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Developer Forced To Pay $3M After Underpaying Construction Workers On 421-a Project

568 Union in Williamsburg, developed by Heatherwood Communities

Developer Heatherwood Communities has reached an agreement with New York Attorney General Letitia James to pay millions in fines and back payments to construction workers after failing to pay them the legally required minimum on projects in Queens and Brooklyn that received tax breaks.

James and New York City Comptroller Brad Lander announced Thursday they and 32BJ SEIU, the labor union that filed the whistleblower complaint, had recovered $3M from Heatherwood. The developer received 421-a tax exemptions on rental properties it built at 27-03 42nd Road in Long Island City and another at 568 Union in Williamsburg.

“Workers are the backbone of New York, and they deserve fair pay and benefits for their hard work,” James said in a statement. “These individuals worked day and night to make ends meet but were denied their hard-earned money. Paying workers fair wages and benefits is not a luxury, it’s the law and Heatherwood cheated these workers and taxpayers.”

Heatherwood declined to comment. 

Heatherwood had told Housing Preservation and Development that it would give its workers the set wage for 421-a, which at the time was between $22 and $26 per hour, in exchange for receiving a partial tax exemption. Instead, Heatherwood was paying janitorial and concierge workers at 568 Union Ave. between $9 and $14 an hour without benefits and workers at the Long Island City project were getting between $8.50 and $15, also without benefits, per the statement. Leases signed in that building this year are between $3,050 and $4,771 per month, according to StreetEasy.

As part of the deal, Heatherwood agreed to pay just over $723K to 24 workers, which includes 16% interest. It will also pay the city just over $1.1M and the state $686K in penalties. The company will also have to continue paying prevailing wages at the properties. The popular 421-a tax break expired in 2017, and was replaced by what was known as Affordable Housing NY Program.

That program lapsed earlier this year, after lawmakers failed to agree on a replacement — much to the real estate industry’s dismay.

Heatherwood was founded as a residential builder on Long Island, but recently started foraying into developments in the boroughs. It also built a project at 544 Union in Brooklyn and the 58-story Tower 28 in Long Island City, according to its website.