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More than $750,000 was won on behalf of 720 security guards who were shortchanged for work at city buildings, City Comptroller William C. Thompson Jr. announced last week. He called it the largest prevailing wage case settlement ever reached by the comptroller’s office.

The settlement is significant because the workers involved represent the largest number of recipients ever in such a case; it is also the largest settlement ever to be prosecuted under New York State Labor Law 230, which covers building services contracts. That’s a statute giving the Office of the City Comptroller complete enforcement power over city contract violations within the five boroughs. Most laws governing state labor issues fall under the jurisdiction of the state Department of Labor.

The city’s prevailing wage for security guards is $10 per hour plus a supplemental benefit of $1.50 per hour, which can be given in a myriad of ways including paid lunch or a medical plan.

The offending company, JC Mandel Security of the Bronx, was awarded a $52 million contract in 2003 to provide uniformed security guards for Human Resources Administration (HRA) sites across the city. A year later, officials from HRA asked the comptroller’s office to investigate possible abuses.

JC Mandel accepted a ‘willful violation’ as part of its settlement, which could lead to the firm being debarred from doing business with the city if it receives a second willful violation within the next six years. Last year, Thompson’s office debarred 20 firms from doing city business for labor violations and collected almost $4 million in underpayments. Representatives of JC Mandel could not be reached for comment.

“This is not an isolated case,” said Matt Nerzig, spokesman for SEIU Local 32BJ, which represents security guards. “A closer look would reveal it’s widespread. Whenever businesses do contracting to handle cleaning or security, you lose a certain level of accountability. It’s more alarming when the contracting is done by the city, state and federal government.”

That’s a sentiment echoed by Bruce Herman, executive director of the National Employment Law Project. “Despite the potential for cost savings, the pervasive contracting-out is a process that can lead to abuse … the city government should be a high-road employer.”

Herman explained the practice has lead to a “serious erosion of wages and a decimation of benefits packages” that can lead more people to use public assistance and food stamps.

Furthermore, Herman said, because many workers are “misclassified” as independent contractors, “they’re not paying into the [unemployment] insurance [system] or workers’ compensation. The public system is being defunded by these practices.”

Comptroller’s office spokeswoman Laura Rivera agreed the city should use employees rather than contractors wherever possible. “In those cases when the city is unable to do so and must contract out services, it needs to be vigilant about the procurement process and must respect the spirit and the letter of the law,” Rivera said.

– Jillian Jonas

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