L&I fight: Labor says Philly has been too easy on ‘underground’ employers who build without permits

Philadelphia may be a “union town,” as labor leaders brag, and some builders complain. Offices, schools, and hospitals are built with union labor, at wages that are about the same as big nonunion contractors, but with higher health and pension costs. Mayor Jim Kenney and powerful Democrats on City Council were elected with union dollars.

But in a letter to Kenney, obtained by The Inquirer, a veteran inspector for the city Department of Licenses and Inspections, Joseph A. Diorio Jr., complained that his unit had been shut for three months in early 2019 — after senior L&I officers accused his group of being too sympathetic to organized labor, and which has spilled into court.

Trade unions have been pushing to get members hired at the smaller residential construction jobs that have proliferated in city neighborhoods. As part of their campaign, they have called on the city to more aggressively enforce city permitting, licensing, tax, and insurance laws against small, typically nonunion contractors — rules that Kenney and other city officials admit are too often flouted, leading to deaths, injuries, and building collapses.

But the ad hoc Underground Economy Task Force that Kenney set up in early 2018 to report problems “has been inactive” for more than a year, city spokesman Mike Dunn said. “There are no current members” of the group," he said, adding that the group had been formed to focus “unlicensed construction activity and unpaid taxes.”

Diorio, a member of that task force, was supposed to lead the charge within the agency as head of L&I’s audits and inspections group.

During the shutdown, “building inspectors Garry Haynes and Anthony Bronico were forced to sit at their desks,” paid for nothing, Diorio wrote last summer, even as news outlets were reporting building collapses and other problems at inadequately monitored residential construction sites. Diorio, who still works for L&I, also alleged that he was retaliated against in the workplace.

In the letter, Diorio blamed the shutdown on Ann Pasquariello, L&I director of enforcement.

Pasquariello had, Diorio told the mayor, “recused herself” from the Underground Economy Task Force meetings because a family member ran a nonunion construction firm that Diorio’s office might target.

But despite the recusal, Diorio wrote, she had told inspector Haynes and others that she was pushing to shut down Diorio’s audits and investigations unit, a move he said compromised her recusal and went beyond the scope of her job.

Impatient for Kenney’s response, Diorio in August sued Pasquariello and L&I Administrative Services Director Kirk McClarren in Philadephia Common Pleas Court, alleging that they had “falsely” accused him of neglecting his job and abusing personal leave. Pasquariello’s “behind the scenes” motive, Diorio alleged, was to shut Diorio’s audits and inspections unit, which she thought was “improperly siding with unions to work against non-unionized businesses.”

With the unit idled, “several properties collapsed due to unsafe underpinning” — one of the problems Diorio said his team had focused on before they were ordered to stay off job sites.

Responding to the suit, the city’s lawyers, representing Pasquariello and McClarren, denied Dioro’s unit was actually suspended or that he was punished for targeting nonunion businesses. They say the two officials acted properly and showed no bias, and they asked the court to dismiss Diorio’s complaint. Judge Frederica Massiah-Jackson refused: “The case is going forward” with discovery planned starting later this spring, Diorio’s lawyer, Brian J. Foley, told me.

So what is the city doing about the small contractors that were the focus of the task force in the first place?

In a February City Council hearing, L&I chief David Perri acknowledged “underground” economy abuses have “unfortunately increased” as more builders add and renovate homes.

But he said Diorio’s successor at audits and investigations, lawyer William Fernandez, is up to the job of launching more surprise inspections to make sure small contractors and their workers comply with federal OSHA job safety requirements, hold proper permits, and are paying taxes and insurance.

Indeed, Perri said Fernandez this winter had launched a new license violation program that ran surprise inspections at 38 job sites in January, finding nine violations and levying $13,000 in fines. City revenue officials also reviewed the unit’s financial record referrals and demanded $629,000 in back taxes.

John Dougherty, the powerful head of the Philadelphia Building and Construction Trades Council of unions, says that’s still just a slice of what needs to be done.

Dougherty’s pending federal charges of bribing a city councilmember and misusing union money have also been delayed by the coronavirus. In the indictment, federal prosecutors say Dougherty crossed the line in his fight against nonunion labor by using his political influence to get L&I to shut down nonunion construction work, including once at the Children’s Hospital of Philadelphia. Dougherty says members of his union and others often report code violations by contractors but has denied illegally influencing L&I.

Brian Eddis, business agent at IBEW Local 98, Dougherty’s union, walked me around Fishtown job sites the day before work stopped for the coronavirus shutdown last month, pointing out damage he attributed to contractors working beyond their permits, and listing complaints he said L&I hadn’t yet acted on.

At one stop, David Hampton, sexton at Fishtown’s onion-domed First Presbyterian Church, pointed to water damage below a new roof, which he blamed on unmonitored apartment construction nearby that had shaken the building and forced Sunday services out of the sanctuary.

In an interview, Dougherty said L&I has not responded to a number of union complaints about similar damage. He said a headcount shows L&I has dozens of vacant inspector positions, and complained that veteran union workers have put in applications but failed to get interviews for those jobs. The city has acknowledged the department had trouble filling inspector slots amid the construction boom.

Cheering the planned resumption of construction this weekend after five weeks of coronavirus closures, Dougherty says he worries the slowing economy leaves the city “swamped by commercial and residential developers who are building as quickly and cheaply as possible, taking dangerous short cuts to maximize profits” while evading permits and payroll taxes.

Dougherty says he’s convinced there’s now an “anti-union environment” at L&I, despite all the union’s close ties to City Hall.