FOR MORE INFORMATION
PAUL McKENZIE (775) 355-9200
First of a long series of wage complaints filed against Sparks Marina
Labor commissioner gives City of Sparks 30 days to investigate
SPARKS, Nev. (12-21-2009) The first of what is expected to be
a continuing series of wage and benefit complaints has been filed against
the developers of the Sparks Marina project.
Earlier this month, the Building and Construction Trades Council of
Northern Nevada/AFL-CIO filed five complaints with the Nevada labor
commissioner against subcontractors who worked on the Scheels sporting
goods store at the Marina development. The complaints allege that the
subcontractors failed to properly compensate workers or to properly
disclose wage rates on certified payroll reports submitted to the state.
"As these certified payrolls have been on file for over a year
and not corrected, it is evident that fault also lies with the general
contractor, Sampson Construction, the project owners, Scheels
Allsport and RED Development, and the City of Sparks,"
stated Paul McKenzie, the council's executive secretary-treasurer.
"All bear responsibility under Nevada Revised Statutes (NRS) section
338 as well as section 9 of the city's agreement with the developer
(1) which mandates that prevailing wages be paid and properly reported
on the project," McKenzie added.
The complaints allege underpayment of prevailing wages, misclassification
of workers and improper reporting of fringe benefits.
In a letter dated Dec. 17,
the Nevada State Labor Commissioner's office notified Sparks City Attorney
Chet Adams that the complaints had been received and that state
law mandates that the city investigate and submit the results of its
investigation to the labor commissioner within 30 days. (2)
"We have dozens of binders filled with certified payrolls which
we are reviewing for violations," McKenzie says.
"One of the most troubling issues is the fact that the City of
Sparks stands to gain thousands of dollars for enforcing the law, as
both NRS 338 and the city's contract with the developer require the
forfeiture of $20 to $50 per day for each day each violation exists.
In a time when we are faced with large budget shortfalls, it is amazing
that city officials are ignoring this potential source of revenue,"
Sparks has been very financially strapped due to the national recession
and is especially deficient in police protection.
"We waited to begin filing these charges until the district court
system had completed its review regarding the City of Reno's oversight
of the similar Cabela's sporting goods project in Verdi," McKenzie
On Aug. 18, Washoe District
Judge Steve Kosach ruled that Reno had failed in its duty
to make sure that Cabela's complied with state law. Cabela's, like Scheels,
received public financing with sales tax anticipation revenue ("STAR")
bonds, where three of every four sales tax dollars produced by a project
go back to the developer to pay off construction costs. Sparks also
subsidized the Marina project with two other forms of taxpayer support.
"The court finds that the (Nevada state labor) commissioner has
the clear authority to enforce prevailing wage laws on projects financed
by STAR bonds, such as Cabela's," Kosach ruled, adding that state
law "is unambiguous in that it provides that contracts for construction
projects paid for by the proceeds of STAR bonds are subject to prevailing
Prevailing wages are based on an annual survey of local area standards
conducted by the labor commissioner. (NRS section 338)
"And yet," Kosach continued, "despite the labor commissioner's
underlying findings that both the legislature and the parties intended
prevailing wages to be paid on projects such as Cabela's, he went on
to find that no prevailing wages were required to be paid in this case.
The commissioner's opinion leads to an absurd result," Kosach concluded,
ordering the City of Reno to comply with the law.
Reno has appealed to the Nevada Supreme Court.
A City of Reno staffer estimated that Cabela's and its contractors face
potential fines and penalties of up to $2.5 million for not complying
with state law.
"These sanctions should have been assessed against Cabela's and
its contractors when the violations occurred," McKenzie stated.
"It was the city's responsibility to monitor the project."
In September, the Reno City Council discussed making Cabela's establish
a $2.5 million escrow account to insure against any penalties for wage
violations, but the council failed to follow through. Reno's agreement
with Cabela's states that the parties will follow all applicable laws.
(Section 4.10, agreement dated 11 Jan. 2006) [UPDATE: Establishment
of the $2.5 million account was supposed to have been implemented in
The escrow account would have avoided any need to pursue contractors
who left the state. The responsibility of tracking them down would
have rested on Cabela's, as the city would have been able to go to the
escrow account and recover whatever fines and penalties might come out
of the final investigation.
The Building and Construction Trades Council went to court to force
the labor commissioner to uphold the law and assess fines and penalties
based on the evidence. This process did not include any possible fines
against the City of Reno which the labor commissioner also has the power
"City lawyers seem unclear on the concept," McKenzie said.
"The city attorney claims that Reno must appeal Judge Kosach's
decision in order to protect the city from $2.5 million in fines and
penalties. However, those are not city liabilities but possible income
for the city and the state," he added.
Fines of $20 to $50
per day go to the cities, fines up to $5000 per offense go to the state.
Under the STAR bonds law,
developers must assert that their projects will generate at least half
of their traffic from tourists.
Cabela's promised three million
new tourists per year from its 150,000 square-foot store. RED Development
Both were estimates from
the same paid experts, Meridian Consultants. There is no penalty in
the law for failure to perform. Nevada lawmakers talked about tightening
the law in this year's legislative session, but did not do so.
The Reno-Sparks Convention and Visitors Authority reported that
the entire 2006 visitor count for Reno-Sparks-Incline/Tahoe was 5,180,692.
The RSCVA reported 5.1 million in 2007 which dwindled
to 4.6 million in 2008.
Both cities hired consultants to monitor wage payments at the Cabela's
and Marina projects, shelling out more than $750,000.
"The results speak for themselves," McKenzie said.
"Cabela's made a big selling point of creating local construction
jobs, but then hired an out-of-state general contractor who retained
subcontractors who imported workers from other regions, some all the
way from Tennessee," McKenzie said.
"It adds injury to insult when these itinerant laborers have not
been properly compensated according to law and contract," he added.
"We are just trying to make sure that all the workers, union or
not, get paid properly for their labor rather than having some of their
hard-earned money stuff their employers' Christmas stockings,"
The Building Trades Council plans on filing more complaints this week
and continuing until all certified payrolls in the council's files have
Established in 1903, the Sparks-based Building and Construction Trades
Council of Northern Nevada/AFL-CIO is comprised of 19 affiliate unions
representing a wide range of skills.
The history of the Cabela's project and the full text of Judge Kosach's
decision may be accessed at Cabellyup.com.
1. This refers to the city's
Disposition, Development and Financing Agreement, or DDFA, with the
2. NRS 338.070(1)
Nevada Administrative Code (NAC) 338.110(1)
The above references are
in the letter sent to
the City of Sparks dated 12-17-2009. The complete letter may be
downloaded from cabellyup.com.
Additional legal references:
NRS 338.015 outlines the
labor commissioner's ability to fine parties in violation of NRS 338
up to $5000 per offense.
NRS 338.090 makes it a criminal offense to violate the provisions
of NRS 338.
NRS 338.070 requires the public body investigate possible offenses
and report their findings to the labor commissioner.
NRS 338.060 requires the public body to assess penalties against the
contractor for each day a contractor is in violation.