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Wage Theft Ordinance could mean justice, and back pay, for unpaid workers.



Standing in the drizzling rain in the parking lot of Lee Kan's Asian Grill, Mauricio Alfaro's composure and polite smile belie the months he has spent fighting for wages he earned but was never paid. Backed by organizers from the Workers Interfaith Network (WIN), Alfaro has come to protest the $8,226 he claims was withheld from him during his 10-month stint as a dishwasher and fry cook for the Collierville restaurant.

Twenty feet away, owner Lee Kan emerges from her car. As she approaches Alfaro, who is wearing a homemade garbage-bag poncho that reads, "Lee Kan's owes me wages," the otherwise pleasant chatter between protesters falls away.

"I can't believe you'd do that to me," she says to Alfaro. "I was so nice to you. I paid you on time and everything."

Alfaro is silent. Behind him, WIN organizers flank him on all sides wearing their own garbage-bag ponchos that read, "Thou shalt not steal." Kan holds out her cell phone to Alfredo Peña, WIN organizer, and asks him to speak to her lawyer.

Ten minutes later, and still in the parking lot, Lee Kan's attorney and Peña, whom Alfaro has given permission to speak on his behalf, come to an agreement. Lee Kan's Asian Grill will pay $5,000 of the $8,226 Alfaro seeks, $2,500 immediately and the rest in installments.

"Usually, if we get to a protest, they'll pay up," says WIN organizer Kyle Kordsmeier. "Every time but once we've come to an agreement."

Wage War

How common cases like Alfaro's are in Shelby County is difficult to determine. Over the last four years, WIN, a workers rights organization, has helped workers like Alfaro recover a total of $280,000 in unpaid wages, but Kordsmeier admits this is only the tip of the iceberg.

"We get 400 calls a year from people with cases," he says. "And we don't even get in all the cases we could."

In 2010, WIN helped Jorge Panuco win a case against local Mexican restaurant El PatrÓn. After working for two years for "chips and tips" — food from the restaurant and tips, but not the waiter's standard minimum wage of $2.13 an hour — Panuco took El PatrÓn to court and won the right to double his unpaid wages, a total of $32,000. (Because El PatrÓn already owed the government in back taxes, Panuco is still waiting for his money.)

That same year, Texas de Brazil settled a national case, agreeing to pay $177,502 worth of back wages and overtime pay, including $14,574 to 42 employees at its location in downtown Memphis.

Accurate statistics on wage theft can be hard to come by, primarily because wage theft victims are almost always low-paid workers, many afraid of reporting wage theft at the risk of losing their jobs.

"Wage theft is so underground in general that nailing it down with decent statistics is a bit of a bear," says David Ciscel, University of Memphis professor emeritus of economics. "But I think it's happening a lot."

"I think it's frighteningly common," says Bryce Ashby, an attorney at Donati Law Firm, who works closely with WIN on arguing wage theft cases. "It's one of those things that people don't realize just how common it is."

Wage theft is perhaps most common among Latino workers, where language barriers and the fear of documentation questions make them even less likely to report instances of wage theft.

"There are all sorts of gimmicks that have been used in the Memphis economy, but of course they're used most consistently, in my experience, against Latinos," Ciscel says. "Latinos have the most difficult time complaining. If you're white or black, you can start by going to your minister and then go to Mayor Wharton's office, and if you really understand, you'll go to the wage-and-hour people, although they're hard to get hold of. But if you're undocumented or if your documentation is not altogether good, then you're hesitant, so it's easier to steal from you."

Ashby agrees, adding that it isn't always the non-Latino population taking advantage of Latino workers.

"The Mexican restaurant industry right now is a good example," Ashby says. "A lot of them are typically owned by new immigrants or second-generation immigrants. From what I've seen, the vast majority of those aren't paying their workers properly, aren't paying their workers overtime. We have cases right now against the Happy Mexican restaurants and another one that we're looking at against a couple others."

Making a case against employers who commit wage theft can be especially difficult when workers won't come forward to report the crime or corroborate their co-workers' claims.

"The majority of wage theft cases we see are when workers are terminated or when conditions become unbearable," Ashby says. "They start thinking, You know what? I've had it. I've been getting cheated long enough. I want the time that I should have gotten."

Carlos Limon was in this position last April, when he filed his case against Casa Mexicana with WIN. After a year working as a waiter and suspecting he was being cheated out of his wages, Limon starting keeping track of his hours and talking to co-workers about the possibility of wage theft at the restaurant. He believes the management caught on to his suspicions and fired him, after which he wasted no time contacting WIN about a multitude of minimum wage and overtime violations he says were common practice at the restaurant.

"Every two weeks when we got our checks, we would have to pay in cash the same amount of the check," Limon says. "It was just one of the rules for us to pick up the check."

If this seems nonsensical — paying the amount of the check to receive the check itself — Kordsmeier reiterates that this is actually one of the ways businesses hide wage theft. Wait staff and bartenders collect tips from patrons as usual but are denied the additional $2.13 an hour they are entitled to because the employer keeps that amount by forcing workers to pay for their checks.

A hidden camera caught a similar kickback scam at a Cincinnati animal hospital in 2010. The video shows workers paying their employer cash to cover the overtime payments in their checks.

"Basically, Carlos was just getting paid in tips and not even that federal minimum of $2.13 an hour," Kordsmeier says. "It looked good on paper for the restaurant."

Limon also claims to have worked more than 60 hours a week and never received overtime pay. (Any hours worked beyond 40 hours a week are supposed to be compensated time and a half.) WIN is currently seeking legal help as all other avenues of negotiation have been exhausted.

"Their lawyer requested a time sheet, so we sent them some and got another letter back stating that Carlos was lying, that he couldn't have possibly worked all the hours at Casa Mexicana he said he did because no one works in the restaurant from 2 to 5 p.m.," Kordsmeier says. "I went down to the restaurant the other day at 4 p.m. and made a video of people eating and waiters working. I asked the guy at the front, 'Are you open here?' He said, 'Yeah, we're open.'"

In total, Limon is seeking $13,000 in back pay and overtime from his former employer. When asked if this type of wage theft happened to anyone else at the restaurant, Limon says it happened to everyone.

"But a lot of other people may or may not have papers and say, 'This is the only job I can get, and if I lose this job, I won't have a job,'" Limon says. "They're scared."

Legal Action

Through mediation, direct action, and connecting workers with attorneys, WIN has helped victims of wage theft in Shelby County find recourse for stolen wages.

Now, WIN is looking for a large-scale, more efficient way to fight wage theft in Shelby County: an ordinance.

If passed, a wage theft ordinance would allow workers who believe they have been victims of wage theft to file an official complaint with the county. Employers would then have the chance to negotiate with aggrieved workers, a phase known as conciliation. If neither side can agree, the case goes before a hearing examiner who would determine whether or not the worker had been a victim of wage theft. If the employer is found to be at fault, he or she would be forced to pay treble damages — triple the amount of wages originally owed. If not, the case would be dismissed.

"The focus, I think, is on that first level of mediation, where we can try to work this out," says the ordinance's sponsor, Shelby County commissioner Steve Mulroy. "Only if the employer is being stubborn will we then move on to getting away from the carrot and getting into the stick, and the stick is treble damages."

While Shelby County does have a system in place to take on wage theft claims, according to Peña, the Department of Labor office doesn't have the resources or staff to handle the magnitude of wage theft claims in the county. That's because Tennessee, without its own minimum-wage law, defers to the federal minimum-wage law and relies on federal investigators to take on minimum-wage and overtime violations in Shelby County. There are only two Department of Labor investigators for all of West Tennessee. According to Pena, neither is bilingual.

"It's often the case that [investigators from the federal Department of Labor] are going to use their scarce resources to go after big violations or systemic pattern and practice violations," Mulroy says. "And in individual cases, where the amounts are not headline catching, there may not be time for that. But those amounts, nonetheless, are still huge in the eyes of the individual minimum-wage workers who are counting on that money to get by."

And, as Mulroy points out, local government might be better suited to taking on these small-claims cases.

"It's entirely appropriate for this to be a matter of local legislation," he says. "The problems with wage theft may vary from locality to locality, and this is the type of small-claims dispute that has traditionally been resolved through county adjudicatory processes. So it's appropriate for this to be handled at the local level, and necessary, since the state's not really doing anything about it."

The Shelby County wage theft ordinance would be one of many passed nationally in recent years, including ordinances in San Francisco, Seattle, and Miami-Dade County. In fact, the Shelby County wage ordinance is modeled heavily on the one Miami-Dade County passed in 2010, which has so far resulted in the restitution of $1,248,331 to wage theft victims.

According to Jeanette Smith, director of South Florida Interfaith Worker Justice, one of the biggest successes of the ordinance is the swiftness with which cases can be resolved.

"A prompt call from the county can be a little intimidating, and if you owe the money, you tend to take care of it pretty quickly. That quick phone call can resolve a lot," Smith says. "Any county that's going to do this has to be sure they handle the cases quickly. Otherwise, if it gets backlogged too far, they go to make calls and people's phone numbers have changed, people may have moved."

That swiftness may have helped Zorina Bowen, who lost $1,493 in wages after working only a month at the now-closed Safari World Tapas Bar on South Main. Her employer and friend, Faatimah Muhammad, promised Bowen and others that they would receive full compensation for their work, but when Bowen received only partial payment in cash, she started asking questions. She was promptly let go.

"We were working 12- and 13-hour days," Bowen says. "I wasn't the only one; I was just the only one who spoke out about it."

By the time Bowen went to WIN and began trying to get in touch with Muhammad, she was impossible to find.

"We tried to file with General Sessions Court to try to serve her, and she's been unable to be served by the processor," Kordsmeier says. "Then the restaurant closed. She was essentially a ghost."

Bowen has not been able to locate Muhammad and has yet to recover her lost wages.

A Wage Theft Economy

When it comes up before the county commission in the fall, the ordinance could be the first official legislation addressing wage theft in Shelby County. But despite a demonstrated need and evidence of the Miami-Dade ordinance's positive returns, Mulroy is still anticipating resistance to the ordinance.

"There's going to be resistance to anything that would require more resources in county government," he says. "I don't think this will be that expensive to administer, but any amount over zero will trigger a certain amount of reflexive opposition."

Mulroy hopes that by highlighting the impact wage theft has on the local economy, beyond the immediate victims of the crime, citizens and commissioners will appreciate the need for the ordinance.

"The businesses that cheat have a competitive advantage over their competitors that don't cheat," he says. "This will actually protect the good employers who do what they're supposed to do for their employees. It'll also mean that since these are people who tend to spend more of their income, there will be more money put right back into our economy at a time when we need that kind of stimulus."

Ciscel agrees.

"Of course, it cheats people out of income they should have and consequently reduces the amount they spend in grocery stores and, since most of these would be low-wage workers, the amount they spend in small restaurants and fast-food joints," Ciscel says. "But in addition to the economic impact, what wage theft does is send the message to small businesses in general that in order to compete they have to engage in labor practices that are less than honorable. If one person is not paying overtime or is cheating his workers out of hours, it causes others to be at a competitive disadvantage. That's a big social impact."

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