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Wage theft rampant in Colorado

Collecting illegally withheld money isn’t easy, either

Wage theft – a term for employers illegally withholding wages – is rampant across Colorado.

From telemarketers to tortilla manufacturers, workers in myriad industries have suffered from employers failing to pay them wages they are owed, a Rocky Mountain PBS I-News investigation has found.

While blue-collar workers most frequently are cheated, workers across pay-scales in Colorado are vulnerable to wage theft, the analysis of federal enforcement data shows.

Since 2005, the federal Department of Labor has recovered more than $31 million in wages that had been withheld illegally by employers in Colorado in violation of the Fair Labor Standards Act.

Across the U.S. the amount of illegally withheld wages was more than $1.4 billion for the same period.

Whether it’s from bad intent or just from honest misinterpretation of complex federal rules, Southwest Colorado is not immune to the problem. Since 2005, the Department of Labor found businesses in Durango owed 80 employees $59,009 in back wages. Pagosa Springs companies owed 35 workers $142,149, Bayfield companies owed $14,595 and Cortez companies owed $4,416. No Ignacio, Mancos or Silverton companies were listed.

Over the last two years, the Department of Labor determined Durango restaurant owner Alison Dance violated child-labor, minimum-wage, overtime and record-keeping laws while operating Cyprus Cafe. The agency found Dance liable for $27,194.82 in minimum-wage violations. The violations occurred too recently to be included in the Rocky Mountain PBS I-News probe.

Eight Durango companies made the list of businesses that illegally withheld wages. But the wages aren’t always withheld with bad intent.

Kogan Builders paid back $20,816 in wages owed from March 1, 2007, to Feb. 28, 2009. The issue, said owner Alix Kogan, was that his bookkeeper had a different interpretation of overtime laws than did the Department of Labor. More specifically, the issue was overtime pay to salaried employees based on whether they’re considered management or nonmanagement.

“Once we understood their interpretation we modified our procedures accordingly,” Kogan said. He emphasized there were no falsifications and said the wages were repaid well before a federal deadline.

Bechtolt Engineering owed $19,773 in back wages from April 18, 2011, to April 17, 2013. A call to owner Rich Bechtolt seeking comment was not returned.

The six other Durango companies each owed less than $7,000.

Under the Colorado Wage Claim Act, employers who cheat workers out of wages can face a misdemeanor charge, $300 fine and 30 days in a county jail – penalties the General Assembly put in place in 1941 that have not changed since.

But that law is not being used to hold potential criminal employers accountable. No charges have been filed under the law since 2001, according to state court data analyzed by I-News.

The investigation shows the patchwork of enforcement options in the state means persistently egregious employers can escape harsh punishment.

Construction No. 1 in unpaid wages

Construction was the largest source of unpaid wages in Colorado, according to the I-News analysis, followed by workers in food service, oil and gas and janitorial services. Wage investigations involving workers employed by local school boards and state correctional institutions also were near the top of the list of wages recovered by federal labor authorities.

The list of industries is diverse. Bakeries, dentists’ offices, hotels and real estate companies also have been sites of wage theft in Colorado.

The amount of illegally withheld wages easily can equal a week’s worth of pay, according to the I-News analysis. For example, since 2005, the Department of Labor recovered an average of $389 in back wages for each of 3,863 janitors in Colorado, while their average weekly wage was $365, according to Bureau of Labor Statistics’ 2013 data.

The amount in back wages only captures cases that have received scrutiny from Department of Labor investigators – countless other businesses and individual cases escape attention.

Some estimates put the rate of illegally withheld wages much higher. The Colorado Fiscal Institute, a policy think-tank, estimated that workers are deprived of $749.5 million per year, based on applying the rate of wage theft cases found in a 2009 survey of workers in Chicago, Los Angeles and New York to Colorado industries. Those surveys found that 1 in 4 workers were paid less than minimum wage.

Workers have a few options to force their employers to pay back unpaid wages. They can file a complaint with the state Department of Labor and Employment, and a compliance officer will send their employer a letter to begin an investigation.

The department receives an average of 5,000 complaints a year and recovers about $1 million in unpaid wages, according to agency spokesman Bill Thoennes.

This month, the department received increased enforcement power to issue fines and penalties to employers for noncompliance, and it will increase the number of employees involved in investigations from four to nine. Previously, the agency only could refer the parties to mediation.

The federal Department of Labor’s investigations under the Fair Labor Standards Act cover employers with gross revenue of $500,000 or more, or employers that are hospitals, preschools, public agencies or universities.

At the federal level, 96 Colorado cases were filed in 2014 under the Fair Labor Standards Act, the federal law regulating hour conditions and wages. The number of cases filed under the act has tripled since 2009.

The courthouse also is a place some workers turn to recover unpaid wages.

In county courts, workers have filed an average of 73 cases a year since 2009 for unpaid wages, according to Colorado court data as of November 2014. Cases from last fall show the diversity of businesses where workers alleged wage theft – a bison ranch in Grand County, a real estate company and even a Vietnamese restaurant.

But the cost of paying an attorney and court filing fees easily can exceed what the unpaid wages are worth.

“A lot of the time when you have small dollar amount disputes, the person who’s been wronged will say, ‘I’m just going to eat that, I’m going to move on, I need to keep working, I can’t devote time to this,’” University of Denver law professor Raja Raghunath said.

Raghunath runs a legal clinic that helps clients with cases of unpaid wages. Feeling confident that no one will catch them is the main incentive for employers to engage in illegal labor practices, he said.

“In this context, increased criminal enforcement of the wage laws would provide significant deterrent effects,” he said.

State’s Wage Claim Act in disuse

Colorado prosecutors say the state’s wage law is a difficult tool to use to bring criminal charges. The biggest hurdle is proving that the employer intended to “annoy, harass, oppress, hinder, delay or defraud” the employee by withholding his or her wages. Another obstacle is proving that the employer is able to pay the wages, which means prosecutors have to subpoena company financial records.

The low penalty of $300 and 30 days in jail is too small to make prosecution worth it, said George Brauchler, district attorney for Arapahoe, Douglas, Elbert and Lincoln counties.

“Careless driving? You can get up to 90 days in jail. This, up to 30. Think about that,” he said. “Speeding 25 miles over the speed limit has bigger penalties than this.”

Colorado legislative records show the penalties for wage theft have not been changed since 1941. A bill to strengthen the criminal penalties never made it through the state legislature in 2013.

“My best guess is that it has very little deterrent effect for employers who are willing to engage in this conduct,” Brauchler said.

The state law on theft also can be applied to extreme cases, Brauchler said, but it also requires proving that the employer intentionally did not pay the wages. A defense in which the employer states that he intended to pay the worker later can make theft a high bar to prove beyond a reasonable doubt.

A Denver-based legal services organization, Towards Justice, has advocated in favor of increased criminal charges for unscrupulous employers and cites the effect of unpaid wages on economic growth by reducing consumer spending and tax revenue.

“Allowing wage theft to remain unchecked affects us all,” executive director Nina DiSalvo said. “Work is the foundation of success in America, and if we all believe in that, then we must all fight back against wage theft.”

The Durango Herald contributed to this report in partnership with Rocky Mountain PBS I-News. Learn more at rmpbs.org/news. Contact Anna Boiko-Weyrauch at abw@rmpbs.org.

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