The Crime that Pays

Wage theft especially targets the most vulnerable workers, including undocumented immigrants and unskilled or low-skilled workers who are desperate to hang onto any job in a tough market.



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The Crime that Pays

How predatory bosses steal and get away with it.

Evan M. Lopez

Stealing hundreds or thousands or tens of thousands of dollars is, generally speaking, a risky proposition. Take it from a wallet, or a private house, or a bank ? and get caught ? and chances are good that criminal prosecution awaits.ÿ

There?s an exception to this rule though, a loophole that?s especially gaping in Philadelphia: Steal from your employees, do it openly and flagrantly, and your worst-case scenario is generally just a civil lawsuit. Best-case ? and most likely ? scenario: You get away scot-free.ÿ

Wage theft, the unglamorous name for a shockingly common crime, can be anything from failing to pay promised wages to denying overtime, paying below minimum wage or requiring work off the clock. Some particularly audacious bosses don?t pay their employees at all, but wage theft is usually a slow bleed. It especially targets the most vulnerable workers, including undocumented immigrants and unskilled or low-skilled workers who are desperate to hang onto any job in a tough market. The lack of either strong anti-wage-theft legislation or sufficient local or state resources dedicated to the issue has, some argue, made Philly a haven for predatory bosses looking to save on payroll. ÿ

Eduardo, an undocumented Mexican immigrant in South Philadelphia and a skilled carpenter, says he?s living proof. He?s been working here for seven years ? but the recession, he says, was when things got bad. In 2010, he was nearly finished with a bathroom-remodeling job when his employer fired him and refused to pay the rest of his wages.ÿ

?I knew of other friends of mine, other immigrants, who had been threatened with the police or immigration when they tried to complain about pay,? says Eduardo, 29. (He asked that City Paper not use his real name due to his undocumented status.) ?So I was a little bit afraid, and I didn?t know what to do. I let that go.?ÿ

Luckily, he soon found a good gig with another construction company, and even brought on an apprentice, another immigrant we?ll call Hugo. They worked as a team until, in late 2011, new owners took over the company. Their business model was awfully familiar. The construction company began to dramatically underpay both men, claiming a lack of cash flow. Some co-workers were fired, and never paid. The employer changed his phone number to avoid their calls. Finally, the owner stopped paying Eduardo, too, and stopped answering his phone calls.ÿ

Eduardo took his case to Community Legal Services (CLS), which is helping him prepare a case against his employer. But getting his former co-workers, including his prot‚g‚e, Hugo, to join the case has been challenging, given their fears of retaliation.ÿ

Hugo doesn?t have much reason for optimism. ?I didn?t complain at that time; I just kept working, and didn?t really know what to do about it,? he says. He has friends in other lines of work who?ve had the same experience. ?It?s a widespread problem that happens to a lot of people.?

It?s a growing problem, if the number of lawsuits is any indication. An analysis by CNNMoney recently found that, nationwide, federal collective-action lawsuits alleging wage and hour violations have increased by 400 percent since 2000. (The accused range from perennial targets of outrage like Walmart to companies like IBM and Bank of America.) This increase doesn?t include lawsuits settled in lower courts, individual wage-theft suits or claims settled by other means. Of course, the vast majority of cases go unreported.ÿ

While there?s been no quantitative research on wage theft specific to Philly, we can extrapolate from a 2009 National Employment Law Project study of New York City, Los Angeles and Chicago: There, 68 percent of low-wage workers interviewed had experienced wage and hour violations in the previous week, amounting to about 15 percent of their pay.ÿ

Tom, 24, a college graduate who lives in North Philadelphia, says it happened to him, back when he used to work at a ?pretty popular coffee shop in Northern Liberties,? where his boss never paid overtime, even when he worked for two weeks without a day off. (Tom requested his real name not be used because he feared harassment from his ex-employer.) The boss promised to pay extra hours in a separate check, but never did. The same went for the rest of the staff. When one worker quit, he never got paid for his last two weeks. No one reported the owner.

The lack of reporting is due to ?a toxic brew of circumstances,? says Tim Judson, senior policy specialist at the Progressive States Network. ?Fears of retaliation, weak laws ? unresponsive enforcement agencies with too little capacity, people not knowing their rights.? In a recent report, he gave Pennsylvania an ?F? grade for its wage-theft policies.

Theft is especially rampant in the low-income service sector ? which also happens to be where the jobs are. Philly lost 8,700 jobs in the last year, but the ?leisure and hospitality? sector expanded, adding 2,000 jobs, the most of any employment sector by a long shot.

One 26-year-old waitress told CP she spent two years working at a restaurant where she was forced to pay a portion of her tips to an assistant manager, meaning she and other waitstaff often took home less than minimum wage. When she complained about these practices to a colleague, she was told that if she tried to act she would get the kitchen staff in trouble because their immigration status was in question. ?I?m not sure when I?m going to be an outspoken advocate on these issues,? she told CP, ?just because I don?t know when I?m going to need a job again.? ÿ

In one of the city?s better-known sports bars, for example, the 20- to 25-strong waitstaff (every one a citizen) is required to pool some of their tips for the bartenders. That?s a standard industry practice. What happens next is hopefully less standard: Around two-thirds of the tip pool vanishes.ÿ

?The consensus is that it?s pocket money for the owners,? says Joseph, 29, a waiter who asked that his real name not be used for fear of retaliatory firing. ?A lot of people rationalize it by saying, ?Well, I still make money.? But the employees are paying the owner! There are not a lot of options for someone in that position, if they want to keep their job.?

Part of the problem is that, while Philadelphia is still a union town, it lacks the type of non-union worker organizations that have sprung up in other cities across the country. Workers? centers ? which work with the Department of Labor to expose abuses and even lead direct actions against criminal employers ? are relatively common in Los Angeles, New York and Chicago (which is home to eight such organizations).ÿ

?In larger cities, if we wanted to do some research there would be a central location where we can go, but in Philadelphia we need to think differently,? says Lenore Uddyback-Fortson, spokeswoman at the Department of Labor?s regional office. ?In Philadelphia ?[there is] Community Legal Services, but there seem to be more of these kind of organizations in New York and New Jersey.?

In fact, CLS is one of the only organizations in the city actively combating wage theft. Their caseload provides an idea of the problem?s scope. CLS reports handling more than 100 wage-theft cases a year since 2003, with a huge increase from 2002 through 2008. Since 2009 the number of cases has been falling as residential construction jobs have declined ? and, says CLS lawyer Michael Hollander, as the slack labor market has made workers even more afraid to take action. One CLS client used to bring pay stubs to the organization every two weeks, in the hope of eventually holding a thieving employer liable. But, in an economy like this, barely making rent is better than not making rent at all.ÿ

?It?s a big risk to complain,? Hollander says. ?What happens to people, [such as retaliatory firings], those stories spread. It?s really hard for people to come forward and make these complaints unless they are already out the door. People who have already been fired come to us. There just has to be a better, more innovative way to enforce this systemically.?

In recent years, the federal Department of Labor?s Wage and Hour Division claims to have adopted just such an approach, by working with labor and community groups to track down abuses. In 2010, the Department of Labor cracked down on Pennsylvania motel owners, recovering $366,000 for 900 workers. The regional office followed that with an effort that found an additional $198,542 in wages owed to 72 employees. ÿ

?The [Wage and Hour Division] will never have the resources to address every complaint it receives, let alone investigate every employer who may not be complying with the law,? says Department of Labor spokeswoman Joanna Hawkins. ?For these reasons, the Wage and Hour Division is putting more of its resources into ? a focus on industries with a prevalence of low-wage and vulnerable workers, strategically targeting industries when available data and evidence tell us that there are significant levels of noncompliance.?

Since July 2010, the regional office has won back $226,255 for 627 Philadelphia workers. But it?s unclear how often the department?s new strategic focus has been applied to Philadelphia, outside the motel industry. Labor?s White Tablecloth Initiative, focusing on abuses in high-end restaurants, hasn?t yet reached the city.ÿ

Nor can the Pennsylvania Department of Labor & Industry (DLI) offer much help. It employs seven inspectors in Philadelphia; in the last year, the department received 445 complaints from Philly, and returned $272,278. But they don?t have enough staff to adequately pursue every claim. Moreover, they don?t have the authority to adjudicate claims or the resources ? if an agreement can?t be reached ? to take an employer to court.

DLI has no systemic programs for dealing with wage theft. There are no educational campaigns or investigative task forces, no focus on troubled industries. ?The bureau is complaint-driven, and follows up after a claim is filed,? says DLI press secretary Sara Goulet. This is particularly problematic for those who work off the books.

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