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The Plain Dealer, More workers being cheated out of wages, experts say

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By Olivera Perkins
March 13, 2010, 2:24PM

The owner of the small nursing home wanted out. Owner Kay Justice left a letter to employees saying the place would close in a week. Then she vanished.

With her went Bonnie Lapinski's last paycheck and those of the 20 other employees at the Wellington Manor Nursing Home in Lorain County.

"We were assured we'd get paid, but I haven't seen anything, and that was in August," said Lapinski, a licensed practical nurse.

What happened to the Wellington Manor workers is commonly called wage theft: employees not getting paid for the work they perform. Some employers don't pay earned overtime. Some pay less than the minimum wage. Some require employees to keep working after forcing them to clock out.

Experts say wage theft has increased during this economic downturn as owners have had difficulty making the payroll.

The Legal Aid Society of Cleveland has seen its employment cases increase more than 15 percent in the past year, to nearly 730, said Melanie Shakarian, the group's development director. Wage theft cases tripled, she said.

Julie Clutter Cortes, a staff lawyer handling some of the cases, said the recession sparked many of the complaints.

"Businesses are having economic issues, and one of the first things some of them do is try to cheat their employees," she said.

But not everyone agrees that employers are solely at fault. Some say increased complaints and lawsuits have more to do with workers, prodded by lawyers, trying to get money from employers.

"These cases are going up across the board, and it is not clear that there is any increased violation going on as opposed to a more aggressive plaintiff's bar that has been pursuing these cases," said Jonathan Keselenko, a partner in the Foley Hoag LLP law firm in Boston and co-founder of the Wage and Hour Defense Institute, an advocacy organization of lawyers representing employers on such issues.

Many Fortune 500 companies have been targets, including Wal-Mart, Keselenko said. Last year, the world's largest retailer agreed to pay up to $85 million to settle a suit brought by employees who claimed they were denied overtime pay and breaks.

The Bureau of Labor and Worker Safety, part of the Ohio Department of Commerce, handles cases involving wage theft cases involvling minimum wage, prevailing wage on public projects and overtime.

Most of the department's wage theft workload involves minimum wage, which stands at $7.30 an hour in Ohio. After voters approved a minimum-wage increase in 2006, complaints jumped by nearly 85 percent the first year, to 695.

The spike was predictable, but the cases didn't drop dramatically the next year. Complaints were up nearly 60 percent to 1,104 during fiscal year 2008 and dropped by only about 75 cases in fiscal 2009.

Even though complaints slipped slightly, the amount employers paid in fines and back wages increased. In fiscal 2009, complaints brought in nearly $582,000, a 7 percent increase from the year before and a nearly 500 percent increase from 2006.

Dan Belville, chief of the labor relations section for Ohio Attorney Richard Cordray, said employees of failed entrepreneurial ventures bring many claims.

"The trend we are finding is that more and more small businesses -- Mom and Pop shops -- are going under right and left," he said.

Cases in Northeast Ohio range from big companies to small. Several have hit the headlines recently:

•Inkstop, a Warrensville Heights company, had 450-plus employees and more than 150 stores in 14 states before abruptly closing last October. The defunct company still owes former employees $1.1 million in wages -- including final paychecks -- vacation pay and expense reimbursements to 456 employees, according to filings in U.S. Bankruptcy Court.

•Discount retailer Marc's pay $426,503 in unpaid overtime wages to 160 supervisors in Ohio and Connecticut in December. The U.S. Labor Department concluded that the workers had been misclassified as exempt from overtime. Court documents show Marc's agreed to the judgment without admitting wrongdoing, and the company had no further comment.

•More than 200 Aldi store managers filed suit in January claiming the discount grocer had misclassified them as exempt from overtime. The case, pending in U.S. District Court, was initiated by Howard McNelley of Elyria, who spent nine years working at the Aldi in Brooklyn before being fired in June 2009. The lawsuit does not say why McNelley or other workers were fired.

Aldi released a statement for this story saying "As a matter of policy and practice, Aldi consistently adheres to all employee-related laws and regulations. We look forward to presenting the facts in court."

The Ohio Commerce Department lists these as the biggest prevailing-wage and minimum-wage violations in Northeast Ohio last year:

•AAA Pipe Cleaning of Cleveland consistently paid less than the prevailing wage on at least eight contracts, the Ohio Bureau of Labor and Worker Safety determined. For example, on the Silver Lake Heights sanitary sewer project, most workers were paid $18.25 per hour instead of the $31.47 they should have made, the state said.

AAA Pipe cleaning has paid all but $17,000 of the nearly $100,000 in back wages and fines ordered. Company officials did not return calls from The Plain Dealer for this story.

•GPF Industries failed to pay 29 employees minimum wage for up to four weeks. The company had to pay $16,106 in back wages and $32,212 in damages. Company officials could not be reached for comment. The telephone number was disconnected, and no forwarding number was available.

Vincent Tersigni, a partner in the Cleveland office of the Jackson Lewis law firm, which represents employers in wage and hour matters, said companies should regularly audit their operations to make sure workers classified as exempt are not performing nonexempt duties -- for example, that an assistant store manager isn't classified in the same category as a store manager.

If employees successfully bring suit, employers could have to pay back wages of two to three years, he said. "Damages for liability can add up very quickly particularly for class action claims, which are very popular right now," Tersigni said.

People who feel they have been victims of wage theft have a few options: They can file a complaint with the state, as Lapinski did. They can file a federal complaint, as the Marc's workers did. Or they can sue in state or federal court.

The variety of options makes it difficult to determine just how widespread wage theft is, said Zach Schiller, research director for Policy Matters Ohio, a nonprofit research group that is studying the topic.

Then there is another reason.

"Many incidences are not reported because people are afraid to do so even though it is their right to do so under the law," Schiller said.

Even if a government agency or a court rules in favor of a wage theft victim, it doesn't mean the person will be able to collect.

The recession has brought more bankruptcies, and employees who are owed paychecks aren't usually among the first creditors to collect, said Katie Laskey-Donovan, the Legal Aid lawyer for Lapinski, the nurse. She said it is even harder to recover when the owner has disappeared because no one is left to sue.

Lapinski hasn't given up hope of the nursing home owner resurfacing and employees getting their back pay.

"The state made a lot of cuts with Medicaid, and she realized she couldn't do it anymore, so she just left town," Lapinksi said. "I feel back for her, but then at the same time she could have let us know what was going on and tried to work it out."

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