When Jen Mendoza started working at The Drinkery in Over-the-Rhine three years ago, she wore two hats – one as a bartender serving drinks and another as a manager booking bands.
Neither earned her a paycheck. As bartender, she was paid only in tips. As a booking agent, she was told she was an independent contractor and on her own.
Such informal arrangements are common in the bar and restaurant industry, Mendoza says, especially in Over-the-Rhine because “it’s a hip kind of place” where young people needing jobs want to work.
But tips-only pay and phony contract employment are also illegal and, worker rights advocates argue, unfair and exploitative. They call it wage theft, an umbrella term for failing to pay employees their lawful wages and benefits.
The U.S. Fair Labor Standards Act of 1938 sets a minimum wage, overtime pay for more than 40 hours in a workweek, a requirement that employers keep accurate time records and guidelines for determining if a worker is an employee or a contractor.
Wage theft is the most prevalent financial crime against working people in the state of Ohio. “This is the crime that no one talks about,” says Kim Bobo, former executive director of the national Interfaith Worker Justice.
Of the top 100 cases of wage theft in Cincinnati resulting in federal recoveries against employers from 2009 to 2015, 20 involved restaurants or bars. Worse, bars and restaurants accounted for three of the four willful or repeat cases.
“Some nights, I was making $30 an hour in tips, but other nights, after a 10 hour shift, I’d make $80,” Mendoza said. “It’s not regular or predictable.”
With the help of the Cincinnati Interfaith Workers Center, a non-profit advocacy group, Mendoza filed suit against the owners of The Drinkery in March of last year. She sought $50,000 in back wages – three times the minimum wages she was owed, as permitted under Ohio law.
The owners of The Drinkery settled the suit this week under undisclosed terms. The attorney for the owners, Brian P. Gillan, did not return several phone messages asking for comment.
Wage theft can and does occur in all industries and professions, however, as shown by the following recent U.S. Dept. of Labor recoveries in the city of Cincinnati: Walmart ($23,000); Sigma Capital ($111,455); Sterling Medical Corp. ($149,800); Triton Services ($5,724); Club Chef ($24,466); Dancing Wasabi ($38,494); Widmer’s ($34,522); and the Cincinnatian Hotel ($29,273.)
Despite federal and state laws against wage theft, worker advocates say short-staffed federal and state investigators do a poor job of enforcing them.
The city of Cincinnati will bolster that effort with its own staff of five investigators under an ordinance City Council passed on Wednesday. But the new law will apply only to those companies that have received tax breaks, contracts, loans or other financial favors from the city. Companies found guilty of wage theft will forfeit those city moneys and may be barred from doing further business with the city.
Worker rights advocates say far more wage theft occurs than is reported — one, because many workers aren’t aware of their rights under the law and, two, many fear they will be blacklisted within their industry.
Mendoza said she didn’t realize that her tips-only employment was illegal until her tax preparer informed her. “He didn’t even want to mess with (my return). I just had to guess-timate when I filed.” Tipped employees in Ohio are entitled to $4.05 an hour, plus their tips, which should total no less than the minimum wage of $8.10 an hour.
Mendoza’s co-complainant in the lawsuit against The Drinkery asked that he not be named in this story because “it could possibly influence my future employment.”
“The thing about the bar industry in a place like Cincinnati is that everyone knows everyone else,” said Mendoza, a former organizer for CIWC who now works for Ohio Citizen Action. “There are expectations that you just kind of roll with the punches. If you make complaints about things that are going down, you’re done.”
When Kayla Burns applied for a server’s job in July of 2014 at Paradise Café and Hookah Lounge in Clifton, part of “rolling with the punches” meant an unpaid try-out period of a week and a half in which she competed with other applicants for a job.
After Burns filed a complaint with CIWC, owner A.B. Alsheyyab paid Burns her back wages of $180. He says he now keeps a record of his staff’s hours, issues all of them paychecks and meets the minimum wage guidelines.
Employers can also evade labor laws by misclassifying their workers as self-employed independent contractors – a strategy in many industries to avoid paying taxes, overtime and employee benefits. The Economic Policy Institute estimates that 10 to 20 percent of employers misclassify at least one employee.
The DOL decides whether workers are independent contractors in business for themselves or economically dependent on their employers. A big factor is how much control workers have over their own pay and working conditions.
But that hasn’t kept many companies from stretching or defying the law. In July 2015, Fedex agreed to pay $228 million to settle a suit by FedEx Ground and Home Delivery drivers in California claiming they were employees who were misclassified as independent contractors.
Misclassified employees are cheated out of family and medical leave, overtime, minimum wage and unemployment insurance. Misclassification also shortchanges the U.S. Treasury and Social Security and Medicare funds as well as state unemployment insurance and workers compensation funds.
City coffers are cheated, too, because many independent contractors do not file local taxes or under-report when they do.
Some recent local examples of wage theft documented by court and DOL records include:
- At Dancing Wasabi, a popular Hyde Park sushi restaurant that closed in 2014, owner Chang Hee Choi was ordered to pay 65 employees $38,494 in unpaid wages for violating minimum wage and overtime laws. Hoi compensated the employees, but then told four of the kitchen workers whose English skills were poor to return checks totaling $7,600 or be fired.
- In Fairfield, Cascom Inc. in 2013 paid nearly $1.5 million in recovered wages to 250 cable installers after they were misclassified as independent contractors.
- At the Los Tres Amigos Supermarket in Cincinnati, employees were paid as little as $300 a week for 70 hours of labor. Under a 2013 consent agreement with the DOL, the owners paid 85 employee $88,795.
- At three El Rancho Grande restaurants in Cincinnati, Sharonville and Dayton, 171 kitchen workers and servers were owed $285,000 in back wages in 2012 after being paid a flat weekly rate less than the minimum wage and without over-time pay. Servers performed cleanup duties before and after their shifts without pay.
- At Smythe Automotive in Cincinnati and Northern Kentucky, drivers making runs to the warehouse for auto parts were required to work through their breaks in violation of federal labor law. The drivers won their court case in 2011.
- At Burlington Coat Factory locations in Cincinnati, stockers were misclassified as managers, if even one other employee was working in their vicinity, so they wouldn’t have to be paid overtime. The DOL ordered they be classified as employees in 2011.
- At TruGreen in Ohio, lawn technicians saw their hourly pay converted to a flat salary in the payroll system to cheat them out of overtime. TruGreen settled the dispute for $650,000 in back wages in 2010.
In the development industry, large construction companies lower their costs and shield themselves from liability for their workers through a chain of subcontractors. To earn the business of larger contractors, subcontractors must cut their labor costs to the bone. Exploiting immigrant labor helps them do that, says Leila Rodriguez, an assistant professor of anthropology at the University of Cincinnati whose research focus is immigrant labor in the Cincinnati-area market.
“It’s part of this trend of big construction companies externalizing a lot of their costs,” Rodriguez says. The bigger contractors “wash their hands of the issue by saying, ‘This other company gave me these workers, and how was I supposed to know (if they were being cheated)?’ ”
Vice Mayor David Mann, who introduced the new ordinance to City Council, says it will cover both contractors and their chain of subcontractors who have financial dealings with the city. “It’s very easy for big companies to hear no evil, see no evil, do no evil,” he said. “We want to put a stop to that.”
Any governmental agency, arbitration decision, court judgment, or industry regulatory body would identify wage theft violators under the new law.
The city ordinance will be enforced by a staff of five local investigators who would periodically check work sites and handle complaints from workers, a city compliance official told a city budget committee on Monday.
Brennan Grayson, director of CIWC, said the next step for worker advocates would be to encourage the city to prosecute misdemeanor cases against wage theft even among companies not doing business with the city. Under state law, he said, the city solicitor’s office would have that power.