San Jose bends to developers in delaying wage theft policy

A shiny luxury condo tower in downtown San Jose is a stark reminder of the dark and tragic abuse workers endured to construct it—with some locked in shipping containers after spending the day working for little to no pay. The city’s latest policy is designed to ensure history doesn’t repeat itself.

Under the proposed responsible construction ordinance, the city would withhold certificates of occupancy for private construction projects if the owner, developer, contractor or subcontractor have any unpaid final wage theft judgements. The San Jose City Council decision on the policy was set for a vote on Tuesday, but deferred until January because city officials said there wasn’t enough outreach to developers.

While the policy has been nearly five years in the making, city officials only released the language to the construction community 11 days before the vote.

“There’s very broad, maybe universal agreement that wage theft is immoral, illegal, unacceptable and something that we will not tolerate in San Jose,” Mayor Matt Mahan said at Tuesday’s council meeting. “(But) the fundamental question here is … have we actually looked at every place that our ordinance differs from other cities and gotten some outside input on how that might affect costs (and) risks?”

The policy is aimed at encouraging owners and contractors to comply with court orders to pay wages and other monies owed. The complaining party would be required to prove that a final wage theft judgment had not been paid, and the owner and contractor could appeal or resolve the alleged violation before the certificate of occupancy is withheld.

Wage theft is prolific—and the most common type of property crime in the state, Assemblymember Ash Kalra said at a news conference ahead of the meeting. Santa Clara County is no exception, with more than 12,000 construction workers who have been victims of wage theft and robbed of more than $46 million, according to county documents.

Labor leaders said San Jose is rampant with wage theft issues, but the most glaring example is the illegal and abusive labor practices employed during the construction of the now renamed Silvery Towers at 188 W. St. James St. in downtown in 2018.

Unlicensed Silvery Towers subcontractor Job Torres Hernandez was accused of recruiting workers from a Tijuana newspaper advertisement and promised them fair wages and legal status in the U.S. But once the workers arrived in Hayward, they were held in sordid quarters, denied compensation and threatened with violence against them and their families in Mexico at the hands of drug cartels if they were to sound alarms.

While Hernandez eventually had to pay out $1 million in stolen wages and is serving 103 months in federal prison, city bureaucracy has been slower to respond. In 2019, Councilmember Sergio Jimenez and some former colleagues fought to expand the city’s wage theft ordinance to include all public work projects. The city finally implemented it this year.

The responsible construction ordinance has taken even longer to pass, and labor-leaning councilmembers worry developers claiming they were “blindsided” by the policy is just a tactic to delay implementation, Councilmember Omar Torres said.

He and Councilmember Peter Ortiz questioned the supposed lack of developer outreach because the council started drafting the policy in April. The city also held a roundtable meeting with 35 people from the construction community on Dec. 7.

“The language with every point of this ordinance is no different from a lot of the surrounding cities like Milpitas or Sunnyvale. And the same developers in San Jose are also working there,” Ortiz told San José Spotlight. “We’re seeing a lot of pushback from individuals and it’s a red flag when developers are scared of something like this. It (makes me wonder) just how prevalent is wage theft is in this industry?”

While the policies are similar, there are a few differences between what’s being proposed in San Jose and other South Bay cities. Milpitas, for example, does not withhold the certificate of occupancy, and instead has authority to revoke or suspend the business license of any employer who refuses to pay their final court order. In Sunnyvale, the city can withhold building permits or certificates of occupancy.

For this reason, those in the construction industry want more time to delve into the language. Some developers maintained that while they aren’t opposed to the spirit of the policy, they want to ensure something that regulates their industry won’t have unintended consequences. Real estate development in San Jose is struggling, with not a single project started in 2023, said Reyad Katwan, chief operating officer of Republic Urban Properties.

Jon Ball, retired principal at Hensel Phelps Construction and founder of Urban Confluence, said he’s concerned like other developers, and wants more time to provide input.

“Just because people think this has been a live wire since 2015, this proposed language is still very fresh,” Ball said.

Contact Jana at [email protected] or follow @Jana Kadah on X, formerly known as Twitter.