Mills administration cracking down on employer wage and hour violations

Feb. 6—Since Gov. Janet Mills took office three years ago, the Maine Department of Labor has escalated its pursuit of illegal workplace practices including wage theft, child labor and false record keeping, a significant departure from past practices at the agency.

The number of inspectors at the department's Wage and Hour Division has doubled. The amount of unpaid wages recovered for workers has skyrocketed. In an unprecedented move, two employers have been shut down permanently for wage theft. And now, the department will regularly publish business names and violation details in an online database.

Collectively, the changes reflect a shift in the department's effort to find and resolve a serious offense against some of Maine's most economically vulnerable workers. But labor advocates say a lot more could still be done.

"It is just a matter of trying to make the best use of limited resources to protect workers from abuses, and protect law-abiding employers from unfair competition that comes with employment law violations," said Michael Roland, director of the state Bureau of Labor Standards. "We just felt we could be more effective given the resources we have."

In 2018, there were just four inspectors working at the bureau. As of this year, it has nine inspectors and an assistant attorney general specifically tasked with pursuing wage and hour cases.

Even with more inspectors, the department is understaffed compared with its scope of work. Maine has more than 50,000 businesses, creating an over 5,500-to-1 ratio of workplaces to inspectors.

Department officials admit they don't know the true scale of labor law violations in Maine. They can't boast about how much of a difference their efforts have made. Instead, they direct the personnel they have to problematic parts of the economy, such as industries with lots of low-wage, hourly workers.

In 2020, employers in accommodation and food service accounted for about a quarter of all cases involving wage and hour violations, out of 17 industry sectors. Restaurant workers represented one-fifth of all employees owed back wages that year.

"I am pretty sure we are having an impact, but we need more experience and more data," Roland said.

There are still not enough staff and resources to randomly inspect employers, which is the only reliable way to gauge the true extent of wage theft and other serious labor violations, according to Roland.

"What we have been doing for the most part is responding to complaints," he said. "That is important, but it doesn't tell us what the larger universe is like out there."

STRATEGIC ENFORCEMENT

The department's new approach is modeled on a practice called strategic enforcement, pioneered at the U.S. Department of Labor during the Obama administration. Maine Labor Commissioner Laura Fortman was a deputy administrator of the U.S. Labor Department's Wage and Hour Division during President Obama's second term.

New York, Colorado, California and other states have adopted strategic enforcement tenets, as have major cities including Seattle and San Francisco, said Terri Gerstein, a former New York state labor official. Gerstein heads the State and Local Enforcement Project at Harvard Law School's Labor and Worklife Program.

Generally, the shift to strategic enforcement means proactively working to effect broader compliance with labor laws, instead of merely addressing individual worker complaints, Gerstein said.

It involves analyzing data to seek out problem areas, identifying violators through press releases and the news media, working with labor and community groups to discover violations, and assessing penalties intended to prevent further lawbreaking.

"You leverage limited resources in ways that are going to have the greatest and longest-lasting impact leading toward employer compliance," Gerstein said. "You could have a huge staff and collect penalties year after year from the same employers, but you are not moving the dial on compliance if they are still violating the law. You need both strategy and staffing."

One worker in Maine said it seems inevitable that employers will break labor laws. The worker reached a settlement with discount retailer Dollar General last year after a manager there repeatedly falsified time sheets at the store. The worker spoke to the Portland Press Herald/Maine Sunday Telegram on condition of anonymity because of a nondisclosure agreement.

The worker said violations like that have been commonplace nearly everywhere they've been employed. And while the worker recognized it as a problem, many others might not.

"I don't know if it is a corporate standard, or people they have in management that don't know the law, but everywhere I've worked, there is some form of wage theft or labor violation," the worker said. "I don't think there is enough education — most people don't know business law."

MAKING VIOLATORS PAY

The labor department has made recovering pay owed to wage theft victims a major focus. From 2019 to 2021, unpaid back wages flagged by the Wage and Hour Bureau grew by an average of almost 25 percent annually while the number of investigations remained steady.

Employers can short their workers in a number of ways. They can decide not to pay tips or overtime, enter false hours, misclassify employees as private contractors or pay them illegal subminimum wages.

Workers found by the bureau to have been owed back wages grew from about 353 in 2019 to more than 1,050 last year. The total amount of back pay it deemed owed grew from almost $516,000 to more than $770,000.

Not all those wages have been paid. In the past five years, the state has averaged a recovery rate of just under 70 percent.

In one case, Luchador Tacos, a restaurant in South Paris, repaid more than $60,000 to 14 employees to compensate them for unpaid tips going back almost three years. One employee alone was owed more than $13,000. The owners did not respond to an interview request left at the restaurant.

"We are putting a much tighter focus on back wages of employees," Roland said. "They are the ones that suffer if they don't get what they are entitled to."

Last summer, the labor department took the unprecedented step of shutting down an Augusta call center for repeated wage violations.

Inspectors flagged Protocall Contact Services Inc. in 2019 after finding it owed more than $110,000 to 95 workers. Protocall paid the back wages, but two years later, inspectors found it owned another 28 workers $60,500 and hadn't paid them in months.

In June, the department ordered Protocall to shut its doors under authority granted by a 2019 state law. The business remains closed, and attempts to reach its owners for an interview were unsuccessful.

The 2019 law authorizes the department place a cease operations order on businesses for repeated instances of wage theft. Employers can be shut down if more than 10 employees are not paid correctly and on time more than once in a year, if the unpaid wages total at least two times the employees' weekly pay.

PARADE OF WAGE THIEVES

Despite a focus on recovering wages, the department has pursued other commonly broken laws. Last year, Healthy Cannabis Co., of Buxton, was fined $7,100 and ordered to repay more than $2,400 in back wages for misclassifying some workers as independent contractors. The company has not paid its fine or back wages, according to the department. An interview request left at its Falmouth store was not returned.

Tennessee-based Charter Foods, a major operator of Taco Bell and KFC franchises in Maine and other states, was fined $94,000 by the department for over 200 violations of the state's child labor laws. Teen workers regularly worked too many hours when school was in session, and at least one worker did not have authorization to work, the department found.

Charter Foods signed a settlement agreement and paid just $9,400 in exchange for two years of compliance monitoring, employee training and an internal complaint procedure. The company's director of operations did not respond to an interview request.

Manchester Motors, a tractor dealership in Manchester, was fined more than $91,000 because it did not keep daily time records on 17 employees over a period of three years. The company had to repay $13,500 to workers in unpaid overtime, but the penalty was reduced to $250 after signing a settlement agreement with the state. Owner Michael Saucier declined an interview request.

Details of the violations were gleaned from the labor department's new public disclosure page. The page, which went live last week, includes details about violations at 29 employers, including citation letters, settlement agreements, fines, laws violated and wages repaid.

Broadcasting the labor department's work may encourage complaints and boost compliance, said communications director Jessica Picard. Employers may see common violations and then take the time to make sure they understand the law. Workers may recognize illegal practices going on at their own workplaces and call the department.

"It has also helped law-abiding companies know the playing field is being leveled, and (it) is helping bad actors know we are investigating and that there are consequences for breaking labor laws," Picard said.

That so few employers are annually cited by the department indicates that most stay within the law, said David Clough, state director of the National Federation of Independent Business, a small-business advocacy group.

"It is a very small list, which says that the vast, vast majority of employers are following the rules and doing what they are supposed to do," Clough said.

When violations do occur, it is more likely to be a mistake, not intentional abuse of the rules, he said.

"My understanding is, the vast majority of reaction from employers is, 'Oh, I didn't realize I was doing it wrong,' " Clough said.

'TIP OF THE ICEBERG'

Stepped-up enforcement is a welcome change for many, but labor advocates say the bureau's efforts are only scratching the surface.

"It's great to see their hard work is paying off, but we are starting to see the tip of the iceberg," said Andy Schmidt, a Portland labor attorney. "That is a great indication that we should do a lot more."

The state could help educate workers about their legal rights, including the law that prohibits employers from retaliating against staff for speaking out about workplace violations, Schmidt said.

"I think it is important that the Department of Labor continue to remind workers that they will go above and beyond to protect them from threats, and that they will take retaliation very seriously," he said.

Although recently bolstered, the team of inspectors remains smaller than it was 50 years ago, which means relying on worker complaints, said James Myall, a policy analyst at the left-leaning Maine Center for Economic Policy. The power imbalance between employees and managers in low-wage, hourly industries means many people fear making those calls, he added.

Myall estimates Maine workers lost $30 million in wages as a result of labor violations in 2017.

"Some of the estimates out there suggest there is a lot more going on than they are able to catch with this inspection capacity," he said.

Gov. Mills has not always made decisions supported by organized labor and worker advocates. Last month, the governor vetoed a bill allowing Maine farm workers to unionize. Last year, she vetoed another bill that would have allowed private parties to bring wage and hour cases against employers with the authority of the state.

"I think it is really significant and important that the department is making this information public and really trying to move forward with smart, strategic enforcement," said Matt Schlobohm, executive director of Maine AFL-CIO, a coalition of labor unions that represent 40,000 workers in Maine. "I think it is also true that there is much more across the board that all of us need to do to create a culture of compliance and make sure the law is respected in the workplace."

The diminished strength of labor unions, proliferation of forced arbitration on employees and rise of "gig worker" jobs has left U.S. workers exposed to regular wage and hour abuses, Schlobohm said.

Politics is a key issue, too. Under Mills, a Democrat, tackling illegal labor practices has been prioritized. That was not the case under former Gov. Paul LePage, Schlobohm said. LePage, a Republican, is challenging Mills for the governor's seat this year after serving two consecutive terms from 2011 to 2019.

"The strength, quality and scale of the enforcement depends a lot on the leadership of the department and the vision and policy approach of the governor," Schlobohm said. "It has huge impacts."