Will Wage Theft Derail Seattle’s $15 Minimum-Wage Law?

The state and city appear unprepared to enforce the new increase.


Protesters at Queen City Grill. Photo by Allegra Abramo/InvestigateWest

On a sunny mid-June evening, two dozen protesters in scarlet, green, and gold T-shirts paced in a circle in front of Queen City Grill in Belltown.

“Wage theft is a crime,” they chanted. “Pay your workers or do the time.”

One protester’s sign: “You pay, we leave!”

The protest was organized to pressure the restaurant owner on behalf of former employee Fernando Moreno Ruiz, who says he was owed more than $5,500 in back wages.

Moreno Ruiz says he worked for the owner for more than six years. But last year his paychecks started bouncing. Alone in the U.S. for the past decade, Moreno Ruiz counted on the wages to support his wife and two children in Mexico.

By December he couldn’t wait any longer. He quit. The lost wages almost cost him his marriage, he says, because his wife thought he didn’t want to send money home anymore.

“I tried to do honorable work, and he didn’t know how to honor me as a worker,” Moreno Ruiz says of his boss.

The protest against Queen City Grill was organized by Casa Latina, which runs a day worker center and educational programs for immigrants. The Seattle organization gets hundreds of calls a year from workers like Moreno Ruiz who say employers have failed to pay them some or all of their agreed wages.

The protesters marched for only 10 minutes before Moreno Ruiz and a Casa Latina organizer were called into a back office.

The owner, Robert Eickhof, never came out of the office, nor did he respond to several phone calls later from InvestigateWest seeking comment.

But after a few minutes, Moreno Ruiz emerged. Back out on the sidewalk, he beamed as he flashed $800 in crisp $100 bills and a promissory note for the rest.

Seattle may soon find that passing a $15 minimum wage was the easy part. The real challenge will be making sure workers actually get what they deserve under the law.

However satisfying that June evening in Belltown proved for Fernando Moreno Ruiz, that is not the way the system is supposed to work.

In the past eight years, both the Washington legislature and the Seattle City Council have passed laws to address what’s coming to be understood as a huge problem: wage theft, the withholding of wages or denial of benefits rightfully owed an employee. It’s a misdemeanor under city and state law. Widespread violations of minimum-wage laws, overtime provisions, and other examples of wage theft have been well documented in recent decades.

And yet in hundreds of cases annually, Washington fails to retrieve workers’ shorted wages, a review of state records by InvestigateWest shows. Meanwhile, the city ordinance has yet to bring about even a single prosecution of employers who withhold pay.

The Washington Department of Labor & Industries has sped up wage-complaint investigations over the past several years, yet four in 10 cases take longer than the legally mandated 60 days. And the department collects less than $6 of every $10 it says workers are owed, according to an InvestigateWest analysis of state records.

Given these shortfalls, worker advocates wonder how under-resourced agencies will ensure Seattle workers actually do collect $15 an hour under the new law.

“Everyone is aware that passing a $15-an-hour minimum wage was historic,” says Rebecca Smith, deputy director of the National Employment Law Project, who serves on a panel advising Mayor Ed Murray and the City Council on the wage theft issue. “But if we cannot enforce that, we haven’t accomplished much.”

Comprehensive statistics are lacking on the extent of wage violations in Seattle today, but dozens of studies and investigations by federal and state agencies have uncovered widespread violations nationwide.

A 2009 report by the National Employment Law Project surveying thousands of low-wage workers in New York, Chicago, and Los Angeles found that nearly seven in 10 workers had experienced at least one pay-related violation in the previous work week, and that more than one-quarter of respondents had been paid less than minimum wage. Three-quarters of those who had worked more than 40 hours had not been paid the required time-and-a-half rate.

In addition to failure to pay minimum wage and overtime, common violations include requiring employees to work off the clock, denying meal breaks, illegal deductions, misclassifying workers as independent contractors, and not paying for all hours worked.

“I don’t think you can find an employer in the state of Washington that pays overtime to their immigrant piece-rate workers.”

In some industries, wage and hour violations seem to be the norm. The U.S. Department of Labor found violations in 71 percent of the West Coast restaurants it investigated in the six years prior to 2012. A five-year investigation of California garment manufacturers found violations in 93 percent of them. Violations are also common in construction, agriculture, child care, and janitorial work, according to studies and attorneys who represent workers.

Seattle labor attorney David Mark often represents residential construction workers, who are predominantly immigrants, many paid a piece rate. “I don’t think you can find an employer in the state of Washington that pays overtime to their immigrant piece-rate workers,” Mark says. “So there’s an example of a large segment of the economy where a blatant violation of the law is the norm. It’s just outrageous.”

Although numerous studies show that wage theft is common among low-wage workers in general, immigrants seem to suffer higher rates of violations. A 2010 study by researchers at the University of California Los Angeles found that foreign-born workers in that city suffered more than twice the rate of minimum-wage violations as their U.S.-born counterparts.

“The violations, they’re extraordinary among the immigrant workforce,” says Mark, who has represented thousands of immigrant employees in multimillion-dollar class-action lawsuits, including a recent Washington Supreme Court case against Fred Meyer for misclassifying janitorial workers.

“The classic is an immigrant worker who’s working 55 or 60 hours a week and getting $1,000 twice a month, that kind of thing, which works out to at or below minimum wage, and no overtime,” Mark says.

Not everyone believes that wage theft is widespread, however. One doubter is Bob Battles, general counsel and director of government affairs for the Association of Washington Business. “I don’t see this as an out-of-control, pervasive problem,” Battles says. “This is a few bad actors that are spoiling the bunch if we’re not careful, but go after those folks individually. This is not what we think is a prevalent problem.”

The Washington Department of Labor & Industries, which is responsible for investigating complaints of wage and hour violations, offers a similar assessment. The department receives between 3,000 and 4,000 complaints each year for the more than three million people employed in the state, the agency points out. Elizabeth Smith, assistant director of fraud prevention and labor standards, says most employers are trying to follow the law: “There’s a small subset that know the law and are not following it intentionally.”

That’s what Casa Latina has found, too, says Cariño Barragán Talancón, the organizer who usually fields calls about wage theft. “We’ve realized that some employers and companies, it’s actually their business model to steal from workers,” Barragán Talancón says. “They make money knowing that many workers will just not do anything, and just move on to the next job.”

But Labor & Industries learns of a violation only if a worker complains. Prior to the Wage Payment Act of 2006, remedying wage violations required taking employers to court. The new law was designed to help more workers more quickly by handling most wage complaints through an administrative process. In general, say advocates, this has been an improvement for workers. The downside is that the department is so burdened with complaints that it has virtually ceased conducting targeted investigations of companies and industries.

Advocates argue that relying entirely on complaints is not effective because workers fear retaliation, including losing their jobs or being reported to immigration authorities. And the people who complain are the people who can best afford to have suffered a violation, says the National Employment Law Project’s Rebecca Smith: “They are not the people who are the most vulnerable, and who are being abused the most.”

The organization’s three-city worker survey suggests fear of retaliation is justified. More than 40 percent of workers who complained to their employer said they were fired or suspended, threatened with a cut in hours or pay, or faced other forms of retribution. One in five said they had not complained to their employer about a violation, in large part out of fear.

Casa Latina’s Barragán Talancón says a growing number of workers who call for help with wage violations ask her whether the boss can call in immigration authorities. When she admits she doesn’t know, she doesn’t hear from them again. In her seven years with the organization, she has never encountered a wage-theft case in which the worker was still working for the employer. “That is very telling to me,” she says.

InvestigateWest found one worker who prevailed—because, again, he went outside the systems set up in recent years by the state and the city. He hired an attorney.

Let’s call him Miguel, although we agreed to withhold his real name because—as is typical—the wage-theft settlement his attorney arranged came with a legally binding promise not to discuss the case publicly.

Miguel kept his job at a King County teriyaki restaurant for more than a year, even though he says he worked 11 hours a day six days a week and took home at most $1,000 twice a month. That works out to close to the federal minimum wage of $7.25 an hour, well below the current state minimum wage of $9.32 hourly, with no overtime.

“Employers particularly exploit immigrants more,” Miguel says through a translator. “They know they don’t have a valid Social Security number, and how they don’t have many options to go somewhere else. They take advantage of this and exploit it.”


Fernando Moreno Ruiz claimed he was owed more than $5,500 in wages. Photo by Allegra Abramo/InvestigateWest

Eventually a lawyer won a settlement for Miguel of about $15,000 in back wages. In theory, the law allows workers to collect double the amount withheld, plus attorneys’ fees. But that requires going to court. Smaller cases like Miguel’s are usually settled before a court hearing.

In one way, Miguel was fortunate: His case was large enough to interest an attorney. Labor lawyers say few private attorneys in Washington take individual wage and hour cases, and they rarely accept cases worth less than $5,000.

Many wage claims don’t reach that threshold because people are paid a portion of their wages or quit after a short period, says Andrea Schmitt, an attorney with Columbia Legal Services, which focuses on large class-action lawsuits. InvestigateWest’s analysis of state data shows workers who’ve filed complaints with Labor & Industries are owed a median of just over $700. “Maybe that means they can’t pay the rent or buy food,” Schmitt says. “But it’s not big enough for most private lawyers to be able to pay attention to.”

Since 2011, Seattle workers have had another tool to seek justice. The city’s wage-theft ordinance made it a gross misdemeanor—a criminal offense—to intentionally withhold payment for agreed-upon services.

Maria Arciniega is one of a handful of workers who have filed a complaint in the past year.

Arciniega, 36, says she worked 46 hours as a cook at Domani Pizzeria and Restaurant in Queen Anne, but after she called in sick, the owner told her it wasn’t working out. Arciniega says she went to claim her wages, totaling $432. The owner, Martin Pumpalov, offered her $120. Pumpalov says he explained that her work spanned two pay periods, so she would have to wait until the next payday for the rest. In a negotiation hobbled by a language barrier, Arcienega turned him down. She says she’d kept track of her hours in her own little notebook, and insisted on the full amount. She says the owner demanded to see her working papers, which she took as a veiled threat. Pumpalov says he asked for her Social Security number.

Arciniega turned to Casa Latina. Barragán Talancón helped her file a claim with Labor & Industries and also arranged a meeting with Pumpalov. Both sides say the meeting quickly escalated into a shouting match, though both blame the other.

“They didn’t come to talk, they came and started threatening me,” Pumpalov says. When Arciniega and Barragán Talancón told him they had filed a claim with Labor & Industries, he told them he’d handle the claim through the agency. Speaking with InvestigateWest, he says he never disputed owing Arciniega more than $120.

After the argument in the restaurant, the women returned to Casa Latina’s office and immediately filed a report with the Seattle Police Department under the city’s wage-theft ordinance.

Only 11 people have reported wage theft to the police since last summer, according to Lieutenant Gregory Schmidt, the department’s burglary and theft commander. He was unable to say exactly how many wage-theft complaints the department received in the first two years after the ordinance was passed. In that period, Schmidt explained, cases could end up in any one of the city’s five burglary and theft squads, and were not tagged as wage theft. (The Seattle Police Department has yet to fulfill a request InvestigateWest filed June 17 under the Washington Public Records Act seeking documents recounting enforcement of the wage-theft law.)

“We have this great ordinance in place, but we aren’t able to move forward because of the tough time we have finding cases.”

Worker advocates say the police were not prepared to respond to wage-theft complaints after the ordinance passed in 2011, and initially even turned some callers away. Today, Schmidt says, the department gives wage-theft cases “special treatment.” He says he has instructed the sergeant in charge of these cases to investigate complaints even if the initial evidence is thin, and to make extra attempts to contact victims.

Still, the calls are hardly rolling in. And no employers have been prosecuted under the law.

Last year the police department forwarded to the city attorney the case of a painter who had not been paid for 7.5 hours of work. According to Schmidt, the city attorney declined to prosecute the case because detectives have not been able to speak with the employer or find a witness to corroborate the worker’s story. A second case was forwarded to King County prosecutors as a potential felony, but the police were not able to positively identify the suspect: Two people so closely matched the identifying information that the police could not identify the suspect to the prosecutor’s satisfaction, Schmidt says.

Gathering enough evidence to prove wage theft in court can be a challenge, as worker advocates acknowledge. City law spells out that a prosecutor has to prove an employer intended not to pay. That can be a tall order in the case of day laborers paid in cash, with no records kept.

“We’re frustrated as well, ” says Craig Sims, criminal division chief in the city attorney’s office. “We have this great ordinance in place, but we aren’t able to move forward because of the tough time we have finding cases.”

Sims says his office is finalizing an agreement with the U.S. Department of Labor to receive Seattle cases that the federal department has investigated but chose not to pursue. “There’s no perfect case out there,” Sims says, “but we’re definitely willing to look at every possibility.”

Maria Arciniega’s case with the Seattle Police didn’t make it very far, either. Her employer agreed to pay her wages through Labor & Industries, and Arciniega received a check a few weeks later. But, she says, the delay in payment meant she couldn’t pay her rent, and she and her 11-year-old daughter lost their apartment as a result. According to Schmidt, the police closed the case because it would have been difficult to prove the pizza-shop owner had intended not to pay her.


Photo by Allegra Abramo/InvestigateWest

A second provision of Seattle’s wage-theft ordinance has had even less impact. The ordinance permits the city to revoke the business license of an employer with an unpaid-wage violation issued by a court or by Labor & Industries. But in Seattle, business licenses are used mostly to track businesses and collect taxes, not to regulate them. The city has little incentive to revoke them. It would only do so in “extreme circumstances” and after working with the business to bring it into compliance, according to the Department of Finance and Administrative Services, which issues city business licenses.

The department says in an e-mail that Labor & Industries has forwarded the names of 19 Seattle businesses with outstanding judgments. Fewer than half have current licenses, and the department has not taken any action against them.

Seattle City Council member Nick Licata, who has called for a city office of labor-standards enforcement, admitted that neither provision of the wage-theft ordinance has been effective. What’s needed, he says, is a coordinated, proactive approach to enforcing all the city’s labor-standards legislation, including the minimum-wage, wage-theft, and paid-sick-time ordinances.

“It’s not really effective nor fair to expect employees to risk losing their job to complain that their employers are not following the law,” Licata says. Rather than simply respond to individual complaints, he says, the city should audit entire businesses, particularly in industries where there may be a pattern of violations.

That’s what the state used to do. And it’s what the U.S. Department of Labor still does, to the extent its budget allows. Nationally, however, the odds that a business will be inspected in any given year is only one in 1,000, according to an analysis by economist David Weil, who just became the head of the department’s Wage and Hour division. Your typical pizza parlor or teriyaki joint has little to fear from the feds.

For many Washington workers hoping to recover a few thousand dollars or less in wages, often their best alternative is to file a complaint with the state Department of Labor & Industries. But justice here is usually neither swift nor certain.

Under the Wage Payment Act, the department is required to investigate every complaint it receives within 60 days. Last year it met that target in 60 percent of cases, according to InvestigateWest’s analysis of closed complaints from 2009 to March 2014 obtained from the state by Columbia Legal Services. Labor & Industries has a staff of only 16 investigators to pursue up to 4,000 cases per year.

“Even if you can get some kind of official judgment... do you get your money back or not? And the answer is, a lot of times not.”

Advocates credit the department with reducing backlogs and speeding investigations greatly since the early years of the law. On average, cases resolved in 2013 were open for 65 days—about half the time it took in 2009. But many cases can take much longer—for example, if either party appeals the decision. Last year nearly a quarter of investigations were open for 90 days or more.

For workers living paycheck to paycheck, a delay of weeks or months can be catastrophic. Never getting paid at all is worse.

Columbia Legal’s Schmitt has worked closely with Labor & Industries for years to improve its enforcement and tracking under the Wage Payment Act. Her biggest concern is that the department still lacks resources for adequate enforcement and collections. “And collection of wages is the big punch line at the end of all of this,” Schmitt says. “Even if you can get some kind of official judgment that you’re owed wages, do you get your money back or not? And the answer is, a lot of times not.”

InvestigateWest’s analysis of state data found that over the past five years, Labor & Industries recovered more than $11.6 million, about 56 percent of what it determined employers owed. (And even some of that, interest and penalties, went to the state, not workers.) That leaves nearly $9 million in outstanding debt to about 3,000 workers.

Some cases go more smoothly than others. Often employers pay the wages or set up a payment plan when the department contacts them, as in Maria Arciniega’s case. In those cases the average worker gets nearly 90 percent of what is owed.

But in about 16 percent of all cases it receives, Labor & Industries must issue a formal citation to the employer. If the employer still refuses to pay, the complaint is closed and sent to a separate collections department, which has the equivalent of fewer than two full-time employees overseeing a caseload that perpetually runs into the hundreds. Asked for its collections success rate, the department reported that over the past two years it has recovered about 40 percent of amounts owed in cases sent to collections. The department was unable to say how long it ultimately takes to get workers paid.

Worker advocates, as well as state and city agencies, are exploring ways to better make workers whole. At the state level, Labor & Industries is looking for a way to again launch systematic investigations targeting industries in which abuses are rampant.

In Seattle, councilmember Licata says he’ll propose funding an office of labor-standards enforcement in the next budget. “It’s absolutely critical that we have sufficient staff to do ongoing audits of businesses,” he says.

Licata says he expects that such an office, modeled after San Francisco’s, would contract with community organizations to educate both employers and employees, particularly among immigrant and non-English-speaking groups. A labor-standards advisory committee, with representatives from business, labor, and city departments, is developing recommendations for enforcing the minimum-wage and wage-theft ordinances and other city labor laws. Business representatives on the committee declined to discuss their perspective until the group shares its recommendations with the mayor and City Council sometime around Labor Day.

Not everyone is convinced the city will be up to the task of enforcing the $15 minimum wage. Labor attorneys point out that the ordinance does not explicitly include the right for workers to sue employers in court. That places a huge burden on the city, says Mark, the labor attorney. “If it’s left just to agency enforcement, that’s a problem, because no agency ever has enough resources to enforce these laws,” he says. To address the dearth of attorneys willing to take individual or small-group cases, this fall he will launch the Washington Wage Claim Project, a nonprofit to represent low-wage workers and train more attorneys.

Strengthening state law is also a priority for labor advocates. In Washington, workers currently have little recourse if an employer retaliates against complaints about labor-law violations. In a recent example, a Seattle Police investigation into labor violations by contractor Dathan Williams uncovered a pattern of threatening workers and reporting them to immigration authorities, according to King County Superior Court charging documents. In fact, two witnesses in the case were deported, charging documents state.

The National Employment Law Project says it and other organizations will push to reintroduce an anti-retaliation bill as part of a package of wage-theft legislation that passed the state House last session. In Seattle, the minimum-wage legislation already spells out retaliation as a violation of the ordinance, though advocates say the penalties need to be stronger.

Jaime Alvarez Garcia still hopes that he’ll be able to get justice. This summer he came to a meeting of Casa Latina’s Workers Defense Committee, where workers share their stories and get help from staff, volunteers, and other workers in the same situation.

Wearing jeans and construction boots, Alvarez Garcia, 50, explained calmly in Spanish that he and his son had worked on several bathroom remodels for a local contractor. He didn’t have anything in writing, just a verbal agreement about how much he would be paid for each task. At first he was paid, but after the last job, he says, the contractor kept putting off paying him the final $1,800. His son sent dozens of text messages, at first imploring, “I need the money, I’ve been waiting a long time.” Later they threatened to take legal action. He says the contractor stopped responding.

Casa Latina’s Barragán Talancón drew a house on the whiteboard and explained how placing a lien on the building might help Alvarez Garcia get paid. In this way, he is fortunate. Only construction and agricultural workers can generally take advantage of liens in Washington. The state lacks a general lien law that applies to all workers—something that advocates say they want to fix.

Alvarez Garcia says it’s sad that these things happen to honest workers, but he has hope. “I know that there are laws and rights for workers in these cases,” he says through a translator. “Even if some of us don’t have papers, it’s not a system that’s all stacked up against us.”

Let’s see if he gets his dough.

news@seattleweekly.com

InvestigateWest is a nonprofit news organization based in Seattle that covers the Pacific Northwest. Please see invw.org.

If you have been a victim of wage theft or know someone who has, please contact InvestigateWest at 206-441-4288 or staff@invw.org.

For assistance with a wage-theft complaint, contact:

Casa Latina’s wage-theft hotline: 206-745-2045

Washington Department of Labor and Industries Employment Standards: 866-219-7321.
Or file a complaint online at https://secure.lni.wa.gov/wagecomplaint/#

Seattle Police Department’s non-emergency number: 206-625-5011.
Or report online for cases less than $500: seattle.gov/police/report/default.htm

 
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