Amid Rampant Wage Theft in Post-Harvey Reconstruction, Immigrant Workers Take on Disaster Recovery Giant — and Win

About a month after Hurricane Harvey, Karla Lopez saw a post on Facebook about a job repairing a flooded apartment complex in north Houston. When she called to find out more, a man named Gilberto urged her to come into work that same day.

“He said he could pay me $11 an hour for a 10-hour day for six days a week, including Saturdays, with no overtime.” Lopez recalled. “But I was OK with what he offered because I really needed the work.”

She spent the next two weeks on a crew of mostly immigrant laborers, demolishing walls and carrying out trash, then “putting up sheetrock with the guys and caulking and even cutting up siding” on buildings. A 20-year-old undocumented immigrant from Honduras, she had never worked in construction before, but she learned quickly and “just focused on getting the work done.”

Halfway into her third week on the job, Lopez fell from a ladder that shifted as she was stepping down. At the hospital, a doctor told her she had ripped the tendons in her ankle. Lopez was stuck with the bill, and then, she says, “The company didn’t want to pay me for the time I had worked.” Others at the site were also waiting to be paid; some had been waiting for more than a month.

When Lopez complained, Gilberto gave her the phone number of the subcontractor handling the project. The man who answered the phone told her “he would pay me some of the money soon,” she recalled. “But I told him I needed all of the money because I’d had an accident and had bills to pay.”

She informed him that other workers were contacting lawyers in order to get paid and says he responded, “Do what you have to do,” and hung up.

Workers like Lopez lost thousands of dollars in the first month after Hurricane Harvey, according to a report commissioned by the Fe y Justicia Worker Center and the National Day Laborer Organizing Network, which found that more than a quarter of laborers doing recovery work in Houston had experienced wage theft since the storm. “After a natural disaster, there’s this huge risk of not only keeping the status quo of inequalities, but actually making them a lot worse,” said Marianela Acuña-Arreaza, executive director of the Fe y Justicia Worker Center.

The survey of storm recovery workers showed they were primarily undocumented immigrants from Mexico and Central America, although most were long-term residents of the Houston area. As The Intercept documented in November, a state law that lets police request the immigration status of anyone they detain or arrest has made many workers reluctant to report abuse. This week, the U.S. 5th Circuit ruled that most of the law can take effect even while it is appealed.

In the meantime, in a rare success, Lopez actually recovered the money she was owed — about $1,000. Labor advocates helped her bypass the web of subcontractors and directly pressure the project’s general contractor, Interstate Restoration, the second-largest disaster recovery firm in North America. Now other immigrants could use the same tactic to hold businesses accountable as they continue the slow work of rebuilding Houston.

The Ravinia Apartment complex located in Spring, Texas, 15 minutes north of Houston, on Feb. 27, 2018.

Photo: Jessica Ofelia Alvarenga for The Intercept

Interstate Restoration was well-positioned for a massive cleanup after Hurricane Harvey’s flood waters receded.

“This has the potential to be, at least from an economic standpoint, the biggest [disaster] of all time,” Interstate President and CEO Stacy Mazur told the trade magazine Restoration & Remediation a week after the storm. He estimated the company would have over 500 people working in the Houston area, and over 5,000 vendors and subcontractors.

“Search and rescue and kind of the basic needs gets all the media attention,” Mazur noted. “But really, the hard work starts here in a couple of weeks once that dies down, and it’s billions of dollars’ worth of remediation and restoration that will take place.”

Interstate focuses on commercial properties, which are usually covered by business interruption insurance that allows work to begin immediately, and Mazur said the company had contracts to repair “a real mixed bag of damage,” including apartment complexes, hotels, car dealerships, and banks.

As the 2017 hurricane season continued with Hurricane Irma, the company sent 150 workers to Florida and added 500 subcontractors. When Hurricane Maria devastated the Caribbean, Interstate issued a press release estimating that its work on the islands of Puerto Rico, St. Thomas, St. Kitts, and St. Martin, where its clients owned property, “could translate into a 5-10 percent increase in annual business.”

A CNBC report on the “disaster-recovery boom” after the three storms called water damage from hurricanes “a cash cow and a growing industry,” citing a survey of contractors in which water-damage restoration topped the list as the most profitable service they could offer. According to the report, some of the biggest players in the industry are “large private firms that are gobbling up smaller ones to create large national and worldwide networks better equipped to work with insurance companies’ third-party administrators.” This includes Interstate.

Mazur co-founded Interstate in 1998 with his brother Clay Mazur, the managing partner at Mazur Capital, which claims to “reinvigorate businesses, buildings, and urban spaces” through “win-win capitalization strategies.” It now does business under the name Bellwether International Group, whose chair, Jeff Johnson, co-founded Belfor USA, one of the world’s largest disaster recovery firms.

In a 2006 settlement after Hurricane Katrina, Belfor agreed to pay $223,000 to 163 migrant workers who alleged the firm “unlawfully used a subcontractor system to avoid paying any overtime wages” for 12-hour days of cleaning mold and mud from Tulane University. The Department of Homeland Security later audited the contract approved by the Federal Emergency Management Agency and slammed Belfor for adding “$35 million in excessive and prohibited markups” that FEMA couldn’t prove were incurred.

In 2007, Interstate was acquired by MBHE Holdings, a private equity and venture capital firm that Johnson also co-founded. He later supported Interstate’s acquisition of Canada’s largest disaster recovery services company, FirstOnSite Restoration, noting that several key members of Interstate’s team had been Belfor senior executives. The expansion came with help from another private equity firm, Delos Capital, which acquired Interstate in October 2015.

With each acquisition can come pressure to deliver higher returns, according to the Center for Economic and Policy Research, which describes private equity as a lightly regulated alternative investment mechanism “that most directly affects the management of, and employment relations in, operating companies that employ millions of U.S. workers.”

In a company acquired by a private equity fund, the goal is often “to cut costs at all costs,” said Chad Gray, research coordinator at the Workers Defense Project, a Texas-based nonprofit that advocates for low-income laborers. “That could trickle down to squeeze the pool of money for contractors to offer subcontractors and drive down prices.”

Workers Defense Project staff attorney Alondra Johnson reviews Hector Menjivar’s time sheets.

The immigrants hired by Interstate’s subcontractor, Don’s Cen-Tex Restoration, to repair the flooded Ravinia Apartments included men and women of all ages who had to provide their own safety equipment. Lopez came to the U.S. five years ago in a wave of unaccompanied minors fleeing violence. Her former co-worker Hector Menjivar, 51, is also from Honduras but arrived in the U.S. 18 years ago.

“They told us they were going to pay us on Wednesday. Wednesday would come, and then they would tell us next Monday. Monday would come, then they would tell us next Wednesday,” recalled Menjivar.

After three weeks on the job without a paycheck, he asked the man who hired him about the $1,500 he was owed. “I told him I liked the job, but I needed to get paid,” Menjivar said. “His response was that we should keep working, and that the salary would come for sure. That’s when we decided to stop working.”

When Lopez initially sought advice from a lawyer about her unpaid wages, he told her there was “nothing he could do” because she was undocumented, despite the fact that immigrant workers are protected from wage theft by federal and state laws. But she got a different response when she joined Menjivar at a wage theft clinic offered by the Workers Defense Project.

“They had the forethought to take pictures of their time sheets from the company for their hours, so it was easy to piece together the paperwork,” said Alondra Johnson, a WDP staff attorney who worked on the case. The time sheets said “Interstate” at the top.

The WDP decided the best strategy was to notify Interstate and the owner of the Ravinia Apartments in a certified letter that if the workers remained unpaid, the property and improvements “may be subjected to a lien pursuant to the State of Texas Property Code,” which could freeze financial transactions related to the project.

“Just because they were hired by a subcontractor does not mean Interstate would not bear liability,” Shana Khader, director of WDP’s employment and legal services program, told The Intercept. “The lien is powerful because it goes straight to the top of the chain,” allowing workers to resolve their claims more quickly.

In January, the group presented the workers with their paychecks from the subcontractor during a Facebook Live video. Once they were paid, the workers signed lien releases.

Don Gross, the owner of Don’s Cen-Tex Restoration, said in a phone interview that the lien “alerted me to the money that was owed the workers” and that he paid them “as soon as we found out about the problem.” He complained that Interstate had been late in responding to his biweekly invoice in the chaos after the storm, and then some of the funds were stolen.

Interstate’s vice president of operations, Brian Wooley, told The Intercept in a statement that the firm was “aware of incidences during chaotic events when the workers hired by our subcontractors felt they were not receiving payment in a timely manner.” He added that “Interstate always pays its own workers and vendors on time” and expects its subcontractors to do the same.

But Gross said he has subcontracted with the company in the aftermath of other natural disasters, and “our checks have been more on time, not to the point now that you have to fight for every check and when they will pay me.” He added, “I’ve been doing this since Hurricane Katrina and I’ve never seen it this bad in my career.”

Hector Menjivar outside of the car dealership where he now works in Houston, Texas, on Feb. 27, 2018.

Photo: Jessica Ofelia Alvarenga for The Intercept

The victory for Lopez and Menjivar marked the first time that the Workers Defense Project has used a lien to hold a disaster recovery firm accountable for failing to pay workers in Houston on time, or at all.

The group’s Houston organizer, Mauricio “Chele” Iglesias, said he hopes workers who have encountered wage theft around the city will be encouraged “to step forward and decide to take action.”

“When we think about strategies for recovering unpaid wages and making police reports, we do have a lot of members who are immigrants who are wary of doing that,” Johnson said. “So a lien seems more confidential and less risky.”

Filing a lien can be much cheaper than litigation, and the response is usually much faster than it would be to a complaint filed under the Texas Payday Law, which few workers have heard of, or the Fair Labor Standards Act of the Occupational Safety and Health Administration, which has limited staff in Texas.

WDP lawyers have also learned from partners in New York and New Orleans who recovered unpaid wages for people working on rebuilding after hurricanes Sandy and Katrina. Since 2011, the New York Department of Labor has returned more than $150 million to mostly to immigrant construction workers through “compliance conferences,” in which employers agree to pay what they owe. When they refuse, local district attorneys can prosecute.

In contrast, Louisiana lacks a state labor agency, so most of the litigation is handled by volunteers with the Workplace Justice Project at Loyola University New Orleans College of Law, which has filed claims totaling between $200,000 and $300,000 every year since Katrina.

“The biggest strategy we have created is to file suit,” Luz Molina, director of the project, told The Intercept. This keeps track of alleged offenders, “whether we are successful or not, so there will be a public record of this individual cheating somebody of their wages.”

She noted that day laborers pose special challenges as clients because they often change addresses and phone numbers, or disappear for other reasons. “I just finished settling a case of a client,” Molina recalled, “and when I called him, I found out he’d been picked up and deported.”

Back in Texas, the WDP has asked state lawmakers to vote on a measure next year to create a public list of companies that owe back wages to their employees. “Workers told us, ‘If this info was available, we would know who to avoid,’” Khader said.

Companies that rob workers of their wages can also face criminal “theft of service” charges under the Texas penal code, which defines “service” to include “labor.” The Austin Police Department and the Travis County Attorney have pursued such cases since 2002, and former APD Cmdr. Juan Gonzalez said he thought the threat “made some employers pay up.”

Advocates hope more law enforcement officials will pursue similar cases. The WPD says officers should have a clear policy in place that they will to refuse to share a worker’s legal status with immigration agents despite the Texas law known as SB4, which instructs them to do so for anyone they detain or arrest. They point to how some contractors in New Orleans after Hurricane Katrina avoided paying migrant workers by reporting them to federal authorities after they had done weeks of work.

Neither Lopez nor Menjivar contacted the police when Interstate failed to pay them. Menjivar said that at first, he was concerned he would be asked about his legal status if the WDP filed a lien on his behalf. But once he established trust with labor advocates, he “didn’t feel afraid anymore.”

“What can I say?” he concluded. “It was a lot of money that I worked hard for. So I decided to do it.”

Top photo: Hector Menjivar outside of the car dealership where he works in Houston, Texas, on Feb. 27, 2018.