New York lax on wage theft collections

Saprina James was hopeful when she received a letter in 2019 about her wage theft claim against her former employer. The letter said the New York State Department of Labor had substantiated her claim and ordered Mugisha F. Sahini and his company, Riverside Line, to pay her more than $70,000 in back wages.

“I was feeling good that the government was on my side, and that I would soon get paid,” she said.

James first started driving a van for Sahini in January 2016, taking people to medical appointments in Buffalo. She often worked six days a week, usually helping dialysis patients who relied on walkers, and drove clients from 4:30 a.m. until 10 p.m. She didn’t mind the long hours — she assumed that her pay would ultimately reflect her hard work.

But James had to lease a Toyota minivan for $700 a week as part of the job. On most weeks, after paying her leasing fee, she was left with less than minimum wage.

“It was very hard for me,” said James, who had a difficult time paying her rent and groceries, as well as taxes owed on her income as an independent contractor.

In late 2017, James quit and filed a wage theft claim with the Department of Labor, accusing Sahini and Riverside Line of violating the minimum wage law. She was later joined by her former co-workers, who also claimed minimum wage violations.

The agency substantiated the workers’ claims two years later, ordering Sahini to pay nearly $425,000 in back wages and $850,000 in penalties.

But the Department of Labor, which is responsible for both investigating wage theft claims and recovering back wages, has not been able to collect even a penny on behalf of James. Sahini flatly refused to pay for more than a year, James said, and then appealed the case, claiming that he wasn’t aware that the workers were earning less than minimum wage. The appeal has since been rejected, but James has yet to receive any payment.

About to turn 60, James said she’s now unemployed and running through her savings to pay her bills. “I’m so upset,” she said. “This is ridiculous. I don’t understand why it takes so long.”

Sahini did not respond to repeated requests for comment.

What happened to James is strikingly common among victims of wage theft in New York state, an investigation by Documented and ProPublica found. She and her former co-workers are among thousands of wage theft victims whose employers were ordered by the Department of Labor to pay, but for whom the agency failed to fully recover back wages, according to an analysis of the agency’s database of wage theft violations from 2017 through 2021.

In all, during the five-year period, the agency determined that at least $126 million in wages had been stolen from workers, the analysis shows. As of Feb. 21, however, the agency still needed to recover about $79 million of that total — or about 63% of the back wages.

Of the outstanding back wages, the agency hadn’t recovered at least $7.8 million because of “uncollectible” circumstances, such as businesses going bankrupt or investigators being unable to track down employers, the analysis shows.

The rest, about $71 million, was labeled by the agency as “pending payment,” which means either that no payments or only partial payments had been made, or that the cases were being appealed.

Of the thousands of businesses in the database, at least 95 with outstanding back wages were repeat offenders, each failing to fully pay in at least two cases during the five-year period, the analysis shows.

A case in point: The agency began investigating Brooklyn-based Reymond Construction in 2018 and opened three additional cases in 2019 based on claims filed by 12 workers. It eventually ordered the company to pay more than $31,950 in back wages, but as of Feb. 21 the payments were still pending. The owner of Reymond Construction did not respond to repeated requests for comment.

Frustration with the agency

Labor experts said it’s hard to compare New York’s wage recovery effort against those of other states because of the paucity of wage theft data. State labor enforcement agencies across the country either do not make such information publicly available or do not maintain it in a standardized format that allows for state-by-state comparisons.

National Mobilization Against Sweatshops, a worker-rights organization, is so frustrated with the Department of Labor’s wage recovery rate that it has mostly stopped sending workers to the agency.

“It’s a waste of time,” said JoAnn Lum, the group’s director. “I’ve seen so many workers file claims, and they’re told that they’re owed so much in back wages — and then nothing happens.”

Another report on the state’s anemic response to wage theft, this from New York Focus

Advocates and labor lawyers, as well as eight former Department of Labor officials interviewed by Documented and ProPublica, said it’s critical for the agency to improve its wage recovery rate. But they said the agency has a number of problems that prevent that from happening: Its enforcement unit is chronically understaffed; it lacks a collections unit tasked with wage recovery; and its investigators, unlike their counterparts in other states, do not have legal authority to take actions against recalcitrant employers.

The former agency officials, some of whom had spent decades working at the Department of Labor, said these challenges often leave investigators incapable of enforcing the law against unscrupulous employers. One official — who still works in state government and did not want his name used out of fear of retaliation — put it this way: “If an employer said, ‘Fuck you,’” in response to a payment demand, “there’s not much the agency can do.”

The Department of Labor, which released wage theft data after Documented sued the agency over its refusal to do so, “works diligently to protect the paychecks of hard-working New Yorkers,” Aaron Cagwin, an agency spokesperson, said in a statement.

Cagwin said the agency is also “consistently making improvements to its wage theft investigations and wage recovery processes,” including improving how wage theft claims can be filed and expanding law enforcement partnerships.

Advocates said workers are the ones who suffer the consequences of the agency’s poor wage recovery rate: They are often forced to move on to other jobs, rely on their family for support, go on public assistance, or relocate to another state or, in the case of immigrants, back to their country of origin.

“Wage theft impacts the lowest-wage workers who need that money to pay the rent, buy groceries, take care of their families,” said Magdalena Barbosa, senior vice president at Catholic Migration Services.

She noted that New York has strong labor laws that don’t “trickle down into enforcement — and you have workers waiting sometimes for many years to get a small piece of what they’re owed in back wages.”

Vincent Cao, an organizer with the Chinese Staff & Workers Association, said “it’s the cruelest slap in the face to award them back wages that take so long to arrive.”

Lack of resources

On a bitterly cold morning in December, a former senior investigator with the Department of Labor was sitting in a coffee shop in Brooklyn, reflecting on his years at the agency. Bald and bespectacled, he raised his eyebrows and described a Sisyphean environment in which overworked investigators faced scarce resources, bureaucratic obstacles and unscrupulous employers and their lawyers while trying in vain to reduce a backlog of thousands of wage theft cases.

“It feels hopeless sometimes,” he said, “but more than hopeless — it makes me angry.”

The former investigator’s assessment was echoed by the seven other agency officials interviewed by Documented and ProPublica. They all expressed their frustration with the agency’s chronic failure to fulfill one of its core mandates: to protect the state’s 10 million workers from wage theft.

The former investigator, who still works in state government and did not want his name used out of fear of retaliation, blamed New York’s political leaders for not prioritizing the agency’s mission and perpetually underfunding it.

Budget figures for the agency’s enforcement arm, the Division of Labor Standards — which the former investigator joined more than a decade ago — are available from 2008 to 2022, and they show that its budget went up by 17.8% from $28 million to $33 million during that period. Just to keep up with the inflation rate, the budget would have had to increase by an additional $5 million.

Some state lawmakers said the agency’s woes were particularly pronounced during the tenure of former Gov. Andrew Cuomo, who ran New York from 2011 to 2021. On the one hand, Cuomo launched two joint task forces made up of multiple agencies to crack down on industries, such as car washes and construction, where wage theft is prevalent. But he also instituted a spending cap that kept most state agencies from increasing their budget by more than 2% each year.

With the tight budget, the Division of Labor Standards reduced the number of employees from 282 in 2008 to 140 in 2017, while the number of open investigations climbed from 6,923 in January 2008 to 15,824 in January 2017, according to agency documents obtained by Make the Road New York, an immigrant-rights organization, and shared with Documented and ProPublica. The vast majority of the division’s employees are investigators, while administrative and support staff make up the rest.

Carmine Ruberto, who ran the Division of Labor Standards from 2007 to 2015, recalled the impact of the tight budget on staff morale and workload.

“Do I think we could have done better under Cuomo if we had gotten more people? Sure,” he said.

Richard Azzopardi, a spokesperson for the former governor, said wage theft was “a huge priority” for Cuomo, but his administration’s hands were tied with limited resources.

“In 10 of the 11 years during his administration, we had structural deficits and we came in at the heels of the Great Recession where giant cuts had already been made. And we had to restructure government in order to make things right,” Azzopardi said. “I do understand that some people have different opinions on what the money should have been spent on. But it’s a balance.”

Under Gov. Kathy Hochul, the Division of Labor Standards saw its budget increase by $7 million, or 19.5%, in 2023, but the number of full-time employees now stands at 129 and has increased only by three since the governor took office in 2021.

Justin Henry, deputy communications director for Hochul, declined to comment.

The former investigator said the tight budget also meant that the agency couldn’t form a collections unit fully staffed with those versed in financial fraud investigation, asset tracking and locating employers, which could then be deployed for wage recovery — a task that Terri Gerstein, the agency’s former deputy commissioner, called “a crucial part of the process.”

Instead, the agency has been relying on senior investigators to handle the task, which adds to their workload and sometimes requires them to do tasks they’re not trained for, such as overseeing the payment plans of some employers, several former agency officials said.

The agency needs “a proper collections unit,” Gerstein said.

Bureaucracy slows enforcement

In addition to the lack of the collections unit, the former agency officials said the process is slowed down because each case has to be reviewed by several layers of officials.

For instance, once a claim is substantiated, the case goes to a senior investigator, who can sometimes take up to a year and a half to review it. Similarly, when an employer is unresponsive, the Division of Labor Standards issues an order to comply, but only after getting approvals from three more layers of officials.

The former investigator said the bureaucratic bottleneck helped create long delays in recovering back wages.

“It’s not like we push a button and increase the speed of the machine and then the cases come out at the other end,” he said.

The analysis of the agency’s database appears to back up the former investigator’s claim. As of Feb. 21, the agency had recovered no wages in 8,300 cases — affecting about 29,000 workers — that were at least five years old, or more than a fifth of the total cases from that time period.

Two of the long-pending cases were filed by Fernando, a 49-year-old Mexican immigrant who worked as a delivery driver for two Brooklyn restaurants. He filed his claim against the first restaurant in 2009 and another claim with his co-worker against the second restaurant in 2015.

The agency substantiated the claims, finding that two restaurants owed Fernando and his co-worker a total of more than $380,000 in back wages. Fernando, who requested to be identified by only his middle name because he’s undocumented, said he has not received his back wages.

“The most important thing is the DOL could resolve these cases quicker,” he said.

The former agency officials said that when investigators try to go after employers for back wages, they find themselves without effective enforcement tools to force quick payments.

The orders to comply, for instance, can be appealed at the state’s Industrial Board of Appeals, a five-person panel that can take months, or even years, to adjudicate a case. In the vast majority of the cases, the board eventually sides with the agency. But even then, former agency officials said, employers often continue to ignore the orders, knowing that they are unlikely to face any consequences from doing so.

The former agency officials also said filing judgments in court against particularly recalcitrant employers often fails to force quick payments: While it puts a mark on their credit report, employers can and do get around the judgment by conducting their businesses in someone else’s name or getting a private loan from their family and friends.

Advocates and labor lawyers agreed that this was common practice.

“Just because you get a judgment doesn’t mean you can collect on it,” said Margaret McIntyre, a lawyer who represents wage theft victims.

What works elsewhere

Advocates and labor lawyers said New York could adopt a number of tactics that have been successfully deployed in other states.

In Maryland and Wisconsin, for instance, workers are allowed to place a lien on their employers’ personal property to secure the payment of back wages. This has proven to be effective, according to a 2015 report by the Legal Aid Society, Urban Justice Center and the National Center for Law and Economic Justice.

“A wage lien not only encourages an employer to dispute the matter and play fair in court, but ensures that if the workers win their case, they may actually be able to enforce a judgment against the employers’ property and collect the wages they are owed,” the report said.

New York, in fact, has had a lien law for decades, but it only applies to certain workers in the construction industry. Industry pressure, especially from the powerful New York City Hospitality Alliance, which represents restaurant owners, has helped defeat legislation introduced in recent years to expand the law’s scope.

In June, after the latest lien bill stumbled in Albany, the Hospitality Alliance issued a statement, saying it would have been a violation of due process to allow an employee to place a lien on “the private property of the owners, investors and even managers of the business based solely on the accusation of wage violations.”

In California, businesses appealing the finding of wage theft violations are required to post a surety bond up to $150,000, which they forfeit if they fail to pay back wages after losing on appeal. Those who fail to post the bond can be and are prohibited from doing business in the state.

In New York, the state has a similar bonding rule, which was implemented in the wake of a 2015 New York Times exposé on working conditions in nail salons, but it only applies to owners of nail salons with at least two workers. New York City also has a limited bonding rule that applies to owners of car wash businesses. Advocates for nail salon and car wash workers said they didn’t have enough data to know whether the bonding rules have significantly helped reduce wage theft.

Some states and local communities have also used the licensing and contracting processes to their advantage.

In 2015, for instance, Cook County in Illinois took aim at violators of state and federal wage laws, disqualifying them from lucrative county contracts. In 2019, Santa Clara County in California also launched a pilot project that would suspend the licenses of any business for five days if it fails to pay back wages. Before the year’s end, the county suspended eight licenses, mostly from restaurants, and each led to the payment, according to the county’s Office of Labor Standards Enforcement.

“Being closed for five days is really bad for a restaurant’s business, so they seek to avoid that,” Gerstein said.

Adopting these approaches “wouldn’t make wage theft disappear in New York, but it would make a difference,” said Rick Blum, staff lawyer at the Legal Aid Society.

Some workers have already lost faith in the Department of Labor — and this includes a young woman named Kirsten, who filed a wage theft claim with the agency in August 2020 against a downtown Manhattan bar that had repeatedly failed to pay her. Kirsten, who requested to be identified by only her middle name to protect her future employment prospects, said she submitted documents and pay stubs. She didn’t hear back for more than a year and a half, until a phone call and letter from an investigator in the spring of 2022 asking her for more information about the case.

To this day, Kirsten said she has not received her back wages and has given up altogether. The agency “has been useless to me,” she said. “It just feels hopeless, like workers are all alone.”

Story by Marcus Baram, Documented, with data analysis by Agnel Philip, ProPublica, and Lam Thuy Vo, special to ProPublica