"As long as people struggle with job security, there will be fear": How wage theft goes unchecked

Even without threats, wage violations often go unreported -- often because low-wage workers don't know their rights

Published May 14, 2014 12:30PM (EDT)

  (Reuters/Kevork Djansezian)
(Reuters/Kevork Djansezian)

This piece originally appeared on FairWarning.

FairWarning Karim Ameri decided to play hardball after learning that his Los Angeles recycling business was under investigation for allegedly failing to pay the minimum wage or overtime to workers putting in 60-hour weeks.

Court records say Ameri pressured employees of Recycling Innovations, a string of bottle-and-can redemption centers, to lie to federal officials about his company’s pay practices. He allegedly threatened to fire workers or report them to immigration authorities if they cooperated with U.S. Labor Department investigators.

In one court document, Ameri is said to have “threatened to break an employee’s arm” – although an accountant for the business said Ameri got tripped up by language barriers and didn’t mean it as a real threat of violence.

Federal officials in December took the unusual step of getting a restraining order to bar threats or interference with their investigation. Ameri told FairWarning he could not discuss the case until it is resolved, but added: “I have really good employees, but somebody gave them bad information.”

Whatever the outcome, the case reflects a fact of life about wage abuses. Violations often are concealed, and regulators hindered, because workers fear what will happen if they speak up.

“Fear of retaliation is the number one reason why workers do not complain about wage theft,” said California Labor Commissioner Julie Su in an interview. With enforcement efforts driven mainly by complaints, “we rely on the cooperation of workers,” and “don’t know who’s not coming forward as a result of fear.” But “as long as people struggle with job security,” she said, “there will be fear.”

Under the federal Fair Labor Standards Act and laws in many states, it’s illegal to punish or threaten workers to keep them from filing a wage complaint or cooperating with an investigation.

Yet even without threats, wage violations often go unreported, either because workers don’t know their rights or believe complaining will only get them fired. If they are undocumented immigrants, as many low-wage workers are, fear of being reported to immigration authorities also keeps them silent.

While there are no exact figures on the extent of wage theft, authorities say it is rampant among low-wage workers in such industries as construction, garment manufacturing, restaurants and home health care.

Violations include requiring unpaid work “off the clock” before or after shifts; withholding a worker’s last paycheck; stealing tips and deducting the cost of work uniforms or supplies, along with paying employees less than the minimum wage and failing to provide time-and-a-half overtime pay after workers put in more than 40 hours in a week.

Also widespread is the practice of misclassifying workers as independent contractors, which strips them of wage and hour protections and enables employers to escape paying for Social Security, Medicare, unemployment taxes and workers compensation insurance.

Concern that fear has helped to keep such abuses hidden  recently spurred the Dallas regional office of the Labor Department’s Wage and Hour Division to increase its focus on retaliation. It concluded 40 investigations in fiscal 2013, up from seven the year before.

Among the recent cases: A Houston convenience store employee who had earned only $18 a day and was allegedly fired for cooperating with a Wage and Hour investigation; a server at an Oklahoma restaurant who was fired after she was heard talking to co-workers about employees being forced to continue working after clocking out; a janitor who was fired for refusing to sign a statement falsely asserting that he had been paid back wages due him from a previous wage investigation.

Cynthia Watson, who heads the agency’s southwest region, said she didn’t know if retaliation by employers is increasing, but that her office has become more aware of the problem through contacts with workers’ advocates. “They expressed to us that they didn’t believe that employers had any fear” of being investigated for retaliating against workers, Watson said.

A Novel Strategy

To keep employees from talking to investigators, Boston Hides & Furs, a tannery in Chelsea, Mass., allegedly stashed them out of sight so they couldn’t be questioned—and then fired them once they did talk.

According to a Labor Department lawsuit against Boston Hides in federal court in Boston, the company was paying some  workers $50 to $70 per day, even though they were putting in at least 10 hours a day, six days a week. As a result, their pay fell below the minimum wage, and didn’t include the time and one-half rate after 40 hours, as the law requires.

According to court papers and interviews, when federal investigators showed up at Boston Hides in May 2012, company officials hustled more than a dozen workers from the main plant to a separate factory building. Then they were led to a nearby house and kept there until the investigators left. “We didn’t know what was going on, but we knew something strange was happening,” recalled a former employee named Santos, who did not want to give his last name and spoke through an interpreter.

Another employee tipped investigators, advising them to come back but this time to the back door of the plant. The investigators returned a few days later and interviewed workers who’d been hidden in the house. According to court records, 10 employees, including Santos, were abruptly fired.

A 31-year-old native of El Salvador who had worked more than three years for Boston Hides, Santos told FairWarning he had been earning $300 for 65-hour weeks. He said that along with the meager pay and the blood and putrid smell of cattle hides, the management of the company was extremely abusive.

The supervisor “would treat us badly, like calling us stupid or telling us we were dead cows,” Santos said. “I never thought I would ever experience in this country that people that have money treat people that don’t very differently–and it was very hard.”

For Santos and 14 others, however, things eventually took a better turn. Federal officials hauled the company into court, charging Boston Hides and several of its officials with “willfully and repeatedly’’ violating minimum wage and overtime rules, and illegally firing employees for cooperating with the investigation.

In an email, Gary Feldman, a lawyer for the firm, denied that the company had hidden workers, treated them abusively or fired them for talking to investigators. Even so, the company last September agreed to settle the case by paying the workers back wages and damages of $925,000.

A husband-and-wife business team in Bellingham, Wash., allegedly tried a different way to keep employees of their restaurant and massage therapy salons from cooperating with investigators: They threatened to tell police that the workers were thieves.

In a declaration filed in federal court in Seattle, a Wage and Hour investigator said workers told her that one of the owners, Huang “Jackie” Jie, “instructed them to lie to me about their hours of work and their rate and method of pay…Some employees told  me Mr. Huang told them that if his interest was harmed, he would call the police and falsely tell the police that the employee was caught stealing,” the investigator said. “Some employees told me that Huang threatened to turn them in to the immigration authorities.”

Federal offcials accused Huang, Zhao “Jenny” Zeng Hong and their businesses Pacific Coast Foods and J&J Comfort Zone of violating minimum wage and overtime rules, and of falsifying payroll records to cover it up. Their lawsuit seeks back wages for about 100 current and former employees of the businesses.

The defendants have denied intentionally violating wage standards, saying in court papers that “there is a bona fide dispute as to whether any additional wages are owed.’’ Defense attorney Chris Jackman would not go into detail but told FairWarning: “I don’t believe my client’s guilty of anything.”

Going to the Bank

Investigations have also revealed cases of employers forcing workers to kick back pay to hang on to their jobs.

The stealth practice has repeatedly surfaced in public works projects that require employees to get the “prevailing wage” – typically, the amount of pay and benefits a union worker would receive.  Depending on the location and construction trade, the prevailing wage can be $40 to $50 per hour. Either because they underbid to win the contract or just want to line their pockets, some contractors secretly compel employees to kick back part of their pay.

The Illinois Attorney General has filed criminal charges against the head of a Chicago-area paving firm, North Suburban Asphalt, saying it has videotape of him accompanying employees to the bank to cash their paychecks and then taking back part of their pay. And prosecutors in Orange County, Calif., have filed a string of kickback cases involving public works projects, including one that ended in a contractor getting a two-year prison term.

According to charges in the case, Reza Mohammedi and his firm, Southland Construction, had won contracts for building projects in seven Orange County municipalities. While the payroll records showed employees—mostly undocumented Latino workers—getting prevailing wages, they were forced to kick back money and threatened with being turned in to immigration authorities if they reported the scheme.

Testifying before a grand jury, a worker named Jose Alfredo Banos said Mohammedi had coached him to lie to investigators, and told how Mohammedi, at a hearing, used hand signals to tell Banos what to say.

Another employee, Rafael Martinez, said Mohammedi told him that if anyone asked workers about their pay, “we should tell them that he was paying us $47” per hour, because ‘’that was what supposedly he should be paying us. But he said to me, ‘I offer $13 an hour to you, take it or leave it.’”

In an equally brazen scheme, some employers who have been forced to pay back wages after getting caught violating the law then go to the workers and secretly demand that they give the money back.

High Performance Ropes of America, a Belton, Texas producer of heavy metal ropes used in mining, oil and gas and ski lift operations, agreed in a settlement with federal authorities to give back wages to dozens of workers it had improperly failed to pay overtime.

But according to court papers, High Performance submitted false records documenting the payments. In reality, the company arranged for employees to be taken to a local bank, where they “cashed their checks, and returned the money back” to the company.

The company pleaded guilty last May to a felony charge of making false statements to the government, and was ordered to pay back wages and damages to 31 employees. Three company officials were also convicted of felonies.

Then there’s the case of Dancing Wasabi, a Cincinnati restaurant cited for minimum wage and overtime violations. After agreeing to provide back wages, the restaurant’s co-owner and manager allegedly told three kitchen workers to return their checks. They refused and were fired, according to a lawsuit filed in December by the Department of Labor.  The restaurant’s lawyer is seeking dismissal of the case, saying any violations were the fault of a former co-owner who is no longer in charge.

Waiting Game

In  Los Angeles’  San Fernando Valley, employees of Alkanan, Inc., which operates under the name Recycling Innovations,  load bottles and cans into shipping containers set up in parking lots. Until investigators showed up last fall, the workers allegedly were being paid $55 to $65 per day in cash to put in 10 hour days, six days a week. That meant they were getting less than the California minimum wage of $8 an hour, and were not getting time and one-half after 40 hours, as required.

The Spanish-speaking immigrant workers were afraid to confront their boss, Karim Ameri, or bring a wage complaint. When Ameri learned of the federal investigation, he began “threatening the workers,…asking them who’s the one who called the Department of Labor,” said Antonio Bernabe, a labor advocate and senior organizer for a group known as CHIRLA, or Coalition for Humane Immigrant Rights of Los Angeles. In fact, Bernabe said, he brought the complaint to labor officials because the workers were afraid to do it themselves.

Things took a volatile turn after investigators showed up, according to a court declaration by Carolina Ferniza of the Wage and Hour Division.

“Employees informed me that Mr. Ameri told them that if they are contacted by the Department of Labor they should state that they work only part time, that they are paid the minimum wage, that they are paid by the hour, that they are paid by check”—all things that are untrue, Ferniza said.

“Employees are afraid to tell Mr. Ameri that they have spoken to me because he has threatened to retaliate against any employee who complains to the Department of Labor. On various occasions, Mr. Ameri has told employees that if he finds out who has complained to the Department of Labor that he will fire that person, that the person will be reported to immigration, that he will ‘make [that person’s] life bad,’ and that he will ‘break [that person’s] teeth.’ “

Several workers contacted by FairWarning—all of whom asked not to be identified—confirmed they had been coached to lie to investigators or risk being fired or reported to immigration authorities. According to one account, Ameri had snatched cell phones from workers to see if they had placed calls to the Labor Department.

Now they are in a waiting game to see what will come of the investigation, though one thing already has changed: The company began paying employees $8 per hour, while cutting them back to 40-hour weeks.

“The truth is that I don’t know what’s going to happen,” one worker said. “I don’t know how the investigation is going to turn out, how it is going to affect us or if we’re going to benefit.”


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