Contract to Cheat: Followup

For many workers cheated out of wages, NC Department of Labor offers no help

From left, Victorino Paredes, Gaspar Zuniga, Adan Hermenegildo, Juan Paredes, and Rogelio Rodriguez pose in north Raleigh Wednesday, Nov. 12, 2014. These workers were among dozens not paid for several weeks of work for a Raleigh construction firm called Tri-City Contractors. The North Carolina Department of Labor found that the workers were owed thousands of dollars but declined to pursue the money in court on their behalf.
From left, Victorino Paredes, Gaspar Zuniga, Adan Hermenegildo, Juan Paredes, and Rogelio Rodriguez pose in north Raleigh Wednesday, Nov. 12, 2014. These workers were among dozens not paid for several weeks of work for a Raleigh construction firm called Tri-City Contractors. The North Carolina Department of Labor found that the workers were owed thousands of dollars but declined to pursue the money in court on their behalf. ehyman@newsobserver.com

This story provided improper context for a quote from former labor investigator Henry Sasser, who was quoted as saying the state Department of Labor won't be able to affect employer behavior until the agency litigates more cases. Sasser was referring to the improper practice of treating employees as independent contractors, not of employers failing to pay employees, the primary focus of the story

Thousands of workers turned to the North Carolina Department of Labor each year to collect the wages their bosses had promised.

The lucky, less than half during the past fiscal year, find an investigator who can convince a company owner to settle up. The unlucky – those caught laboring for an unscrupulous or cash-strapped company – find no help. The agency very rarely pushes these matters to court, allowing companies willing to cheat workers out of pay to escape unscathed.

In the past five years, the North Carolina Department of Labor has filed lawsuits against only four companies to recoup wages owed to workers.

In the past fiscal year, the only workers who filed complaints that the agency helped recover missing paychecks got results because their bosses voluntarily agreed to settle up. For at least 2,011 workers, more than half of the 3,694 who asked for help in the past fiscal year, the agency took no action.

Employers didn’t get fined. No one was charged with a crime for not compensating the workers’ time and labor.

The North Carolina Department of Labor, run by Republican Cherie Berry, has significant duty to the state’s 4 million workers. The agency is charged with ensuring that they toil in safe environments and holding employers who fall short to account.

The department inspects elevators and boiler systems. A team of 17 investigators is in charge of making sure employees in North Carolina are paid what they are due.

In September, The News & Observer and The Charlotte Observer reported widespread abuse of workers in North Carolina in a five-part series, “Contract to Cheat.” Using federal payroll records, the papers estimated that more than a third of the state’s construction workers are improperly treated as independent contractors, rather than employees as laws require.

Workers treated as contractors often work without proper insurance if they are injured or laid off. Those who pay taxes, because they are considered self-employed, bear a higher burden. Some of the workers reported being cheated out of pay.

Treating workers who should be employees as independent contractors, a practice called misclassification, costs the state $467 million a year in lost tax revenue, the newspapers estimate.

Berry, who was first elected in 2000, has declined this year to speak with reporters about these labor schemes. Berry’s spokeswoman has said that the N&O misunderstands Berry’s role in combating these problems. Last week, Berry again declined to be interviewed.

The N&O reviewed North Carolina laws, interviewed several former department employees and spoke with workers and lawyers who have interacted with the agency in recent years. The newspaper found several areas where Berry’s office has not been forceful with cheating employers:









Critics said by not doing more, Berry is failing workers and the state.

“There’s no going beyond what’s the letter of the law and using the bully pulpit,” said Mary Fant Donnan, a Democrat and former Labor Department employee who unsuccessfully challenged Berry for labor commissioner in 2008. “These issues of equity and fairness, they are not in her wheelhouse.”

An agency spokeswoman defended the agency’s record on wage complaints, saying that investigators’ time is best spent going after money they have a chance of collecting. For the employers who agreed to pay, workers recovered an average of 73 cents for each dollar owed.

Civil lawsuits to recover wages for employees take a lot of time, and it can be difficult to collect, lawyers agree. Of the agency’s four lawsuits in recent years, one has yielded money for the workers; the others are not yet resolved.

“Spending money on court costs and attorney fees often results in the courts issuing a judgment that may never be paid,” the agency’s spokeswoman, Dolores Quesenberry, wrote in an email. “The money recovered through our efforts is put back in the complainants’ pockets and thus back into the state’s economy via customer spending.”

On their own

Gaspar Zuniga, Juan Paredes and nearly 20 co-workers were among the roughly 2,000 workers the state Department of Labor turned away last year after they asked for help recovering wages their employers never delivered.

The owners of Tri-City Contractors, a concrete company in Raleigh, owed each of the men about $2,000, enough money to put the men in peril of not affording rent and groceries.

“We live paycheck to paycheck,” said Paredes, who was owed more than $2,000.

At first, Zuniga, 40, and Paredes, 39, hoped their boss of more than two decades would settle up on his own. As bills piled up and Christmas approached, they lost hope.

The men, immigrants who came here illegally from Mexico, found a telephone number for the state Department of Labor. Soon, 18 employees for the company had lodged a complaint, the agency said.

Labor investigator Dawn Beasley confirmed 18 laborers for Tri-City Contractors of Raleigh were cheated out of several weeks of wages. But the company owner, Curtis J. Fields, declined to voluntarily pay what he owed, and a lawyer for the company told Beasley that the company was likely going to file for bankruptcy, the agency said.

Fields and two other executives of Tri-City could not be reached for comment. Tri-City appears to not be operating, but one of the other principals opened another concrete company late last year, according to North Carolina Secretary of State records.

In May, Beasley closed the case. She mailed each worker a letter, breaking the news that their boss had not agreed to pay. She had more bad news: The agency wouldn’t go to court on their behalf.

“You are free to pursue the back wages on your own in court,” Beasley wrote.

In the past fiscal year, the department sent similar letters to workers in 195 other cases, according to the agency.

The men were stunned. They knew they couldn’t afford to pay a private attorney. Mostly, they couldn’t understand why a department devoted to sorting out labor violations wouldn’t come to their aid.

“I expected they would help us,” Paredes said. “I thought that’s what the office was there for.”

Zuniga showed the letter to James E. Rogers, a lawyer his brother knew. Rogers couldn’t get over the agency’s response either. Rogers knew taking on their case to court would be a losing proposition for his firm; he and his associate, Candace McKnight, would likely never get paid for their time.

“I knew if I didn’t do something, nothing would happen for them,” said Rogers, whose firm is now trying to help the men recover their wages.

State investigators could have easily helped secure unpaid wages for Zuniga, Parades and other employees for Tri-City, even though the company owners wouldn’t pay up. At the time the workers were cheated on wages, the men worked on projects backed or funded by the federal government. Such projects require protections to ensure workers get paid what they are due; if a subcontractor such as Tri-City falters on payments, the general contractor or contracting agency must step in and pay the wages.

Officials at Camp Lejeune and Cape Fear Community College, where the men worked last October, said no one from the Labor Department had reported a wage problem to them or the general contractors.

Zuniga and Paredes don’t recall anyone from the state labor office asking them what projects they worked on.

Consult, don’t confront

Berry, a former small-business owner, ran for state labor commissioner in 2000 after four terms in the state House of Representatives. She stepped into an agency that had been ruled by Democrats for decades. Her office has about 400 employees and a budget of roughly $33 million. She is paid $125,000 a year.

Her campaign promises aligned with her Republican sensibilities: Government should tread lightly in the lives of people and business. When her agency must get involved, Berry favored working in consultation with businesses rather than confronting them.

“She didn’t run on a platform of being approachable by the worker,” said Robert Willis, a Raleigh lawyer who has represented workers cheated out of wages who were turned away from the Department of Labor.

It’s unclear how much more, if at all, prior administrations, under the guidance of Democrats, went after scofflaw businesses. Court records from those years weren’t available, and employees’ recollections vary.

Under Harry Payne, who served as labor commissioner from 1992 to 2000, investigators did sometimes initiate their own investigations to verify companies kept the records they should, paid the overtime pay required and didn’t allow youth to work inappropriate hours, said Tom Harris, former head of the Wage and Hour Bureau and former acting counsel to the Labor Department who served for 18 years under two Democratic commissioners. When the agency did receive a worker complaint, it widened the investigation to examine more than that single worker’s complaint.

Henry Sasser, a veteran employee of the state Department of Labor who retired in 2008, said more than the commissioner’s philosophies drive what investigators tackle. Resources, Sasser said, have always been a challenge for the agency.

Sasser, who began his career as an investigator in the 1970s, said the agency’s efforts fall short. By not only pursuing cases in which employers improperly treat employees as independent contractors, Sasser said, the agency squanders the chance to show employers it won’t tolerate these tactics.

“Until people get hammered in court, none of this is going to change,” said Sasser, who retired as deputy administrator of the Wage and Hour Bureau. “Your priorities are where you put your money. Until you put the money in and say we’re going to spend some money and litigate these cases, people will keep doing this.”

‘There is no stick’

At first, Araceli Ascencio thought the Labor Department had worked reasonably on her behalf. Investigators compelled her boss to set up a payment plan to pay back wages owed her and more than 50 others who worked for Precision Healthcare Services, a home health care company.

For nearly a year, Ascencio, a U.S. citizen who lives in the Eastern North Carolina town of Grifton, said the company made good on the agreement, slowly chipping away at the $8,000 she was owed in monthly $150 checks. Then, this spring, the checks stopped coming. No back pay, then, no paychecks at all. By Ascencio’s count, the company now owes her more than $10,000.

Ascencio, 32, said she called the state Department of Labor nearly 20 times this summer; she said no one ever called her back.

Finally, Carol Brooke, a worker’s rights lawyer Ascencio contacted, got an answer from the agency. A supervisor, Brooke said, told her the agency would do no more to ensure Precision paid its workers. Brooke was frustrated but not surprised.

“There’s no incentive for an employer to do the right thing if they know that when they violate the law, there is no stick,” Brooke said.

Database manager David Raynor contributed to this report.

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