By John Todd Based on original reporting by San José Spotlight
A Rio Linda-based construction subcontractor has found itself at the center of a major labor investigation in the Bay Area, facing nearly three-quarters of a million dollars in potential fines over allegations of wage theft and labor violations.
The San Jose Department of Public Works has cited REO Mechanical, a heating, ventilation, and air conditioning (HVAC) company headquartered at 6800 Rio Linda Boulevard in Rio Linda, for multiple violations of the state labor code. The citations stem from work performed on the Mariposa Place affordable housing project in San Jose.
According to documents obtained by San José Spotlight, the assessed fines totaling $717,592 represent one of the most significant enforcement actions San Jose has issued in recent years, highlighting a growing crackdown on labor exploitation in the construction sector.
A Breakdown of the Allegations
The controversy centers on the construction of a seven-story, 80-unit apartment building located at 748-750 W. San Carlos St. in San Jose. City inspectors allege that REO Mechanical engaged in a pattern of labor violations, including:
- Late or underpayment of wages.
- Failure to contribute to workers’ 401(k) plans.
- Misclassification of workers.
- Failure to pay required “travel and subsistence” stipends.
According to the city’s notice of violation issued on October 29, the total amount of restitution directly owed to workers exceeds $225,000. The city also levied an additional fine of $42,250 for alleged late payroll submissions. When combined with penalty multipliers standard in labor code enforcement, the total assessment reached the $717,592 figure.
Officials note that this sum is an initial assessment and could fluctuate as investigators gather further evidence.
Local Company Denies Wrongdoing
REO Mechanical has firmly rejected the city’s findings. The company maintains that it has compensated its employees fairly and in accordance with the law.
“We’re appealing [the city’s fine] completely because our employees were paid,” a company spokesperson told San José Spotlight, though she declined to provide her name for the record.
The investigation into REO Mechanical is specific to their role as a subcontractor. The project’s prime contractor, Danco, and the property owner, San Jose W. San Carlos LP, have not been accused of wrongdoing in this assessment. Danco spokesperson Jonathan Gutierrez stated the project is 99% complete and is awaiting final utility connections and inspections.
The Human Cost: Workers Allegedly Unpaid and Retaliated Against
Beyond the spreadsheets and penalty calculations, the allegations describe a difficult reality for the workers involved. Tomas Margain, an attorney representing three workers who claim their wages were stolen, described the situation as severe.
“It’s a very large number,” Margain said regarding the fines. “If they actually recover it, that’s a win.”
Margain alleges that REO Mechanical failed to pay fringe benefits required by work agreements for months. While some catch-up payments were eventually made, Margain contends they were insufficient to cover the losses workers incurred during the delay.
One worker, who spoke to San José Spotlight on the condition of anonymity due to fear of retribution, claimed he was fired specifically for raising questions about his pay.
“I was the one asking all the dumb questions, and as a result I got fired,” the worker stated. “I’m at risk of losing it all and having to start over.”
Local Leadership and Public Trust
The investigation is of particular interest in Rio Linda, not just for the scale of the fines, but for the high profile of the company’s owner; REO Mechanical is owned and operated by Maria Liverett, a serving Director on the Rio Linda Elverta Community Water District (RLECWD) Board.
Liverett’s entanglement in a major state labor investigation raises eyebrows regarding her governance role, specifically against the backdrop of the Water District’s own troubled history. The RLECWD has frequently found itself navigating a minefield of labor disputes, legal entanglements, and administrative friction.
This situation forces ratepayers to ask uncomfortable questions: If a Director’s private business is allegedly skirting state labor laws and failing to pay workers, how does that impact her ability to make sound decisions regarding the District’s workforce? With the Water District already facing its own challenges regarding legal compliance and employee relations, the allegations against Liverett suggest a concerning parallel between her private management practices and the issues plaguing our local public utility.
Online Reputation and Accreditation Issues
Beyond the official investigation, REO Mechanical has faced challenges regarding its public reputation.
A review of the company’s standing with the Better Business Bureau (BBB) reveals that REO Mechanical is not BBB accredited. Furthermore, the company’s customer satisfaction ratings on public review platforms reflect significant dissatisfaction. On Yelp, the company currently holds an overall rating of 2.5 stars, with numerous one-star reviews from customers citing various service and communication issues.
Broader Context: A Fight Against Wage Theft
This investigation arrives more than a year after the San Jose City Council passed reforms designed to strengthen safeguards against wage theft in the construction industry. While those specific policies were targeted at privately funded developments, the Mariposa Place project—which received a mix of public and private funding, including loans from the city and Santa Clara County—falls under strict public works oversight.
San Jose Public Works Director Matt Loesch emphasized that the investigation proves the city’s monitoring systems are functioning as intended.
“The purpose of this team is to make sure our contractors are on the up and up,” Loesch said.
While the $717,000 assessment is substantial, Loesch noted it is not the largest his agency has seen recently, pointing to a persistent issue of wage theft allegations in the region.
What Comes Next
As the appeals process begins, the spotlight remains on this Rio Linda business. The outcome of this case will likely hinge on the documentation REO Mechanical can provide to prove their compliance with state labor codes.
It also underscores the vital importance of transparent labor practices and the devastating financial impact that alleged wage theft can have on individual tradesmen and their families.
Credit for the original investigation and reporting goes to San José Spotlight. To read their full coverage, please visit SanJoseSpotlight.com.
