BLDG 44 Developers LLC (BLDG 44) is the subject of a new lawsuit filed by attorney Brad Lander with the New York City Comptroller’s Bureau of Labor Law. The lawsuit was filed at the New York City Office of Administrative Trials and Hearings and accuses BLDG 44 of failing to pay over $40 million in back wages and penalties.

According to state officials, BLDG 44, a leading residential builder in the state, violated the state's minimum average hourly wage paid out to its construction workers under New York State’s Real Property Tax Law 421-a. aka the Affordable Housing New York Program. Under this tax incentive program, there is a partial real estate tax exemption for the construction of new housing.

Under the 2017 version of the program, developers of properties containing at least 300 dwelling units must guarantee a minimum average hourly wage of $60 for construction workers in Manhattan south of 96th Street or $45 in Brooklyn or Queens.

The minimum average hourly wage is not a specific rate that must be paid to each worker but is instead a calculation that gets the average of the total compensation of all workers on a construction project divided by the total hours worked. However, according to the Bureau of Labor Law, BLDG 44 paid well below the required minimum wage with an average worker wage of $31.88 an hour.

Claudia Henriquez, Director of Workers’ Rights at the Comptroller’s Bureau of Labor Law, shared, “As part of receiving an as-of-right tax benefit, developers must pay the minimum average hourly wage to their construction workers—or face penalties.” Henriquez adds, “My team uncovered significant underpayments in our investigation of BLDG 44. If you want to build under 421-a, then adhering to its labor rules is non-negotiable. Our office will continue to ensure developers prioritize fair labor practices.”

The discrepancy in payment violations came out after an investigation revealed that BLDG 44 fell short with BLDG 44 paying out a minimum average hourly wage of only $31.88. This resulted in $32,285,200.48 in underpayment. The investigation uncovered that BLDG 44’s failure to pay the required minimum wage spanned from June 5, 2015, to August 15, 2019.

As a result of the circumstances surrounding the violations, additional penalties were levied against BLDG 44. The pay gap exceeded 15% of the required rate, requiring the Bureau of Labor Law to impose a 25% penalty. This penalty amounted to a $8,071,300.12 fine.

Penalty funds will be designated for the New York City Department of Housing Preservation and Development (HPD) specifically for affordable housing initiatives.

Opting into the 421-a program gives developers a generous 35-year tax exemption equal to 100% of the increases in assessed valuation for developments. Since enrolling in the program, BLDG 44 has received $23.1 million in tax exemptions to date. BLDG 44’s tax break is set to expire in 2054.

The law also details that developers who opt into the tax exemption program must have an independent monitor oversee operations and must submit a project-wide certified payroll report to the Comptroller’s Bureau of Labor Law for review and approval within one year of project completion.

Commissioner Adolfo Carrión Jr. shared in announcing the lawsuit, “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.”