I-Team: State investigates wage theft claim at luxury Downtown apartment project

R & R Steel allegedly underpaid workers

CINCINNATI -- Edward Gonzalez felt fortunate to be earning the best wages of his life when R & R Steel hired him to work on the 8th and Sycamore development Downtown.

But his attitude changed when, six months into the job, Gonzalez found out he was getting paid about half as much per hour as his co-workers.

Gonzalez and two other Hispanic ironworkers -- all of whom are entitled to protections under state and federal labor laws -- claim R & R underpaid them by thousands of dollars and took advantage of Hispanic workers.

Edward Gonzalez

Their complaints have prompted investigations of the company by the city of Cincinnati, the Ohio Department of Commerce and the U.S. Department of Labor's Occupational Safety and Health Administration.

The 8th and Sycamore development is a "prevailing wage" project where non-union construction workers are required to be paid the same rate as union workers.

As a ironworker, Gonzalez learned, he was supposed to be earning $46 per hour. Instead, R & R Steel hired him at a wage of $19 an hour. He got a raise that took him up to $26.80 before he found out what he was supposed to be making.

"I was angry," said Gonzalez, the father of four young children. "I do the hardest work out there. How is that guy making more than me?"

He began asking questions and said he believes he got fewer hours of work as a result. He left the job in June and sought help from the Cincinnati Interfaith Workers Center.

R & R Steel's president maintains the problems with pay were a misunderstanding that he has rectified.

Ronnie Estes (Linked In photo)

"R & R Steel is confident that it is currently in compliance with all laws and regulations relating to employee compensation and benefits," company President Ronnie Estes wrote in a statement provided to WCPO. "R & R Steel is committed to compliance with the law and to fair treatment of its employees."

But Gonzalez and two other Hispanic workers who say they were underpaid don't buy it.

"I think they're just doing wrong," Gonzalez said. "Plain and simple wrong."

'If you work, you deserve to be paid'

The 8th and Sycamore project is a $52 million development that sprang from the relocation of the American Red Cross to Evanston in 2010 and the city’s decision to replace a 54-year-old parking garage on Seventh Street.

8th and Sycamore apartment tower

Al. Neyer Inc. is building a 17-story apartment building and 500-car garage under contracts with the city and apartment developers, North American Properties and NorthPointe Group.

The city contracted with Cincinnati Center City Development Corp. to operate the garage, which was completed last August. The garage supports not only the new apartments, but the Holiday Inn & Suites, a 117-room hotel that opened in December at the corner of 7th and Broadway streets.

The project is on time and on budget, according to Neyer.

The Cincinnati Interfaith Workers Center contends that success has come at the expense of Hispanic workers that have been the victims of "wage theft." That's a term used when an employer refuses to pay workers money they are owed by stealing their tips, refusing to pay overtime, requiring employees to work "off the clock" or simply withholding pay.

"If you work, you deserve to be paid, don't you?" said Brennan Grayson, director of the Cincinnati Interfaith Workers Center. "This is a case for unpaid wages."

But R & R Steel's Estes countered that it's a case of delayed wages. Estes wrote that that his company has paid workers everything they were owed.

R & R Steel in Sharonville

"R & R Steel had become aware that some of its employees had inadvertently been underpaid by amounts representing a small percentage of their total compensation," Estes wrote in the statement. "The amounts of those underpayments have been paid to the employees involved. R & R Steel has changed its payroll processes and its outside vendor for payroll services in order to avoid repetition of this problem."

City threatened to withhold funding

Records obtained by WCPO show the city’s office of contract compliance first spotted a prevailing-wage violation involving R & R Steel in May, three months before the Cincinnati Interfaith Workers Center approached city officials on behalf of the three workers who complained: Gonzalez, Gandhi Merida and Victor Maradiaga. All three men confirmed they are legal residents of the U.S. Gonzalez is a citizen. Merida and Maradiaga are both permanent residents who hold green cards.

“I have reviewed the hard copy payrolls for R & R Steel on the 8th and Sycamore project and came across the below listed prevailing wage violation,” wrote Sharon Collins-Gibson to a fellow contract-compliance officer, Wiley Ross, in a May 5 email.

It described a worker paid $340 for the week ending March 13. That was $38.25 short of Ohio’s prevailing wage rate and $85 short of what was indicated on other payroll reports that R & R Steel submitted to the city.

Collins-Gibson asked Ross to review the discrepancy with Al. Neyer, the general contractor on the 8th and Sycamore project, “so that the issue can be remediated.”

Three months later, the city threatened to withhold funding from R & R Steel after an Aug. 16 meeting with the three Hispanic ironworkers.

By Sept. 23, Collins-Gibson had identified 30 employees who were underpaid by a combined $7,269 over 12 weeks, based on her review of R & R Steel payroll records. R & R Steel and Al. Neyer would later dispute those numbers.

R and R Steel PWV 06192016 to 09112016 by Dan Monk on Scribd

Just last year, Cincinnati City Council approved an ordinance to stop wage theft on city economic development projects. The measure applies to any developer that gets a financial incentive from the city worth more than $25,000.

Under the ordinance, if the city or another agency determines that a company has committed wage theft, city officials have the ability to recover the incentives and forbid the company from doing business with the city for a period of time.

The new penalties cannot be applied to the 8th and Sycamore project, however, because contracts for the project were signed before the ordinance was adopted, said Vice Mayor David Mann, who championed the wage theft ordinance on City Council last year.

Still, he said, city officials are taking the workers' complaints seriously.

"We have some concerns," Mann said. "And until they're completely resolved, there's some money being held back as payment on the project."

City spokesman Rocky Merz said the city is withholding $250,000 in payments until the project is completed, pending the outcome of the state investigation.

Al. Neyer also was “quite alarmed by the accusations” and asserted it would “in no way allow any sort of wage theft to occur on our projects,” according to an Aug. 16 email that Executive Vice President Jerome Tepe sent Edgar DeVeyra, deputy director of the city’s department of economic inclusion.

But by the end of September, Neyer was convinced there wasn’t a problem.

In a Sept. 29 letter to the city, Tepe said his company spent “countless hours” reviewing “piles of documentation” from R & R Steel, which was a subcontractor to TWC Concrete Services LLC.

“We found a significant amount of additional information not disclosed by the workers,” Tepe wrote to city officials, “information that supports the position that these workers have been amply paid.”

8th and Sycamore Letter - FINAL (2) by Dan Monk on Scribd

Meanwhile, an attorney for the Cincinnati Interfaith Workers Center continued to find discrepancies in R & R Steel’s records, including seven employees who were listed on payroll sheets as working at 8th and Sycamore and in another city on the same days during the same hours.

R & R fired office staff

In an Oct. 18 email, Estes, R & R Steel's president, told Neyer and the city that he had “released all my former office workers … mostly pertaining to the debacle" at 8th and Sycamore. "It looks as if there is a total of about 6 employees that were underpaid."

Estes also asked for permission not to provide canceled checks to prove all workers were paid the correct amount. In a Nov. 21 email, Estes said it would be “unduly burdensome” to comply with the city’s demands.

“It’s the only way we can verify how much you’ve actually paid your workers,” DeVeyra responded.

The Ohio Department of Commerce confirmed it is investigating R & R Steel after receiving complaints from the three ironworkers in August.

“Since at least November 2015, R & R Steel LLC has been denying its workers thousands of dollars in required prevailing wages, falsifying certified-payroll records and ignoring prevailing-wage notification requirements,” said a description of the alleged violations filed with the state Aug. 23 by Gonzalez, Merida and Maradiaga.

The six-page document also accused the company of withholding “fringe benefits” from the workers and asking them to sign blank forms that were to be updated later to comply with the state’s prevailing wage notification rules.

“Mr. Gonzalez never received a copy” of the form until it was obtained “as part of an open records request,” said the document. State law requires contractors to supply workers not covered by union contracts with “written notification of the job classification to which the employee is assigned, the prevailing wage determined to be applicable to that classification.”

8th&SycamoreComplaint by Dan Monk on Scribd

The city of Cincinnati filed a second complaint against R & R Steel in December, asking state officials to review whether the company properly paid workers who built a city-funded garage at Oakley Station.

Safety questions, too?

The federal OSHA investigation is another matter.

Gonzalez, Merida and Maradiaga told WCPO that safety protocols were not closely followed during the time they worked on the 8th and Sycamore project.

"Whenever we had to climb columns, we had a belt and not a proper harness," Gonzalez said. "They never had enough for everybody."

Gonzalez also said he never received safety training. In addition, there was rarely water available on hot days, and there was no heat in the R & R Steel construction trailer on bitter cold days, he said.

Three former R & R Steel workers have complained the company didn't always provide proper safety equipment at the 8th and Sycamore job site. Photo by Gandhi Merida

Ken Montgomery, the Cincinnati area director for the U.S. Department of Labor's Occupational Safety and Health Administration, confirmed an investigation of R & R Steel but said he couldn't comment further.

The written statement from R & R Steel did not address that investigation.

The OSHA probe is proceeding separately from the wage-theft investigations.

The three Hispanic workers who spoke to WCPO acknowledged that they have received checks for some back wages. But some of those checks bounced, they said. And Gonzalez said there is no way the $4,000 total he has received in two separate checks could make up for what he is owed.

R & R told the city that a portion of the men's wages had been deposited into 401(k) accounts -- accounts that the workers said they didn't even know they had.

Paying a portion of prevailing wage in benefits, such as a retirement account, is allowed under the law, Grayson said.

"The employer holds all the cards," he said. "You can't refuse to take some of the prevailing wages in fringe benefits. The company gets to make the determination."

But Ohio law does require employers to make those payments promptly.

"You have 15 days," Grayson said. "So whoever they're paying, whether it's the employee or the trustee of a benefit plan, that has to be paid within the timeline that's required. They can't just hold the money."

Mann called the practice "weird" in an interview with WCPO.

"I don't think I've ever heard in the whole world of a 401(k) plan that consists of 50 percent of your compensation," he said.

Even if the three workers' whistleblowing has resulted in R & R paying them all the back wages they were owed, Grayson said the men probably are owed penalty payments because of the delays.

The workers told WCPO they believe R & R still owes them thousands of dollars. Gonzalez said he believes the company owes him as much as $20,000. They worked hard, the workers said, and they feel like the company stole from them.

"They're just using the Hispanic workers to take advantage of," Maradiaga said in Spanish as Merida interpreted for him. "We don't know the laws. That's why."

Gandhi Merida, left, and Victor Maradiaga.

City officials, meanwhile, are waiting for the results of the state's investigation before deciding whether to seek stronger penalties against the project or any of the companies involved.

But no matter how this case turns out, Mann said city officials have a simple message for companies that do business in Cincinnati:

"Don't cheat," he said. "If you cheat, we're going to do everything we can to make you pay. And you run the risk of not being able to do any further business with the city for a long time."

Dan Monk covers business for WCPO. To read more stories by Dan, go to www.wcpo.com/monk. To reach him, email daniel.monk@wcpo.com. Follow him on Twitter @DanMonk9.

Lucy May writes about the people, places and issues that define our region – to celebrate what makes the Tri-State great and shine a spotlight on issues we need to address. To read more stories by Lucy, go to www.wcpo.com/may. To reach her, email lucy.may@wcpo.com. Follow her on Twitter @LucyMayCincy.

Craig Cheatham is the executive producer and chief investigative reporter for the I-Team. To reach him, email craig.cheatham@wcpo.com. Follow him on Twitter at @CheechCheatham. 

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