Labor & Employment Law Daily Wrap Up, REPORTS—D.C. nonprofit urges strong enforcement, legislation to address wage theft in local construction industry, (Sep 8, 2025)

By Patricia K. Ruiz, J.D.

The Washington Lawyers’ Committee calls for increased enforcement and increased penalties for wage theft in the construction industry, including on-site enforcement by D.C. government investigators.

A report by the Washington Lawyers’ Committee for Civil Rights and Urban Affairs (WLC) details wage theft trends in affordable housing projects in the greater D.C.-Maryland-Virginia (DMV) area. Instead of paying skilled workers a fair wage, WLC contends, contractors frequently misclassify workers as independent contractors and fail to pay promised wages, overtime, and prevailing wage rates and fringe benefits on public housing projects.

Misclassification, wage theft. Many state and local governments, including D.C., have enacted employee misclassification or wage theft laws building on federal protections. According to research, legislation that increases the cost of misclassification and wage theft through fines and debarment leads to a statistically significant decline in such practices—but only if paired with strong enforcement mechanisms, the report states. Without these, the report states, employers have little incentive to change their behavior.

Cost evasion. In 2019, the Office of the Attorney General (OAG) for D.C. found that wage theft is rampant in D.C.’s construction industry. Misclassification allows contractors in D.C. to reduce their labor costs by 16.7 percent, enabling them to underbid and undercut employers who do follow the rules. The cost evasion of doing business illegally can reach 27 percent—a massive amount in a competitive, bid-oriented industry, the OAG found. If an employer keeps for themselves all the money they refuse to pay workers in fringe benefits, the number climbs up to 48.1 percent. In the D.C. construction industry, laborers who are misclassified are likely to earn $15,779 less on average per year, or a 31.4 percent difference from what they should be earning as an employee, the Economic Policy Institute Found.

D.C.’s supply-based solution to housing shortage. “Exploitation occurs when need meets greed,” the report states. The effects of the housing shortage throughout the U.S. are felt acutely in D.C., with 12 percent of the city’s population experiencing housing insecurity in 2023. D.C. leads the nation in gentrification and displacement of low-income residents. In D.C., home rental costs jumped more than 11 percent from 2021 to 2022, and, as wages stagnate, almost half of D.C. renters spend more than one-third of their incomes on housing, and nearly a quarter spend at least half. To address the problem, D.C. has chosen to pursue a supply-based solution and expand affordable housing through building new units or preserving and restoring existing ones. As efforts to meet the affordable housing crisis in D.C. ramp up, agency oversight of publicly funded construction projects and strong enforcement are critical to preventing worker exploitation.

Wage theft in affordable housing construction projects. Between 2013 and 2024, WLC identified 25 federal and state cases where workers alleged they were experiencing wage theft while working on affordable housing construction projects in D.C. Of the 20 cases that have concluded, 75 percent ended in a settlement; an additional 15 percent ended in voluntary dismissal with prejudice, usually a sign the parties have reached an out-of-court settlement. Ten percent of the concluded cases ended without resolution for the plaintiffs. In the past 10 years, federal enforcement and private litigation resulted in more than $2.4 million in public settlement payments and default judgment awards for more than 332 workers alleging wage theft violations while working on D.C. public housing projects. The report notes that the total settlement figure for these cases is likely significantly higher.

Recommendations. WLC urged the D.C. Council to consider the following fixes to combat wage theft in D.C.’s construction industry: (1) on-the ground enforcement, such as random audits of affordable housing construction sites; (2) comprehensive audit of D.C. Housing Production Trust Fund and application reform requiring developers to disclose wage theft litigation filed and settlements against their company; (3) increased funding for the D.C. OAG’s workers’ rights section; (4) improvement of government agency collaboration and communication; (5) strengthening of wage theft laws, including amendment of the D.C. Workplace Fraud Act to increase liquidated damages to a mandator five-time multiplier where construction workers on affordable housing projects are victims of misclassification; (6) suspension and debarment of construction companies who are repeat wage theft offenders; and (7) hiring of union contractors, who are by and large not engaging in wage theft, and favor awarding grants and loans to entities that use or pledge to use union contractors.

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