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Harsher penalties suggested for employers who shortchange workers in California

The state Chamber of Commerce calls the legislation a 'job killer,' saying it would add costly regulations on businesses and make them targets of law enforcement actions.

September 16, 2010|By Marc Lifsher and Alana Semuels, Los Angeles Times

Reporting from Sacramento and Los Angeles — Manuel Zuniga said his former employer owes him $49,000 in past wages — for the more than three years in which he was paid $3.50 an hour to wash and detail cars in Florence.

Married and with six children, Zuniga said he knows "many workers who suffer under the same conditions."

And recent data indicate there are thousands in California who, like Zuniga, are paid less than the state minimum wage — $8 an hour — or who don't get paid at all. Many of them say they are stuck with employers who know that in this economy, there are others willing to take their place.

Despite such data, key business groups are urging Gov. Arnold Schwarzenegger to veto two bills aimed at cracking down on employer wage theft and other abuses.

The bills on the governor's desk would, among other things, increase criminal penalties on employers that willfully fail to pay all wages within 90 days after a worker leaves and would increase civil damages for workers who win wage-related verdicts.

The California Chamber of Commerce called the criminal penalties legislation a "job killer," contending that the provisions would add costly regulations on businesses and make them targets of civil and criminal law enforcement actions.

Schwarzenegger, who returned Wednesday from an Asian trade trip, has until the end of the month to make a decision. Though he has not indicated his position on these bills, he has sided with the chamber on most issues.

But this time, business isn't speaking with one voice.

"Our members don't engage in wage theft," said Mike Belote, a lobbyist for the California Employment Law Council.

The group, which represents such large companies as Best Buy Co. and In-N-Out-Burger, said it went from opposing the main bill in the package to taking a neutral position. Belote said his clients won an amendment that would ensure that prosecutors would target only "true wage theft."

"At the start of the recession, low-wage workers were already subject to significant exploitation in the form of minimum wage, overtime, health and safety and other violations," said Annette Bernhardt, policy co-director at the National Employment Law Project.

"The violations have gotten significantly worse during the recession, as employers have more and more power over workers desperate for jobs," she said.

People like Pedro Guzman know firsthand the misconduct of small companies.

Guzman spent 11 years scrubbing, waxing and detailing cars at various carwashes across Los Angeles and said he often was paid $35 for a 10-hour day.

"Owners take advantage of workers because they know many of them are immigrants," Guzman said. "They say, 'Go look for another job if you don't like it.' "

Employers in construction, janitorial services, hospitality and car care have failed to pay workers this year, according to lawsuits filed by the state labor commissioner.

In addition, labor experts said, these employers are robbing the state of much-needed payroll taxes to fund unemployment insurance and disability programs.

A UCLA study, released this year as part of a national project, found that wage theft costs Los Angeles County workers $26 million a week. The survey found that workers who experienced some type of wage theft lost an average of about $40 from typical weekly earnings of $318.

About three-fourths of 160,000 people who worked more than 40 hours a week did not receive overtime pay, and nearly 30% of the county's low-earning workers were paid less than the minimum wage, the survey showed.

One reason for such widespread abuse, experts said, was that state enforcement efforts are overburdened.

Staffing levels for state inspectors haven't kept pace with growth in California's population or the expansion of the so-called underground economy, which generates up to $140 billion a year in economic activity. The underground economy includes trade in goods and services, largely paid with cash, that is hidden from government regulation and thus untaxed.

Last year, the state cited 216 employers for violating minimum wage and overtime pay laws, a drop from 265 the previous year. According to the California Department of Industrial Relations, the number of wage and hour inspectors rose about 7% since 1980 while the state population grew 62%. During those three decades, much of the state economy shifted from higher-paying manufacturing jobs to lower-paying service positions.

In recent years, reports have shown that abuses have been rampant at carwashes.

Last month, the owners of four carwashes were each sentenced to a year in jail after pleading no contest to six criminal counts, including conspiracy, grand theft and labor code violations.

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