San Jose leaders approve new wage theft policy for builders

Construction workers could soon gain an additional layer of protection in San Jose, as city leaders supported new rules to limit wage theft violators from completing development projects.

The San Jose City Council unanimously approved a “responsible construction ordinance” plan Tuesday that prevents builders from receiving a certificate of occupancy from the city for projects if there are any unpaid wage theft judgments against them or their subcontractors. The city manager will return to council at a later date for a final vote of approval on the plan.

The direction from councilmembers to city officials to craft the policy comes more than six years after it was revealed a luxury San Jose condo tower project was built in part by exploited and abused immigrant laborers. Adopting such a policy has been a priority item for the council since at least 2019.

“The promises by the council were to prioritize getting this across the finish line to make sure something like that will never happen again, but unfortunately, construction workers are exploited on a daily basis,” Will Smith, a business agent for the IBEW 332 electricians union, said to the council. “We have an opportunity today to turn the tide. It’s sad that six years have gone by, but yet neighboring cities have been able to get this done.”

Mayor Matt Mahan said he was proud of the council for taking more time to create an inclusive policy, and the unanimous vote sends a message that wage theft will not be tolerated in San Jose. A vote on the plan has been delayed multiple times, most recently in December when it was pushed out a month to allow more input from developers.

“We’re going to do it in a way that has support from the development community and does not punish those who are good actors or push out the investment we desperately need in jobs and housing,” Mahan said.

More than 12,000 Santa Clara County construction workers have been victims of wage theft since 2001, to the tune of about $46 million, labor advocates said.

From 2018 through 2023, there were nearly 100 wage theft judgments against employers in Santa Clara County, and 59 of them were listed as still unpaid, according to state data cited in a city report.

Assemblymember Ash Kalra, in a letter of support for the policy, said it will give victims of wage theft another tool to recover money they are owed.

“When offenders have already been found guilty and ordered to pay back the stolen wages, but refuse to do so, current local laws allow them to continue to operate with impunity,” Kalra said.

In addition to withholding a certificate of occupancy at the completion of construction, the city’s policy will also require a builder, before obtaining a building permit, to attest that none of their contractors or subcontractors are listed on the state’s unpaid wage theft judgment list. If any are on the list, the builder would have to provide proof the wages have since been paid out and the judgment settled.

While Mahan and others said the policy represents a compromise that both labor unions and contractors support, some concerns remained.

Dennis Martin, a government affairs representative with the Building Industry Association of the Bay Area, said the policy is “unnecessary and overreaching,” and risks “improper interference” in getting occupancy certificates and subsequently, project financing.

District 6 Councilmember Dev Davis said the threat of withholding an occupancy permit is a way to ensure the policy has teeth.

“We really needed to get at the worst of the worst, those who would have a conscious disregard for the ordinance, and that there would be a consequence for that,” Davis said.

District 10 Councilmember Arjun Batra raised concerns about exemptions for builders of projects under 10,000 square feet, echoing flags raised by large contractors who would be subject to it.

“I hope this thing does not leave a big gap where the people who are really cheating on the system, they get to escape,” Batra said.

Bill Bailey, a longtime member of UA Local 393, a plumbers and steamfitters union, said the policy is akin to another safety measure for workers on the job.

“Construction, outside of the police department and the military, is the next most dangerous damn thing in this world. Support for this (policy) is very critical,” Bailey said. “Take care of our people.”