NYC comptroller sues developer for $40M in unpaid wages, penalties

The New York City comptroller has sued a residential developer for allegedly owing more than $40 million in back wages and penalties owed under a now-defunct property tax incentive for new housing construction.

The Bureau of Labor Law filed its suit in the New York City Office of Administrative Trials and Hearings against BLDG 44 Developers, claiming the builder violated labor regulations tied to New York State’s 421a program, which requires construction workers to be paid a minimum average hourly wage, according to a press release from the comptroller’s office. 

An investigation revealed significant underpayments by BLDG 44, resulting in a shortage of $32.2 million for construction work conducted between June 2015 and August 2019.

Under the 2017 law, developers of properties with at least 300 units were required to 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 421a requirement was not a specific rate that must be paid to each worker, but was 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, developers were eligible for 35-year tax exemptions equal to 100 percent of the increases in assessed valuation for developments. The program expired in 2022, and the political will needed for its revival has proven elusive. Its disappearance has triggered a slowdown in new housing construction as well as legal action.

Due to the extent of the alleged pay gap against BLDG 44, a 25 percent penalty was also imposed, totaling $8 million, with the entire alleged underpayment amounting to $40.3 million.

“Every New Yorker deserves a fair wage and an equitable work environment, especially those that lay the foundation for affordable housing across NYC,” city Housing Preservation and Development Commissioner Adolfo Carrión Jr. said in the release. “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.” 

The audit of underpayment was conducted by Auditor Zhanna Shalomov and Director of Audit Stuart Rimmer.