said, "and sent a lot of young men with her. They paid a flat fee for getting them jobs and another for transportation. When they arrived [in New Orleans] in vans, there was no sign of the recruiter. The jobs she promised either didn't exist or had vanished, so the van dumped them in front of a FEMA office. FEMA directed them to a local church where a pastor sent them to City Park. They lived in the park, in toxic conditions, paying subcontractors a rate of $300 per month per tent, four people sharing each tent."

In an environment where so many labor standards had been sacrificed, it becomes unclear whether practices like this were against the law. In New Orleans, after Katrina, there were almost no legal standards by which to judge employer behavior or almost anything else.

Certainly, some companies, contractors, and individuals did make sure that their workers were documented. But many of them also took advantage of the temporary (H2B) visa program for the purposes of selling the services of their employees for large sums of money. One case involved an agency that brought Bolivian workers into the country and handed them to an American subcontractor who had been approved for H2B visas. The company promptly leased the immigrants to other contractors instead of providing them with the jobs they had been promised. It was a situation that landed middle-aged women -- women who expected to be working as receptionists in hotels or offices -- in factory jobs intended for 18- to 25-year-old men.

At the Congressional hearing, Kucinich disclosed that another man named Matt Redd, "filed with the Department of Labor to sponsor guest workers from countries such as Mexico. But he apparently lied when he stated that these 'H2B' workers had jobs waiting for them. Rather, he was a human trafficker, and he rented those unfortunate migrant workers out to garbage collection companies and restaurants at an hourly wage."

These were what the abuses looked like. They are what occur when the option of instilling a regulatory order is eschewed in favor of implementing a favorable climate for business interests. Which is why we must take a look at the failures of the federal agency responsible for regulating and overseeing those businesses in order to understand why this all happened.

By contrast, the worker abuses grew out of two preventable -- and intertwined -- circumstances. Many of the incidents resulted directly from policies written at the highest levels of government. Most others stemmed from the reckless milieu that those policies created.

That's not to suggest that pre-Katrina labor standards were flawless, or even decent. Louisiana, like many other Southern states, had unusually weak state-level protections long before its biggest city was destroyed. But even small adjustments in priorities at the federal level could have forestalled employer abuse.

"There was a significant way it could have been mitigated," said Catherine Ruckelshaus, who directs litigation at the National Employment Law Project in New York City. "When large amounts of federal dollars are put in a region, they come attached with pretty basic standards: environmental standards, labor standards, community-impact standards. In New Orleans there just weren't any."

Famously, that's not what the federal government did. Instead, it upended many of the most sweeping federal and state worker protection laws, in some cases by fiat. The administration fully suspended the 1931 Davis-Bacon Act, which requires almost all federally funded public works projects -- whether administered by government entities or private firms -- to pay its workers the prevailing wage. (If the DOL disagreed with this suspension, it didn't voice its dissent publicly.) The DOL chose not to enforce Occupational Safety and Health Act (OSHA) protections.

Six months after the hurricane, Davis-Bacon was restored. And yet all employers whose contracts were awarded before that date -- the vast majority -- were allowed to continue to ignore the wage requirement as if the restoration had never happened.

Understanding why the nation's highest labor-advocacy organization stood by while policies like these were implemented -- or in some cases encouraged them -- requires understanding the Department of Labor as an agency in both long- and short-term decline, currently headed by managers with a history of subverting labor protections.

A 2003 study by Annette Bernhardt and Siobhán McGrath of New York University's Brennan Center for Justice found that the budget for the DOL's Wage and Hour investigators -- the officials who are tasked with protecting workers from exploitation -- decreased by 14 percent between 1975 and 2004. Over the same period of time, enforcement actions decreased by 36 percent. At the same time, the number of workers and establishments covered by provisions that fall within the Wage and Hour oversight increased 55 percent and 112 percent respectively. Under President Bush, the decline has become more pronounced. This year, the DOL's Wage and Hour enforcement budget is 6.1 percent less than it was before Bush took office in 2001.

On June 26, Rep. Dennis Kucinich (D-OH), chairman of the Domestic Policy Subcommittee of the Government Reform and Oversight Committee in the House of Representatives, convened a hearing to investigate the origins of the abuses perpetrated by subcontractors and other employers against those working to clean up New Orleans.

One of the men who testified at the Kucinich hearings was Paul DeCamp. When Katrina struck, DeCamp, then a senior policy advisor to the Assistant Secretary of Labor for Employment Standards, became one of the architects of the DOL response. Last summer, DeCamp became administrator of the Wage and Hour Division. While in the private sector, he worked as an attorney with Gibson, Dunn, & Crutcher, where he co-authored a white paper that suggested a variety of ways in which employers could legally mitigate the provisions of the Fair Labor Standards Act (FLSA) -- a fundamental worker and wage protection law which is one of the strongest on the books.

Today, he is the chief enforcer of that act, but in 2002, he wrote, "The FLSA presents unique challenges to employers. From the standpoint of compliance, the only risk-free way to manage exemption decisions is to designate all employees as non-exempt and to pay them on an hourly basis, but that option is inconsistent with sound business practices." In other words, complying with the law is bad for business.

The DOL's office in New Orleans was badly damaged by Hurricane Katrina. According to Jennifer Rosenbaum of the Southern Poverty Law Center, its five-person staff shut down for nearly four months, even as Immigration and Customs Enforcement and non-profit groups had fully staffed operations up and running in the city by October 2005.

When the Wage and Hour division finally resuscitated its operation in late 2005, it focused more on employer compliance assistance than on proactive oversight like targeting high-risk industries and performing unannounced inspections.

At the hearing, Kucinich noted that "the number of DOL investigations in New Orleans decreased from 70 in the year before Katrina to 44 in the year after Katrina, a 37 percent decrease." Workers and advocates said that many workers -- men and women seeking to file claims -- never met a single DOL enforcement officer in the field, never heard back from the officials with whom they made their claims by phone, and found that their claims had been lost or inexplicably delayed. These hurdles have consequences. With a two-year statute of limitations on the claims over which Wage and Hour has jurisdiction, a great bulk of the infractions will have become permanent injustices by 2008.

And yet, going forward, the DOL is retaining its focus. Though its Wage and Hour division is capable of debarring the general contractors when their subsidiaries fail to pay their workers, they do not make it a standard practice. In response to a question from Sen. Ted Kennedy (D-MA) during DeCamp's confirmation hearing to become Wage and Hour administrator, DeCamp said, "My understanding is that several are in process, where the remedy is being considered. And I believe it's at least two or three." None of the advocates asked about this could name a single example.

Today, the DOL's FY 2006-2011 Strategic Plan for enforcing workers rights laws relies more heavily on passive measures than on proactive ones, and, like so many Bush-era reports, speaks overwhelmingly of goals instead of strategies. In the lone paragraph of this 100-plus page plan that is devoted to ensuring that workers receive the wages due to them, it states that, "the Department will continue its outreach and education efforts to increase awareness of employment laws among employers, employees and other stakeholders. Other strategies include using quantitative and qualitative performance indicators and targets to increase performance, conducting independent reviews of the program to identify opportunities for improvements, and improving data collection processes, especially those related to wage determination."

By comparison, a 1999 plan released by the Clinton-era DOL Wage and Hour division laid out an approach that included hiring dozens of additional investigators and targeting high-risk industries with preventive inspections, noting that inspections based solely around worker complaints "are not effective in securing widespread substantial compliance within an industry as a whole."

The debacle in New Orleans has sunk well below the point at which minor changes at the federal level could redress even a small percentage of the worker grievances of the last two years. It serves as a reminder, though, that an unprepared or unmotivated federal government can have serious consequences for the citizens that rely upon it. According to Ruckelshaus, in the case of the DOL, many of the necessary changes are practically revenue-neutral.

"The federal DOL has had community outreach arms before," she says. "They don't require huge staffs. What we need first is more strategic uses of existing resources." Only when the department revamps its approach will workers, in both the United States and from abroad, be able to trust that their rebuilding efforts in disaster zones will be met with just rewards.


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