To The Victors Go Few, If Any, Spoils In Wage And Hour Suits

By RJ Vogt | July 7, 2019, 8:02 PM EDT

New York State Sen. Jessica Ramos co-sponsored a bill to help workers who win wage and hour suits collect their due. (Photo provided by Sen. Ramos' office)

De Ping Song was working a nail salon in New York in late 2009 when he and several co-workers sued their bosses over hourly wages as low as $2.27.

Two years later, a judge granted him nearly $100,000 in back pay and damages. But today, seven years after the judgment, De Ping Song has received just $23,000 of what's owed because the nail salon's owners completely dissipated their assets before losing the suit.

Their inability to pay means the 51-year old Chinese immigrant with a baby on the way has no legal recourse to the rest of the money he already won.

"When we came to this country, we feel that it is a democracy with better laws," he told Law360 through a Mandarin translator. "But right now we are missing those stolen wages. I don't have enough money to spend, so I have to think about every dollar."

His case helped spur the New York State Senate and Assembly to pass legislation earlier this month that would allow workers in similar situations to put liens on their employer's assets in case they need to tap them for payment upon final judgment.

Sen. Jessica Ramos, D-Queens, co-sponsored the bill and told Law360 that, if signed by Governor Andrew Cuomo, the new law will keep businesses from taking advantage of both employees and other, more law-abiding competitors.

"The New York State Department of Labor has estimated $1 billion in wage theft occurs in New York State each year," she said. "So for me, this bill is about leveling the playing field, holding bad actors accountable and helping good actors."

But the so-called SWEAT bill — Securing Wages Against Theft — is no silver bullet for the problem of employer wage theft and the accompanying challenge of collecting judgments for workers.

Richard Blum, a staff attorney with the New York Legal Aid Society's employment law unit, pointed out that most private lawyers are unwilling to put in the resources necessary to pursue a claim in the first place because "the chances of collecting are so remote."

"People who cannot afford to have a lawyer to do this on a contingency basis are not going to find justice," Blum said. "Its only if they luck out and get legal services, which in turn have pro bono help, that the resources can be spent."

De Ping Song agreed, saying that if hadn't been for pro bono representation from Gibson Dunn & Crutcher LLP and the Legal Aid Society, he could have never convinced an attorney to take his case.

The nail salon worker and his colleagues are not alone in having won a wage theft suit without actually receiving all their missing money: according to a 2018 Politico survey of 15 states, more than 40 percent of the wages employers are ordered to pay in such cases goes unrecovered.

The National Center for Law and Economic Justice noted in a 2015 report that lowest wage workers tend to be the hardest hit. Over half of New York's unpaid civil litigation judgements had come in the construction and restaurant industries, with others stemming from domestic work, garment factories, nail salons and grocery stores.

Compounding the collection problem, Blum noted, is that many wage theft victims are immigrants, who can be fearful of seeking recompense due to concerns about their immigration status.

In the case of one Chinese takeout delivery man who won a $327,000 wage-theft settlement in 2017, the former employer simply changed his shop's name and listed one of the waiters as the new "owner."

Too Many Robbers,
Not Enough Cops

Legislative efforts to improve collections may help workers fight back against shady businesses, but it won’t solve a related problem: state and federal agencies that work to prevent wage theft and collect payment are spread too thin.

The U.S. Department of Labor, for example, reported recovering over $304 million last year in stolen wages, a record high. A department spokesperson clarified, however, that the sum represents how much is “found due to workers,” not necessarily how much is recouped.

The spokesperson added that the Wage and Hour Division, which takes cases selectively based in part on the number of employees and the extent of wrongdoing, collects “approximately 90% of that amount for the employees.”

The quoted rate is more than double the state-level collections documented in a recent Politico survey and other individual state reports. But according to Heidi Shierholz of the Economy Policy Institute, it's hardly a dent in an estimated $50 billion stolen from low wage workers annually — a sum nearly four times the annual value of all robberies, burglaries and larcenies combined.

“When you think of all the resources at all levels of government that go toward combating that kind of property crime and then the resources that go to combating wage theft, it’s just completely out of whack,” she said.

Shierholz co-authored a May report that showed federal wage and hour investigators are now responsible for over twice as many workers as they were 40 years ago. And even the overstretched DOL enforcement workforce — 912 as of fiscal 2017 — is better than staffing levels in states like Maine and Vermonth, which have four and three investigators, respectively. Florida doesn’t even have a department of labor, leaving civil litigation as workers’ only recourse.

“There is an extremely low chance that any violator will be caught when you have so few investigators per covered employee,” Shierholz said. “There’s almost no financial incentive for companies to comply with the law.”

The delivery guy, Cai Shuang Chen, hasn't received a dime, according to his lawyer Arlene Boop of Alterman & Boop LLP.

Other times, as in the case of De Ping Song, business owners ditch their assets while the suit is going on to avoid paying.

Court records show the owners of the salon where he worked had millions of dollars in assets when the suit was filed, including commercial properties and a Long Island home.

But just before trial they sold off those assets. By the time a judgment was issued, De Ping Song's Legal Aid Society counsel Karen Cacace said one main defendant had essentially no money to his name. In a deposition he revealed that even his cellphone bills were being paid by other people.

Although she and her co-counsel were able to secure some payment via a lien on one of the nail salons he tried to sell to a relative, it yielded just one-fifth of the sum due to their clients. And the $500,000 in attorney fees they won has yet to be paid.

Cacace said that New York's new law, had it been passed sooner, could have helped prevent the injustice in De Ping Song's case and scores of others.

"I've been at Legal Aid about nine years, and when I started we'd have one or two cases with judgments that hadn't been collected," she said. "Now I think there's probably eight or nine cases on my list of collection. It is so time-intensive and resource-intensive and very rarely results in full recovery for the client."

Not everyone backs the solution of allowing workers the power to freeze their boss's assets. New York City Hospitality Alliance, a local business group, put out an April statement voicing concerns about allowing "any disgruntled employee" to obtain a lien on a boss or manager's private property.

"While a small handful of states allow liens against business owners in wage disputes (6 in total)," the statement said, "only one state permits such liens purely based on an unproven allegation (Wisconsin).

"[This law] would make New York State a complete outlier and harm us competitively."

Blum contested that criticism, pointing out that the liens would only take effect when necessary as an enforcement mechanism. And though few states have passed lien laws, those that have saw improved collection rates. A 2013 study from the National Employment Law Project concluded that in Wisconsin the threat of liens successfully pressures most employers into paying in full.

Of an estimated 24,000 wage claims filed with the Wisconsin's Department of Workforce Development over eight years, the NELP found liens were actually needed in just 234 cases. Of those, lawsuits to enforce the liens were only filed in 98 cases, and workers walked away with full or partial payment 80 percent of the time.

The NELP study noted Wisconsin's success "stands in stark contrast" to California, where there was no wage lien law at the time. There, just 17 percent of workers recovered any payment at all after winning judgments at the California Division of Labor Standards Enforcement from 2009 to 2011.

The study helped spur California to enact its own wage lien law in January 2016. Ramos said she hopes New York's decision to follow suit will spur even more states to jump on the bandwagon, "ensuring that we're getting rid of wage theft in this country as soon as possible."

--Editing by Brian Baresch.

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