Minimum Wage Violations Cost Workers In California Nearly $2 Billion Annually

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EACH year, minimum-wage violations by California employers sap the state’s workforce of nearly $2 billion in earnings, according to a report released this month by the Economic Policy Institute (EPI), a nonprofit think tank in Washington.

‘This is increasing the financial vulnerability of already at-risk populations and creating a drag on the state’s overall economic health,’ the EPI added. Employees who are supposed to be getting paid the minimum wage in California are, on average, losing $64 per week and about $3,300 annually – 22% of their earnings, from employers shortchanging their hourly workers.

Though the current state minimum wage of $10.50 an hour translates to an annual salary of $21,840, minimum-wage, workers don’t always have full-time work, so they collect only $11,700 a year in wages on average. That forces them ‘to rely on public assistance programmes to survive and provide for their families,’ the report’s authors write.

Their findings suggest that, despite California’s reputation as a bastion of worker-friendly labour laws, wage theft – a broad term that can be invoked any time an employer doesn’t follow those laws – remains a pernicious problem. And it’s one that Julie Su, the state’s labour commissioner, is keenly aware of and looking to combat.

Su said that before she took office in April 2011, the labour commissioner’s office worked to weed out wage theft largely through random workplace inspections, a tactic she called ‘a very insufficient, inefficient way of pursuing enforcement’ of the state’s labour laws.

Su has shifted her agency’s resources, taking a more focused approach to enforcement – relying on reports of workplace violations from employees on the inside before taking action. Su said that her agency has also become ‘much more aggressive’ when it comes to reclaiming money employers owe workers when wage violations are uncovered.

She said: ‘We do in-depth inspections of workplaces where we suspect there are violations, and we go all the way to actually attacking the shell games employers play to hide their assets – going after individuals where appropriate, when they hide assets in their own bank accounts – to get the workers their money.’

Legislation that took effect in 2016 allows the state to recoup stolen wages from individuals, not just corporate accounts. Carole Vigne, an attorney at Legal Aid at Work, a nonprofit agency that provides legal representation to low-wage workers, commented: ‘If you as an individual caused these violations to occur, then you need to be held responsible too. The corporate shield isn’t going to protect you any more.’

Su’s efforts to enforce the state’s labour laws rely on workers coming forward to report wage violations, which means raising awareness about wage theft and where employees can go to report it. To do that, Su initiated a statewide multilingual campaign in 2014, ‘Wage Theft is a Crime,’ designed to flush out violations at the source.

The labour commission is renewing the campaign throughout 2018 and will focus on Bakersfield, Fresno and San Bernardino and Riverside counties, Su said, using billboards, social media campaigns and a website, which includes information for workers and how they can take action.

Since 2012, Su’s first full year in office, an average of 34,000 wage claims are filed with the labour commissioner’s office each year, or about one every four minutes. That figure doesn’t include private lawsuits. Farm labour contractors, car washes and garment manufacturers are among the types of companies that historically have a high incidence of wage theft, Su said.

Because of that, those business are required to obtain special licenses from the labour commissioner’s office, which pays close attention to them. In July 2018, janitorial businesses will be added to that list. Su said her office also keeps a close eye on hotel housekeeping, restaurants, residential care homes and construction businesses.

Legal Aid at Work’s Vigne sees workers in nearly all of those industries during twice-monthly clinics the organisation holds in San Francisco and Oakland for people who believe they’ve been victims of wage theft. She said: ‘We’re seeing a lot of construction workers.’

In that industry, ‘there are a lot of deadlines and pressure to finish a project on time, and we often see people who are interrupted during their meal period to come back to work.’ Vigne added that construction workers are commonly paid only portions of what their employer owes them, with assurances to pay the rest later on. ‘Over several months, it adds up to thousands of dollars,’ she said.

Last year, Vigne represented a construction worker who had seen large amounts of his wages withheld for about two years. After bringing his claim to the labour commission’s office, the agency found he was owed more than $30,000. Harold Butanas of Daly City was working 24-hour shifts caring for half-a-dozen elderly patients at a residential care facility in the Bay Area, but his wages weren’t reflecting the time he spent on the clock.

He said: ‘It came out that I was only receiving $2.53 per hour.’ With some legal assistance from Golden Gate University School of Law, Butanas filed a wage claim with the labour commissioner’s office and was able to recoup the money he was owed. David Cooper, a senior EPI economic analyst and a co-author of the organisation’s report said that wage theft is perhaps most acutely felt by the individuals whose pay cheques are being illegally docked, but the practice has a wider impact on the state’s economy.

He said: ‘If there’s one employer who is keeping their labour costs low by cheating their workers, it puts downward pressure on wages for all the other workers in that industry. It’s one more thing that contributes to holding down wages for the broader population.’

Cracking down on minimum-wage theft isn’t a ‘silver bullet’ for solving poverty, Cooper added, but it ‘makes a real difference in terms of the number of folks who have to turn to public assistance to meet their needs.’

• Five former drivers for XPO Logistics subsidiary, XPO Cartage have been awarded nearly $1 million in reimbursement following a driver misclassification lawsuit. Plaintiffs Jose A Ramirez, Jose Alba, Jose Peraza, Mario Alba and Mauricio Rodriguez were awarded a total of $958,660 in reimbursement plus attorney’s fees and costs by US District Court Judge William Keller on May 16.

All five men were previously issued awards by the California Labour Commission, which found that the drivers had been misclassified as independent contractors. XPO Cartage appealed the decisions in California’s Superior Court before the case was moved to federal court. Attorneys for the Labour Commission defended the decisions on behalf of the drivers.

After a four-day bench trial and post-trial briefing, Keller ruled the cases were not pre-empted by the Federal Aviation Administration Authorisation Act of 1994 and that all five drivers, misclassified as independent contractors, were entitled to reimbursement for expenses and unlawful deductions.

‘The United States District Court”s decision in this case vindicates the rights of five employees who have sought for years to recoup the deductions unlawfully withheld from their wages due to being misclassified as independent contractors,’ California Labour Commissioner Julie A Su said in a press release issued following the ruling.

The release notes that California state courts have also upheld the Labour Commissioner’s awards in misclassification cases in the port and rail trucking industry.