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Industry News

Up against the (dry)wall

As they miss out on jobs, lay off workers, these contractors point finger at competitiors who they say hire illegal immigrants to underbid them.

Originally Published Nov 21, 2010 00:25

Staff Writer

Coming in too high on a bid is an expected part of the building business.

But when drywall company owners Reggie Fisher and Vernon Stoltzfus lost job after job to companies quoting what seemed like impossibly low prices, they suspected they were up against more than normal competition.

Fisher visited the sites of three jobs they’d lost, hoping to find out what was behind the low prices.

He approached the drywallers working on site and asked if they had immigration papers.

Most of them, he said, did not.

Fisher and Stoltzfus, owners of Cornerstone Drywall Co., Strasburg, say they have lost jobs at hundreds of houses to competitors who hire illegal immigrants willing to work for less than half of what Americans workers made before the recession hit.

To keep their company afloat, Fisher and Stoltzfus downsized their staff from 20 to 12. Their own salaries have plunged 40 percent.

“We’re all in this together,” Fisher says. “We’re all taking cuts big time.”

Inside Story interviewed 18 drywall company owners, employees and independent subcontractors who accuse competitors of hiring undocumented workers in an effort to drive down costs and finish jobs faster.

The drywallers interviewed for this story work mostly in residential construction and also do some light commercial jobs.

Lower-priced homes, Stoltzfus says, are the only way to make money in the recession. And, he says, “the way to get it cheap is to beat it out of the backs of somebody.”

He and Fisher say they believe more than half of their fellow drywall contractors use illegal immigrants, mostly from Mexico or Central America.

The drywallers’ accusations are difficult to prove. Most job sites are on private property. Federal authorities, who are responsible for enforcing immigration laws, have not charged any local companies with violations.

Drywallers interviewed for this story say an influx of illegal immigrants has intensified the effects of the ongoing recession, which itself has slammed the building industry especially hard.

The practice of hiring illegal immigrants exploded locally during the housing boom circa 2004, the drywallers say, when contractors struggled to keep up with off-the-charts demand. Some of the drywallers interviewed admit they also used illegal immigrants during the boom.

Now the recession has dried up demand — along with jobs and income. And winter, traditionally the leanest season for building, looms.

Industry groups estimate that unemployment for Pennsylvania construction workers has reached 20 to 35 percent — two to four times the overall national rate.

Longtime Drumore drywaller Bruce Cook, who downsized his three-man company earlier this year, calls the current situation “a disaster.”

Other decades-old businesses, struggling to compete, are considering closing their doors. Drywallers once so busy they had to turn away jobs now sit without work, facing possible foreclosures on their own homes.

One local custom-home builder says he thinks most consumers see undocumented workers as a problem somewhere else. The builder asked not to be identified, because his business is already struggling and he fears potential backlash for speaking out.

“It used to always be an Arizona problem, a Florida problem, a West Coast problem,” the builder says. “Now it’s a Lancaster County problem.”

Fisher and Stoltzfus say a lack of consequences gives contractors who use undocumented workers little to hide or fear. Some builders, they say, are reluctant to question laborers who work hard for little money.

Scott Provanzo, vice president of Heartland Builders, Lancaster, says many local builders do recognize the problem but can do little in the absence of clear federal guidelines.

“I think everybody in the industry is in agreement that we have this issue,” Provanzo says. “We’re not in Nazi Germany, where you can go around and check everybody’s papers. What happens if they are an American citizen?”

Frustrated by their lack of options to attack the problem, Fisher and Stoltzfus founded Contractors Against Undocumented Service Employees/Subcontractors (CAUSE) earlier this month.

Now they’re taking the case against what they call unfair competition to fellow tradesmen — and the public.

“We need to be playing on the same field, with the same rules,” says Bob Smoker, a partner in Smoker & Sons Drywall, Manheim. “That’s just not happening. There are people that are cheating, flat out.”

From boom to bust

An estimated 31,000 to 32,000 Pennsylvania construction workers do not have documents that allow them to work legally in the U.S., according to the Center for Immigration Studies, an independent research organization that favors limits to immigration.

Those numbers have surged in recent years.

In 2003, 10 percent of U.S. construction workers were undocumented, according to research by the nonpartisan Pew Hispanic Center. By 2008, that number had nearly doubled, to 17 percent.

Pennsylvania ranks 18th compared to other states in the size of its illegal immigrant population, according to Pew.

Some building industry leaders disagree on the scope of the problem. Lou Biacchi, executive vice president of the Pennsylvania Builders Association, says he does not believe undocumented workers are a major concern here.

“This is not Arizona,” he says. “This is not Florida. We do not believe illegal immigrants are going to travel all the way up from primarily Mexico … to work in the construction industry in Pennsylvania.”

Jack Zimmer, president of Associated Builders and Contractors Inc.’s Keystone chapter, Manheim, acknowledges that employment of illegal immigrants is an issue in the industry. But, he points out, it is also present in other industries and to a much greater degree in the South.

ABC represents nonunion construction firms that do mostly commercial and industrial work. Zimmer says it might be easier for smaller, mostly residential companies to fly under the radar.

“There are some of our guys who suspect some of the guys they lose work to,” he says. “They can’t prove it. … I haven’t seen it, but they feel pretty passionate about it. I’ll take their word for it.”

Frank A. Sirianni, president of the Pennsylvania Building and Construction Trades Council, an association of local trade unions, says illegal immigrants are especially prevalent in the drywall industry, for unknown reasons (See article, Page A6.).

Undocumented workers are increasingly found in other trades, such as roofing and masonry, Sirianni says. Pew estimates that illegal immigrants make up 31 to 40 percent of the national work force in those three trades.

Drywallers interviewed for this story say undocumented workers first appeared on local job sites in the last 10 years, but the situation has grown steadily worse.

“All of the sudden, it just exploded,” says Keith Fisher, an Ephrata drywall subcontractor who is the brother of Reggie Fisher.

Drywallers say they see more illegal immigrants working in Chester County and other Philadelphia suburbs. Some theorize that the presence of Amish craftsmen in framing, siding and other trades might somewhat limit the practice in Lancaster County.

During the housing boom earlier this decade, many local drywallers had little choice but to hire illegal immigrants, says Rick Mull, a drywall contractor who has worked in the industry for 32 years.

“In the last 10 years, if it wasn’t for (illegal immigrants), we couldn’t have done all the work being done,” says Mull, who says he does not hire undocumented workers.

That demand for workers collapsed when the recession hit. Now, quite simply, there aren’t enough jobs to go around. And the drywallers say those who are paid the least land what work is available.

In the last three years, Pennsylvania has shed 16.9 percent of its construction jobs, according to the state Center for Workforce Information & Analysis.

Local drywallers say there’s an important distinction between their jobs and farm or other low-paying, unskilled jobs, which have traditionally drawn illegal immigrants and which some Americans might be reluctant to do.

In 2009, before the recession’s full impact was evident, the nation’s 102,880 drywallers made an average annual salary of $41,080, according to the U.S. Bureau of Labor Statistics.

Many local drywallers say their actual earning potential was well above average — $50,000 to $60,000 — making drywall a desirable job a short time ago.

But income has fallen drastically since, in part, some say, because illegal immigrants will work for less than half what their legal counterparts were accustomed to earning just two years ago.

“Some people say undocumented workers do jobs Americans don’t want to do,” says Brian Groff, a Kinzers drywall contractor of 26 years.

But that’s not true in this case, he says. American drywallers are just disheartened to earn the same pay they did 20 years ago.

Everyone makes excuses about illegal immigration until it affects them personally, says Greg Reinhart, an East Petersburg drywall subcontractor whose income has dropped $5 an hour.

“What if they start moving into your line of work?” he says. “What if they start wanting to be accountants?

“What are you going to do then?”

How they know, how it’s done

Fisher and Stoltzfus say their crusade has nothing to do with race. They recognize that a worker’s immigration status can’t be determined by appearance or language.

Indeed, construction is one of the most common industries for Hispanic Americans, employing nearly 2.8 million in 2008, according to Pew research.

So how can the drywallers be so certain their competitors hire illegal immigrants?

“We did it, too,” Fisher says. “That’s how we know it’s done.”

In 2004, he explains, Cornerstone was swamped with work. He and Stoltzfus made a conscious decision to grow their business by using crews of illegal immigrants.

But substandard craftsmanship, a language barrier and anxiety over rejected tax documents led them to quickly abandon the strategy.

Scott Spencer, owner of Scott D. Spencer Drywall, Ronks, and a CAUSE member, also used undocumented workers during the boom. He says he didn’t have enough manpower otherwise.

“My justification was still wrong,” says Spencer, who now uses only legal workers.

The industry’s frequent use of independent subcontractors allows some companies to get around labor regulations that apply to employees, says Spencer, who has worked in drywall for 21 years.

A contractor can keep his books entirely clean by hiring one legal subcontractor who finds and brings in a crew of workers who may or may not be legal, Spencer explains.

“How (the subcontractor) gets the job done is up to him,” he says. “You never know who they’re bringing in, or how many are legal or illegal.”

The subcontractor — sometimes called a “broker” — pays his crew in cash, Spencer says. Only the subcontractor’s name appears on the contractor’s payroll.

Drywallers interviewed for this story say they most often see illegal immigrants working in new residential construction, where few people walk on the site.

There might be increased oversight, and simply more people, on commercial job sites. But that doesn’t always stop some contractors from bringing in illegal crews, the drywallers say.

Brownstown drywall subcontractor Michael Zehr, who has worked in the industry for 23 years, says he worked on a commercial job site where the company owner got around prevailing wage regulations by sending in undocumented workers after hours.

“He brought them in at night, when everybody else was gone, mainly the inspector,” Zehr says.

Some drywallers interviewed for this story didn’t mind naming names. The Sunday News is not publishing the names of those drywall companies accused, because the allegations cannot be proven.

Phone messages left for the owners of some of the companies were not returned.

One company owner, who asked not to be named, said CAUSE members have visited his job sites. He acknowledged that illegal immigrants are prevalent in the drywall trade but denied knowingly hiring them.

Some contractors make no effort to disguise the fact they are using illegal immigrants, says John Lapp, owner of John Lapp Drywall, Brownstown, and a CAUSE member.

“They don’t try to hide it,” he says. “[Other companies say], ‘Yeah, we use them. So what?’ ”

U.S. Immigration and Customs Enforcement, the federal agency that investigates violations of immigration law, criminally charged 180 employers nationwide in the last year. None were in Lancaster County.

“[Contractors] don’t have anything to fear,” says Dustin Reed, co-owner of Select Drywall Inc., Lancaster, and a CAUSE member.

“That’s just it.”

Facing the issue

Stoltzfus and others interviewed for this story accuse some builders of ignoring the problem in an effort to save time and money.

“These guys don’t build a business because they’re stupid,” Stoltzfus says. “They know what’s going on.”

Connie King, president of the Building Industry Association of Lancaster County, says the group recognizes the issue and has done what it can to help. King, project manager for Leola builder Earl King Inc., says she also is frustrated by a lack of enforcement.

“We understand it’s not fair. .. [The drywallers] can’t compete,” she says. “But to be fair, everybody is losing money now.”

Fisher and Stoltzfus approached the BIA about the problem earlier this year, King says. In the BIA’s newsletter, she reminded members of their commitment to a code of ethics.

The BIA lacks the authority or manpower to do more, King says. “We weren’t going to police our members,” she says. “It’s not our job.”

Ultimately, builders are responsible for what happens on their job sites, she says. Hiring subcontractors means forfeiting some control, she says, and builders must do their homework.

“You know who you’re hiring,” King says. “Hopefully, you know their business practices.”

Heartland’s Provanzo says many local builders have long-standing relationships with subcontractors they trust. Most of the problem occurs when some subcontractors enlist their own crews that are unknown to builders, he says.

Most builders try to comply with the law, Provanzo says, but lack clear direction from the federal government on what enforcement measures are acceptable.

“I can’t and won’t make snap decisions based on … color of skin, accents or things like that,” he says. “I can’t tell you who’s a citizen and who isn’t. I don’t think anybody can.”

Several other builders declined or did not respond to interview requests for this story.

Drywall contractor John Lapp acknowledges that it’s difficult for builders to know the identity and purpose of everyone on multiple job sites.

One builder asked him to sign a pledge not to use illegal immigrants. This is a good first step, Lapp says, but builders can and should do more, such as verify identifications and insurance coverage for everyone on their job sites.

“There’s nobody out there policing job sites,” he says. “There’s cheap labor, and that’s what contractors want, whether they want to admit it or not. Who can blame them, if they can get away with it?”

Working overtime

No one disputes that crews of illegal immigrants work hard.

“They work like crazy,” Fisher says. “That’s why people love them. They work seven days a week. They even work holidays.”

Crews work at least 10 hours a day and often spend their off hours crammed into hotel rooms or apartments with a half-dozen others, Sirianni says.

“You’re not going to find many people anywhere that want to do that,” he says. “These people are desperate.”

The crews’ long hours allow them to hang and finish drywall in an entire house in a matter of days, drywallers say.

Smoker says he believes there is enormous pressure on the workers to finish jobs in a short time.

“You can make a case that they’re being mistreated and abused,” he says. “They’re obviously not being paid fair wages. .. Where they’re coming from, anything is better than that.”

Local social service agencies say they haven’t heard allegations of abuse or exploitation. The threat of deportation presumably keeps undocumented workers from complaining about any mistreatment.

Nationwide, the majority of illegal immigrants — 62 percent — come from Mexico, according to the U.S. Department of Homeland Security.

Drywallers interviewed for this story say they’ve encountered crews that have migrated from North Carolina or are driven in from Delaware or Maryland for the duration of a job.

“They’re bringing people up from North Carolina, when there are people here who are sitting [without work],” says Dwayne Lapp, co-owner of Lanchester Drywall, Strasburg, and a CAUSE member.

Lapp (no relation to John Lapp) and other contractors say there are enough unemployed American drywallers to get jobs done.

“If builders are concerned about doing something quick, I can get five or six guys in,” Lapp says. “We can do it.”

‘A dying breed’

The recession has hit the drywall industry hard. In more recent bad news, major producers announced they will increase drywall prices by 25 percent next month.

Just two years ago, local contractors paid hangers and finishers $7 to $8.25 per completed sheet. Some installers say they made up to $9.

Illegal immigrants reportedly work for $3 to $4.50, some of which may go to a broker.

Drywallers say undocumented workers’ acceptance of significantly lower wages has contributed to a steep drop in earnings. Many contractors now report paying legal workers $5 to $6 a sheet, a decline of 14 to 44 percent.

Some contractors still insist on paying workers $7 a sheet, cutting into their already razor-thin profit margins.

Denver drywall contractor Brian Wolf, who has worked in the industry for 22 years, earned $7.50 a sheet when he worked as a subcontractor. He recently subbed for as little as $5, a drop of 33 percent.

“That’s where I drew the line,” says Wolf, who estimates that at least a third of the drywallers he once worked with are either unemployed or underemployed.

Hanging or finishing five or six sheets an hour is typical, drywallers say. If an installer completes 200 sheets a week, a $2 per sheet drop means about a $21,000 loss in annual income.

One longtime drywall subcontractor, who asked not to be identified, says he was recently cut off from work by two contractors who had hired him steadily.

Both told him they now hire subcontractors who use illegal immigrants. One referred to American drywallers as a “dying breed,” he says.

The subcontractor, a married father of three, says his income has dropped $500 a week. He says he can’t afford to complain and risk alienating contractors who still might give him work.

He makes countless daily phone calls to line up jobs. He says he feels like he is begging contractors for work.

“Somewhere, somehow, I usually end up with something,” he says. “I have never seen [the drywall industry] this bad, and it’s getting worse.”

Subcontractor Michael Zehr has weathered two abysmal winters with little work. One of the three drywall companies he worked for regularly went out of business. The owners of the other two now do their own work.

Zehr says his own house is set for sheriff’s sale.

“These illegals … are ruining people’s lives, and people are being allowed to do it,” he says. “Builders, these drywall contractors … they just don’t seem to care.”

Losing out

Contractors who use undocumented workers get multiple financial benefits.

Besides lower payroll costs, contractors with fewer “on-the-books” workers generally face lower taxes, health insurance costs and contributions to unemployment and workers’ compensation funds.

Landisville drywall contractor Kevin Eberly, owner of Eberly Enterprise Inc. and a CAUSE member, says he can see the strategy’s appeal.

“There’s definitely temptation,” he says. “The word ‘illegal’ … just stops me every time. I couldn’t sleep at night.”

Installing drywall in an average home can cost $5,000 to $10,000, Stoltzfus says. Contractors who don’t hire illegal immigrants report losing bids by as little as $200 to as much as $2,000.

The recession has tested some drywallers’ long-standing relationships with builders.

“If the other guy is $150 less, you’re going to go with him,” contractor Mull says of the current situation. “It’s just reality. … It all comes down to the all-American dollar.”

Contractor Bruce Cook now bids jobs at just a nickel more per square foot than he charged 20 years ago. Many times, he still loses.

Materials and other expenses have nearly doubled. Cook spends up to $200 a week just on gas.

“How can you go from making $50-60,000 a year, down to making $30,000 and survive?” he says. “You can’t.

“They’ve destroyed my livelihood. I’ve been doing this for 33 years.”

Some drywallers say they don’t know where — or if — they will work next week. Contractor Dustin Reed says he knows one competitor who uses illegal immigrants and has jobs lined up for the next 11-w years.

Of his own company, Reed says: “If we had (work) a month out, we’d be doing jumping jacks.”

Reed’s company now regularly takes jobs up to six hours away, in upstate New York. There is less competition there, he says, and jobs pay up to three times as much.

Other drywallers are surviving by diversifying or carving out niches, such as custom homes or restoration work.

As Mull puts it, “I don’t hire illegals. I’ve got to be a smarter businessman if I want to keep eating.”

Hanging on

Dwayne Lapp, of Lanchester Drywall, says some of the builders he used to work for have stopped calling. He wonders if they’ve gone out of business.

Lapp, a married father of three, now earns less money as a business owner than he made as a subcontractor for another company.

There is more uncertainty. Jobs aren’t booked more than a week or two out.

“I’m scraping by,” Lapp says. “I’m paying the bills. That’s just about it.”

He sometimes thinks about closing the company his father started 35 years ago and pursuing a career in catering.

But for now, he’s determined to do what he can to save the industry his family helped build.

“The fight’s here,” Lapp says. “Why not fight?

“We’ve got to do something.”