Roughly 5,200 claims were identified as settled, paid or having a judgment. It took on average 206 days to close the cases, not the 120 called for by legislation. Of those cases, roughly $10 million of the $23 million owed is recorded as remaining to be paid.
Source: Labor Code Section 98(a)
The analysis identified an additional 8,900 open cases that had passed the 120 day mark, 75 percent of which had yet to even have a hearing scheduled. The district offices with the largest backlog were Los Angeles and Oakland.
The state, it turns out, can’t provide an accurate account of its claim system or how much money is recovered. A 2017 report released by the state’s legislative analyst's office regarding proposed budget increases to the Labor Commissioner’s Office expressed concern that “the DLSE’s data collection and analysis capabilities may not have sufficiently developed to ensure the most effective use of the proposed increased staff.”
A spokesperson for the Labor Commissioner's Office said they “expect that the condition will be improved over time,” adding that potential errors in the database does not impact other programs in the division, such as those dealing with investigations and retaliation.
The legal concept of wage theft goes back to the tail end of the Great Depression, when President Franklin D. Roosevelt signed the Fair Labor Standards Act, a sweeping labor reform that included criminalizing the employment of children under 14, establishing the first minimum wage at 25 cents an hour and limiting the work week to 44 hours.
Within the bill was a simple provision, an employer who violates either the minimum wage or workweek requirement was liable to their employees for unpaid minimum or overtime wages, in addition to an equivalent amount in damages. But it’s only in the past decade that what were known as “wage and hour violations” began to be described as “theft.” In California, it’s a criminal offense, but seldom treated like one. Someone is more likely to be prosecuted for petty theft than wage theft, a fact echoed by employers, workers and the state.
The U.S. Department of Labor, the federal agency tasked with enforcing wage and hour laws, reports that wage theft in the 21st century is costing workers billions of dollars a year and pushing tens of thousands of families below the poverty line. But an analysis of public data maintained by the department shows that, while enforcement peaked in 2010 with 2805 recorded wage violations, it has now dropped to its lowest levels since 2001, with only 237 recorded wage violations. Overall, the department’s budget has been cut by $10 million and 100 employees over the past three years.
But wage theft is still occurring at “staggering levels” in California, according to the California Bureau of Field Enforcement, an arm of the Division of Labor Standards and Enforcement, or Labor Commissioner's Office, the state agency responsible for protecting workers from wage theft and retaliation.
Average Federal Wage and Hour Violation by State (2005-2018)
Note: Click the arrows (>>) in upper left corner for legend.
Click a state to see the average amount owed in backwages per claim filed. Additional information included is the total number of claims, backwages and penalties recorded by the United States Department of Labor. Source: United States Department of Labor Wage and Hour Division Enforcement Database
Wage theft is also prevalent in corporate America, according to Grand Theft Paycheck, a 2018 report by the national policy and research organization Good Jobs First. Researchers analyzed more than 4,000 successful collective lawsuits and administrative actions against major corporations that have been resolved since 2000. The cases generated total penalties of $9.2 billion. Topping the violators list by far was Walmart with $1.4 billion, with FedEx coming in second with $502 million.
Of the top 100 settlements in the report, 67 were brought in California, a state that prides itself on strong labor laws and enforcement.
Assistant Chief of the Wage Claim Adjudication Unit, Carlos Torres, acknowledges that “there is rampant wage theft happening in California,” but added that it is an issue where no single response can “be of any real value.” Still, he says his office has taken a new approach to strategic enforcement and collaboration with legitimate business owners.
Despite these efforts, researchers and attorneys say wage theft continues to go unreported for a number of reasons. Some people don’t know the office exists. Others might be discouraged by the long and bureaucratic process they must weather if they are to even stand a chance of seeing their wages.
“The vast majority of people when they experience wage theft just move on with their lives and never do anything about it, even if they know that it happened. And the employers seem to be more emboldened,” said Tia Koonse, a legal and policy research manager with the UCLA Labor Center. “All of this is predicated on a certain business model that is undercapitalized and never intends to pay anybody their fair wage. How do you legislate greed?”
But perhaps the most disturbing reason for not reporting is the “culture of fear” with more people concerned about retaliation from their employer. According to labor attorneys, the climate has gotten worse due to the current political rhetoric surrounding immigration.
Anel Flores, the legal director at the California-based janitorial industry watchdog Maintenance Cooperation Trust Fund (MCTF), explains that when undocumented workers used to come to her with threats from their employers who said they’d call Immigration and Customs Enforcement if a wage claim was filed, she would feel confident telling workers that the federal immigration agency wouldn’t “follow up.” But these days, she isn’t so sure.
The Labor Commissioner's Office does not inquire about a claimant's legal status at any point during the process, and Assistant Chief of the Wage Claim Adjudication Unit Torres explained that, aside from the division’s retaliation unit, if officials have reason to believe a worker is being threatened due to their immigration status the wage claim can be fast-tracked.
“We continually underscore the fact that immigration status has nothing to do with workers’ rights here in California,” said Erika Monterroza, a communications director with the Department of Industrial Relations, which the Labor Commissioner’s Office is a part of. “That all workers are protected.”
Worker to Investigator Ratio by Labor Commissioner's District Office (2017)
Note: Click the arrows (>>) in upper left corner for legend.
Click on a county to see the investigator to worker ratio by Labor Commissioner's District Office in 2017. Additional information included is the total number of workers and counties within the distict, as well as investigators. The Department of Industrial Relations says claims can be accommodated by any office. Source: Labor Commissioner's Office Budget Proposal.
On December 7th, 2018, Katherine Fiester, a staff attorney with the Wage Protection Program for Legal Aid at Work, is instructing a handful of law students who have volunteered to help workers fill out their wage claims.
There are two stacks of forms on the table in the middle of the room. One is in English and the other is in Spanish. Workers are required to answer questions such as wages promised vs. wages paid, payment method, meal breaks as well as provide their entire work schedule. This can be a daunting task, especially if a person doesn’t have all the information required.
“Can you go to the bank and get a copy of checks?” Fiester asks one of the workers. He replies that he can not because he was paid in cash. In order to make a strong case to the labor commissioner, employees have to gather as much evidence as possible. Earning money in cash can make the process harder.
Hours later, after numerous revisions and drafts to ensure that all the details are accurate and all names are spelled correctly, the four-page form is ready. The worker turns to Fiester and says, “I’m sorry about that. I’m a headache for you.”
She shakes her head and replies, “you not being paid is a headache for you, not me.”
Organizations like Legal Aid at Work are essential to help workers navigate the wage claim process. But experts like Fiester say the experience of people who file claims could be improved if the Labor Commissioner was given more resources.
In 2015, a state oversight agency known as The Little Hoover Commission released a report on how to address California’s underground economy, in which wage theft plays a significant role alongside other illegal practices like tax evasion and insurance fraud. The report found that the state provides “insufficient resources for enforcement,” adding that “many cheaters break the rules because getting caught is unlikely. If they are caught, few are charged in court. When found guilty, the profits from cheating often outweigh the fines and penalties.”
The award, the decision is one thing. But collecting on the decision is a whole other thing.
— Katherine Fiester
Staff Attorney at Legal Aid At Work
This wasn’t the first time that the need for increased funding to enforce wage and hour laws had been raised. In 2013, a report from the UCLA Labor Center and National Employment Law Project called Hollow Victories examined the effectiveness of California’s wage claim process and said the same thing. This was, in part, due to a loophole in the labor code that allowed employers to avoid paying judgments by transferring assets into a new business. At the time of the report, 60 percent of all business entities ruled against were considered inactive by the state.
It’s a loophole that attorneys, like Fiester, and their clients are all too familiar with.
One worker, who is not being identified due to his status as an undocumented immigrant and concern about retaliation, said he returned to a job where he had already had his wages stolen because he couldn’t find any other work. His case is a clear example of how drawn out and complicated the process can be.
This worker asked not to be identified because of his status as an undocumented immigrant and concern of retaliation from his former employer, a travel agency in San Francisco. Photo by Josh Slowiczek
The man returned to his travel agency employer in 2009, even though he believed it still owed him approximately $2,000 in hourly wages from 2003 to 2007. He arranged a new deal with the agency: he would now work on a 35 percent commission. At first, he was paid monthly and on time, but within a year an old pattern started to reemerge. He would write up a statement and ask for his wages. Then, his employer would stall, claiming financial trouble. He said he was forced to borrow money from friends and family for bills and rent, which he would pay late, time after time. When he finally did get paid, it was seldom everything owed. This went on for five more years.
After researching his situation online, he reached out to Legal Aid at Work and met Fiester, who guided him through filing a claim with the Labor Commissioner. Because his employer had already threatened to report him to immigration authorities, he filed both a wage and retaliation claim in mid-2015.
I would say that the agency is not nearly as well staffed or funded enough to actually address the scope and magnitude of wage theft in our state.
— Tia Koonse
Legal and Policy Research Manager with the UCLA Labor Center
It took about a year before an administrative hearing officer ruled he was owed almost $54,000 in wages and damages. However, shortly after the ruling, the business he worked for quietly filed for bankruptcy, but not before the owners transferred all of their assets into a new corporation, which happened to be at the same address under the name of a family member.
That didn’t stop him or Fiester, though. They took the employer to court, filing motions, issuing a debtor’s examination and subpoenaing financial records. In 2018, three years after filing his initial claim, they settled for roughly a quarter of the total decided by the Labor Commissioner’s Office.
“The award, the decision is one thing,” Fiester said. “But collecting on the decision is a whole other thing.”
Tia Koonse, an author of the Hollow Victories report and a research and policy manager with the UCLA Labor Center, said that over the course of her decade-long career representing victims of wage theft she has never seen a worker receive everything they are owed.
“The employer knows the same thing the worker knows: that collecting on your judgment of unpaid wages is almost impossible,” Koonse said, citing a long and complicated legal process that often requires time, expertise and legal representation. So, for workers earning minimum wage or less, a settlement in the pocket is an offer that is hard to refuse. But Koonse and her report make it clear that those workers who end up seeing even a portion of their wages are the exception and not the rule.
In 2015, the state legislature passed a bill that closed certain loopholes, such as the one exploited by the travel agent’s former employer, and added new enforcement tools that allowed business owners to be held directly liable for wage theft. But that bill, SB 588, only expanded the office’s ability to enforce judgments, not necessarily its ability to investigate and process wage claims.
Then, in 2016, then-Gov. Jerry Brown proposed a multi-year plan to increase funding and staffing positions for the Labor Commissioner’s Office, largely for the Bureau of Field Enforcement, or BOFE, which investigates labor standards violations for groups of workers. At that time, the bureau had 82 budgeted investigator positions but a 20 percent vacancy rate.
Source: 2017/18 DLSE Budget Change Proposal
Since then, the Labor Commissioner's Office has had roughly 75 positions and $16 million added to its budget, mostly for BOFE, according to the 2019 California budget. Currently, the Wage Claims Adjudication unit, where most workers have their wage claims processed and evaluated, has approximately 201 positions, including support staff and deputy labor commissioners who rule on wage claims, across 18 offices. The Judgment Enforcement Unit, which helps in-need workers collect their awards after a judgment, only had 16.
But Koonse says that there is still a long way to go. She cites the fact that the International Labor Organization, an agency within the United Nations, recommends one labor standards investigator for every 10,000 workers. In California, where the UC Berkeley Labor Center says a quarter of the state’s 19.5 million workers are employed in low-wage industries, that ratio is roughly one to 85,000. The state fares better than others, though. An investigation by Politico published in 2018 found that six states have no wage and hour investigators, and an additional 26 have less than 10.
“I would say that the agency is not nearly as well staffed or funded enough to actually address the scope and magnitude of wage theft in our state,” Koonse said.
Torres, the assistant chief of the Wage Claim Adjudication Unit in Oakland, says that while many government agencies want more funding and staff, it’s ultimately a process out of their hands.
“We as the wage claim adjudication unit do devote all available resources to ensuring that we’re using every tool at our disposal to investigate and adjudicate cases,” he said. “We do, as a state agency, have to work with the resources we have.”
But Koonse said that the lack of funding has resulted in an inability to enforce even “the most basic provisions of the labor code.” All in all, it should take no longer than four months for a worker to receive a decision from the Labor Commissioner’s Office.
Many, like the travel agency employee and Aldana, can end up waiting for years for the opportunity to see just a portion of what they are owed. But some never see anything at all.
On May 22, 2014, Miguel Gonzalez walked into the towering lobby of the Elihu M. Harris State Office Building in downtown Oakland for the first time. The 22-story building houses several government offices, so security is heavy. Other undocumented workers often avoid the area. But, he wasn’t nervous.
Over his 22 years as a day laborer, Miguel Gonzalez has had his wages stolen four times. He filed a claim for the fourth, but has only seen $240 of the $3,728 in wages and penalties he’s owed. Photo by Anne Wernikoff
Gonzalez has worked as a day laborer for 22 years. Three times his bosses stiffed him for his pay. The fourth time, the 50-year-old Mexican immigrant had had enough. He was heading to the 8th floor to the Labor Commissioner's Office to file a wage claim against a contractor who had hired him to clean out a burnt house for $120 dollars a day.
When he arrived in the U.S., he didn’t expect that having wages stolen would be a recurring theme in his life. In addition to his experiences with wage theft, he got entangled in a big wage theft and fraud case around 10 years ago that saw him lose his entire life’s savings: a whopping $130,000.
“I don’t understand the laws in this country. If I was to steal a fry from a restaurant, or whatever, I would easily be arrested, even if I don’t have a gun,” he said. “But, where there is a more serious crime like this one, people are let free.”
Sixteen months after filing his claim, Gonzalez won his case and was set to receive $3,728 in wages and penalties. He only received $240 of that figure.
“I thought to myself, ‘what is this office good for, then?’,” Gonzalez said. “Sometimes, these papers are just decorative.”
It was for that very reason Koonse gave the Hollow Victories report its name. “It’s a piece of paper that says you’re owed money,” she said. “What are you going to do, frame it? Great, congratulations. You can’t turn that into something to pay for rent and food.”
The state only provides help in a limited number of cases. An analysis of the case-management data provided in response to a public records request shows that only 332 cases have been referred to the state’s judgment enforcement unit since January 2017.
Sometimes, these papers are just decorative.
— Miguel Gonzalez
Not every employer who has had a wage claim filed against them is guilty of willfully or knowingly violating the law, but many less scrupulous business owners try to avoid getting penalized for wage theft by operating in ways that make them less liable for it.
Anel Flores, legal director at the California-based janitorial industry watchdog Maintenance Cooperation Trust Fund (MCTF), says that usually workers do not understand the complexity of subcontracting, making it hard for them to identify which company is responsible for their wages. Sometimes, workers might not even know that they were hired through a contractor in the first place.
In addition, she says that in the janitorial industry the process of starting a contracting business tends to be surprisingly informal. Instead of renting a facility, you can operate out of your car. All that is really needed is equipment for the workers. As a result, there are a lot of fly-by-night operations. They’re really small. They don’t keep a lot of paperwork or timesheets. They pay workers in cash and they most probably have not even filed as a corporation, making the process of filling out a wage claim a lot harder.
But then-Labor Commissioner Julie Su made it clear that general contractors can no longer escape legal liability in that manner. Last year, the Cheesecake Factory was found jointly liable with its subcontractors, under a law signed by Gov. Jerry Brown, in a $4.57 million wage theft case involving 559 janitorial workers who were being underpaid in Southern California restaurants. Moreover, the Labor Commissioner’s Office introduced a janitorial services registration system, where janitorial employers have to register each year with the state labor commissioner.
Those efforts, in addition to SB 588 which closed liability loopholes in California labor law, have been described as major milestones in the fight against wage theft. Fiester describes the moment she informed an oblivious lawyer that his client would still be held liable under SB 588, despite his company going bankrupt. Shocked, the client and their attorney walked out of the meeting, unable to grasp the fact that they could be held directly liable.
However, while these efforts are described as positive steps, their widespread impact is yet to be felt, according to Flores and Fiester. And some, like Alor F. Calderon, director of the San Diego-based Employee Rights Center, say employers are still unmoved.
“Even though they’re saying over and over and over again in reports about the widespread nature of wage theft, the behavior of the employers is unchallenged,” said Calderon. “The law does not really affect the behavior of the employers and the penalties are not good enough.”
Experts and advocates say there are additional legislative and enforcement tools that should be added but face intense opposition from special interests groups like property and commerce associations. In addition, they say more encouragement should be given to cities and counties to raise and enforce local minimum wage ordinances.
“There’s no silver bullet to solving wage theft,” Koonse said. “There’s no magic thing. The secret truth is that minimum wage is paid on an honor system.”
Corrections: An earlier version of this story asserted that Romelio Aldana had his wage claimed dismissed. After publication, the Labor Commissioner's office says his case is still pending. Carlos Torres' title was misstated as deputy labor commissioner. It's actually Assistant Chief of the Wage Claim Adjudication Unit. A graphic, showing worker-to-investigator ratio by county was incorrectly sourced as coming from DLSE case managements system. The data came from the Labor Commissioner's Office Budget Proposal.
Sarah El Safty & Josh Slowiczek
Anne Wernikoff, Yutao Chen, Sarah El Safty, Josh Slowiczek
Vianey Alderete, Liliana Michelena
Special Thanks To
John Temple, Jeremy Rue, Richard Koci Hernandez and Lucio Villa