The New York City Comptroller’s Bureau of Labor Law filed a lawsuit against BLDG 44 Developers LLC (BLDG 44), a leading residential developer, for violating the minimum average hourly wage that should have been paid to its construction workers pursuant to New York State’s 421-a. The lawsuit, filed at the New York City Office of Administrative Trials and Hearings, alleges that the development company owes $40 million in back wages and penalties.
“As part of receiving an as-of-right tax benefit, developers must pay the minimum average hourly wage to their construction workers—or face penalties. My team uncovered significant underpayments in our investigation of BLDG 44. If you want to build under 421-a, then adhering to its labor rules is non-negotiable. Our office will continue to ensure developers prioritize fair labor practices,” said Claudia Henriquez, Director of Workers’ Rights at the Comptroller’s Bureau of Labor Law.
“Every New Yorker deserves a fair wage and an equitable work environment, especially those that lay the foundation for affordable housing across NYC,” said HPD Commissioner Adolfo Carrión Jr. “HPD believes in accountability and agrees with the Comptroller that adhering to the 421-a program’s labor rules is non-negotiable. HPD cooperated closely with the Comptroller in its investigation and will continue to support the Comptroller in any way possible.”
An investigation by the Bureau of Labor Law found that BLDG 44, which is receiving the 35-year 421-a tax exemption, fell significantly short with a minimum average hourly wage of only $31.88, totaling $32,285,200.48 in underpayment. The Bureau’s lawsuit alleges that BLDG 44 failed to meet the minimum average hourly wage requirement for the period of construction that took place between June 5, 2015 and August 15, 2019.
Because the pay gap exceeded 15% of the required wage, the Bureau of Labor Law imposed a 25% penalty as required by law, amounting to an additional $8,071,300.12, designated for the NYC Department of Housing Preservation and Development (HPD) specifically for affordable housing initiatives. The total underpayment sought, including the penalty, totals $40,356,500.60.
When opting into the 2017 version of 421-a, the program mandates that developers of properties containing at least 300 dwelling units guarantee a minimum average hourly wage of $60 for construction workers in Manhattan south of 96th Street or $45 in Brooklyn or Queens. Unlike the minimum wage or the prevailing wage, the minimum average hourly wage is not a specific rate that must be paid to each worker, but instead is calculated by taking the average of the total compensation of all construction workers on a project divided by the total hours worked by those workers.
In exchange for complying with the wage requirement and certain rental affordability requirements, the developer can receive a generous 35-year tax exemption equal to 100% of the increases in assessed valuation for developments. The law requires developers who apply for the tax exemption to appoint an independent monitor and submit a project-wide certified payroll report within one year of project completion to the Comptroller’s Bureau of Labor Law for review and approval. The New York City Office of Administrative Trials and Hearings will preside over the matter.
The Bureau of Labor Law’s lawsuit is being handled by Supervising Attorney Amy Luo and overseen by Director of Workers’ Rights Claudia Henriquez. The investigation was conducted by Investigator Annabelle Walters, Deputy Director of Investigations Jose Quiroz, and Director of Investigations Francisco Gonzalez. The audit of the underpayment was performed by Auditor Zhanna Shalomov and Director of Audit Stuart Rimmer.
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