New data shows Iowans filed more than 600 unpaid wage claims, with limited success, in 2019

 
 

Update: The Iowa Division of Labor on March 2 provided updates on 111 of the 134 unpaid wage claims state workers filed in 2019 that were classified as open in December and January, when The Gazette received data under Iowa’s Open Records Law.

The state labor division closed 48 additional cases, while 86 remained open as of Feb. 5. In closing 516 of the 2019 cases, the state labor division returned $212,154 to claimants — or 23.7 percent of the $893,399 total sum they reported missing.

Less money was returned to claimants than they said they were owed in 376, or 72.9 percent of the closed 2019 cases. In nearly half of the closed 2019 claims — encompassing 243, or 47.1 percent of those cases — claimants received back no money at all.

Across the remaining closed 2019 cases, the Iowa Division of Labor returned the precise amount claimants said they were owed in 109, or 21.1 percent of claims. And 31 other people, or 6 percent of claimants, received back more money than they initially requested.

Franz Dunsworth said he was “hurting for work” when he began his third stint with Jet Services last fall.

The Ainsworth, Iowa, native said he worked about 50 hours before the home improvement company failed to issue paychecks to three co-workers, and later Dunsworth himself.

He said he left the job after several days and excuses received about the non-payments. It wasn’t until later, however, Dunsworth realized Jet Services also had not reported his hours and wages to the state, inhibiting him from claiming unemployment benefits.

Unbeknown to Dunsworth while he was working, the company also was not contributing to his union’s health and welfare fund. Because of that, he said he has not sought therapy or tried to have a child with his girlfriend.

“We just kept working and thought everything was peachy,” he said. “Then, when all the money dried up, it was like, oh yeah, we were getting screwed three different ways.”

Dunsworth and his former Jet Services colleagues are just several among thousands of Iowans who over the years have discovered their jobs were paying them less money than they rightfully were owed.

“This is without a doubt the biggest crime in Iowa, wage theft, and it’s largely ignored by people that could do something about it.”

- Iowa State Senator Joe Bolkcom, D - Iowa City

 

 

Across the state’s workforce, unpaid wages stand out as a pervasive, yet mostly unseen issue, amounting to what studies estimate to be hundreds of millions of dollars withheld each year by employers. The shortages run the gamut from employers skimping on benefits by misclassifying employees as contractors to outright pilfering from paychecks.

Some leave employees hanging after running out of money.

The frequent victims? Low-wage workers spanning a variety of industries, including food services, manufacturing and construction.

Out of the total number of people affected by unpaid wages, it likely is a small fraction who file complaints against their employers with the Iowa Division of Labor, according to labor analysts.

Though the division handles hundreds of wage cases on an annual basis, limited staffing likely impedes its efficiency in investigating claims, analysts said.

And assuming a worker’s back pay can be recouped at all — often not a guarantee — they might have to wait months or even years before receiving what rightfully was theirs.

“Their lives are shut down,” said Mazahir Salih, Iowa City’s mayor pro tem and co-founder of the Center for Worker Justice of Eastern Iowa. “All of those lower wage workers, they live paycheck to paycheck.”

Worker Woes

 

Dunsworth referred longtime friend Aaron Beeson to Jet Services to perform drywall work after the second of his three stints with the business.

Beeson, of North Liberty, said the job started out well after he joined in October but went downhill after one of his paychecks was delayed three weeks. He left at the end of the month, after not receiving his next check for $585 — an amount he said he still is owed.

“I’ve seen enough construction issues before where, if they (the workers) ain’t getting paid, I’m not working for free, so I’m out of here,” Beeson said.

“As soon as I start to see a problem like that, I won’t even stick around to find out how much longer they’re going to string you along. I can’t wait a month on the check that I was owed a month ago to pay my rent and things of that nature.”

“There are some cases where we might look at them and say, ‘Wow, there’s just so much that goes into this, the wage unit just isn’t set up to do an investigation of this type,’” he said.

- Mitchell Mahan, labor lawyer with Iowa Workforce Development

 

 

Dunsworth — who said he is owed $1,341 in unpaid wages and benefits — estimates one or two construction companies out of 50 will create wage problems for workers.

“Sometimes, you have shortages or material problems or this or that. ... I’ve had to negotiate before with a boss, like, ‘Hey, you didn’t pay me, but I understand something’s going on,’ and it was made right almost immediately or in short order.”

Both Dunsworth and Beeson have enlisted the Center for Worker Justice, which fields wage theft complaints and facilitates communications between workers and employers. Salih said the not-for-profit has recouped nearly $90,000 for workers since its inception in 2012.

One such worker, Jason Lanza of Iowa City, successfully collected $1,200 he was owed from the now-closed Taco John’s in Coralville, after sharing his situation with the center last year.

Speaking through a translator, he said he stopped working on the restaurant’s kitchen staff in early 2019, after two-and-a-half months of employment, after he went unpaid and the owner did not return his calls.

Recovering the money “was important because, at the time, my girlfriend was pregnant, so it was important for me to have the money to buy medicine for her,” said Lanza, who now works in construction and is father to a seven-month-old son.

Dunsworth and Beeson also plan on filing unpaid wage claims with the Iowa Division of Labor.

“I don’t really expect more than the exact wages that are owed to me, but in a perfect optimal world, I believe I am owed double or triple that at least,” said Dunsworth.

He added his current inability to claim unemployment benefits has left him “in dire straits.”

Jet Services owner Jim Tate told The Gazette that, to his recollection, all his former workers were getting paid.

“I’m going through an audit of the payroll system to find out if or what happened there, and to find out for sure if they are missing any wages and get it taken care of,” he said.

Hannah Boyd, of Iowa City, submitted an unpaid wage claim to the state labor division in late January, for approximately $1,200 she still is owed from working as hiring manager for the now-closed Beer Burger restaurant in Iowa City.

Approximately 30 people worked at the restaurant when it opened in late December 2018, but Boyd said that number started to dwindle over time, as paycheck problems became apparent.

“At first, it was just random accounts of staff members coming up to me saying their checks bounced,” she recalled. “It was really just a random person here, a random person there. ... Then, as the months went on, it became more apparent that this was consistently happening, especially to our kitchen staff.”

The Iowa City Beer Burger closed in July, after Boyd said the seven remaining employees went a week without receiving paychecks and came to a group consensus — “The doors haven’t opened since all of us agreed that we weren’t going back in until we received our pay.”

In later communications back and forth with the restaurant owner, Boyd said she received different excuses, including that “there was no record of any of us being there or clocking in,” and eventually stopped receiving responses.

Now an elementary school teacher, Boyd said she filed her wage claim both out of financial need and as a matter of principle, and as of early February was awaiting a response.

She noted that when one of her former Beer Burger co-workers filed an unpaid wage claim, for $385 in late October, Division of Labor staff later closed the case without recovering any money.

“They told her that they couldn’t do anything for us,” she recalled. “They told us it was because (the restaurant owner) had closed the business and his home address was in Wisconsin.”

MAiNGREDIENT, Beer Burger’s parent company, did not return a request for comment.

Show Me The Money

 

To submit an unpaid wage claim to the Iowa Division of Labor, a worker must provide information about themselves and their employer, and fill out a computation worksheet to display how much money they believe they are owed, said Mitchell Mahan, labor lawyer with Iowa Workforce Development.

After the division analyzes the claim, an investigator will reach out the employer, upon which varying levels of back and forth could take place, with documents exchanged as officials seek to reach a resolution.

The Iowa Division of Labor received 602 unpaid wage claims in 2019, amounting to $893,399 reported as owed from 447 unique businesses in total, according to data The Gazette obtained under Iowa’s Open Records Law.

 

Here are some details from that data:

• The lion’s share of claims, or 471, involved unpaid wages, totaling $622,101 in claims made. Other types of claims encompassed vacation pay owed, unauthorized deductions and unpaid commissions — 94 cases involved two or more categories of money owed.

• In closing 468 of the 2019 cases, the Iowa Division of Labor returned significantly less money to claimants than they reported missing — with $190,285 recovered from the businesses named, or 21.3 percent of the total sum reported as owed.

• The state’s labor division returned less money to claimants than they said they were owed in 339, or 72.4 percent of the closed 2019 cases, an analysis by The Gazette found.

• In nearly half of the closed 2019 claims — encompassing 217, or 46.4 percent of those cases — claimants received no money back at all.

• Across the remaining closed 2019 cases, the Iowa Division of Labor returned the precise amount claimants said they were owed in 101, or 21.6 percent of claims.

• And 28 other people, or 6 percent of claimants, received back more money than they initially requested.

• The 2019 state claims ranged from $9 to $14,175, with an average amount of $1,484 requested and a median award of $316.

Those findings mirror those of the Iowa Policy Project in 2012, which found, of 3,083 cases the state labor division closed between January 2008 and August 2011, 2,220, or 72 percent of cases, resulted in no award or redress.

The remaining 863 cases, involving unpaid wage claims ranging from $3 to more than $5,000, yielded a median award around $300.

Mahan noted that last year the division recouped more money than just what the closed 2019 cases reflect, from claims carried over from previous years. Officials currently are collecting on one 10-year-old claim, in which he said the employer finally started producing regular payments — “We don’t want to close cases if we think we have a fair chance still of collecting on them,” he said.

Of cases in which employees received back less — or more — money than they initially claimed, Mahan said, “Maybe their math was bad, maybe they just didn’t remember all the circumstances.

“Sometimes, we have forthcoming employers who will say, ‘We actually had two checks bounce, our bad, we’ll make this up.’ We’ll make our own independent investigation, and the (employee’s) number may or may not match what they’ve come up with.”

Some 134 of the 2019 claims were classified as still open when the state division provided the data in December and January.

Among those cases were numerous claims filed by ex-employees at LME Trucking, of New Brighton, Minn., the company subject to the most unpaid wage complaints — amounting to $123,064 owed — filed with the state labor division by a wide margin.

The trucking company in July abruptly shut down 30 delivery terminals in several states, including five in Iowa, leaving some workers uncompensated for a three-week period.

Iowa Workforce Development on July 12 began investigating claims related to LME Trucking, saying in a release the company had not provided 60 days’ notice of its closure.

Ex-LME workers filed 32 claims between July 15 and Dec. 26, seeking anywhere from $819 to $7,394. All but one claim remain open as of when the state data was provided.

Roadblocks To Recovery

 

A correlation could be drawn between the discrepancy between unpaid wage money requested and recouped, and a lack of state enforcement resources at the Iowa Division of Labor, said state Rep. Bruce Hunter, D-Des Moines, who over the years has sponsored multiple wage theft bills.

The division currently employs three investigators, one of whom was hired in late 2019, who deal both with unpaid wage and child labor violations, Mahan said.

Iowa’s labor division in previous years has fluctuated between one and two investigators handling the hundreds of claims statewide. Iowa was one of three states, along with South Dakota and Vermont, to employ just one investigator in handling unpaid wage claims, Policy Matters Ohio found in 2010.

Among the reasons the state labor division will quickly close a claim, Mahan said, are that more than one year has passed since the wages were due, the employee’s work took place outside Iowa or it’s an unpaid overtime case — under the U.S. Department of Labor’s jurisdiction, on account of Iowa’s lack of an overtime law.

On a small number of cases, Mahan said, the division will find a claim “unenforceable,” on account of the “expensive discovery or protracted proceedings” an investigation would entail for the small staff.

“There are some cases where we might look at them and say, ‘Wow, there’s just so much that goes into this, the wage unit just isn’t set up to do an investigation of this type,’” he said.

A small staff size “inevitably” limits how effectively wage theft can be investigated, especially when it comes to proactively investigating or auditing businesses or industries under suspicion, said Jennifer Sherer, director of the University of Iowa Labor Center.

The center serves as an educational hub for Iowa workers on multiple employment issues, including wage theft.

“The idea that there could be active oversight or investigation just isn’t realistic with a tiny, tiny staff,” she said.

As is, when individual investigators are responsible for such a large number of workers — Iowa’s statewide labor force includes 1.76 million workers, as of December 2019 — the state is left to “imperfectly respond to complaints,” said Colin Gordon, a research consultant for the Iowa Policy Project and University of Iowa history professor.

Gordon said labor division staff acknowledged their lack of resources when he and his colleagues were researching unpaid wages around 2015.

“If we think about highly competitive industries, like construction and retail and the service industry, where there’s a high rate of competition for different contracts, honest businesses that are keeping good payroll records and following the state and federal wage payment laws are being undercut ... by contractors who are not following those rules.”

- Jennifer Sherer

Director of the University of Iowa Labor Center

 

“When we were talking to the staff doing this, they basically got to the point where they were telling people to use private lawyers, to not assume that a claim simply filed through the Division of Labor would ever come out the other end,” he said.

This, in turn, can have a chilling effect on complaint filing, as Gordon said a claim likely would need to be “fairly substantial” to be worthwhile for a private attorney.

“There’s not a lot of action to recover $135,” he said.

But Mahan said he does not believe staffing levels factored into any of the 2019 cases closed.

A more common barrier, he said, occurs when an employer goes out of business and the division is left unable to recoup back pay.

Early in 2019, Mahan said he filed multiple trial court actions to recover funds from Spirit Homecare LLC, of Urbandale — the second-most recurring Iowa employer subject to 2019 wage cases, with 14 claims totaling $16,722 filed.

But before any hearings could take place, the company filed for bankruptcy, and the division had to back off, he said.

“Certainly, it can be a frustration when an employer’s out of business and there’s just nothing to go after ... . We look at it and say, ‘Employee, you’re owed the money, in a perfect world, you’d get it, but there’s just nothing to go after,’” Mahan said. “That’s an ongoing thing that happens, certainly.”

Yet another possible factor, Hunter said, is a lack of state protections against retaliation for workers who file wage claims.

“When you look at the people who are most involved, people who aren’t making any money the way it is or people struggling to get food on the table ..., they’re somewhat intimidated and they don’t have the resources under our current laws to go out and aggressively prove that they’ve been wronged by the companies,” Hunter said.

Footing The Bill

 

Iowa workers lose an estimated $600 million each year to wage theft, while the state misses out on about $60 million from unpaid tax revenue and employer contributions to its unemployment fund, the Iowa Policy Project found in 2012.

Three years later, the not-for-profit surveyed 300 Iowans on wage theft, of whom 25 percent said they had experienced wage theft in the past year, while 20 percent reported receiving no overtime pay.

Tracking the industries where unpaid wages are most prevalent can be difficult, as a number of affected workers, such as undocumented migrants, are not in a position to report the issue, Iowa Policy Project’s Gordon said. In terms of data shared with the Iowa Division of Labor, he said, “The reporting is not a very clean sample of actual incidents, particularly if you consider the fact that a lot of wage theft takes place on the margins of the economy, in sectors like day labor.”

Oftentimes, Gordon said, the employers implicated are ephemeral — a “one or two-person outfit with a van and a vacuum cleaner,” several steps along a subcontracted chain of businesses.

One such case involved an entity responsible for drywall work at the University of Iowa Children’s Hospital in 2016. There, five drywall finishers reportedly did not receive their full paychecks and were classified as independent contractors, not employees. Those workers were employed by Rimax Construction, which in turn was hired by Minuti-Ogle, to which Merit Construction, the hospital’s primary contractor, subcontracted the work.

The changing structural nature of some businesses can increase the difficulty for workers in determining their rights and how to hold their employer accountable, said Robin Clark-Bennett, labor educator with the University of Iowa Labor Center.

“Whereas maybe in years past, it was much more clear who was a worker and who was the employer, those relationships have really become blurred in an economy that now increasingly outsources, hires temp agencies, hires subcontractors and additional layers of subcontractors,” she said.

The burden of making up the approximately $60 million the state loses annually to wage theft falls to other taxpayers, specifically law-abiding businesses competing against unscrupulous counterparts, Sherer said.

“If we think about highly competitive industries, like construction and retail and the service industry, where there’s a high rate of competition for different contracts, honest businesses that are keeping good payroll records and following the state and federal wage payment laws are being undercut ... by contractors who are not following those rules,” she said.

“They’re underbidding them based on either not paying people up to the minimum wage or not paying people at all in some cases. It’s just an unfair playing field on that basis.”

Lawmakers’ Response

 

Some members of Iowa’s General Assembly have for years introduced bills — some short, some more comprehensive — in attempts to address state unpaid wage issues.

In 2019, these included bills to:

• Shift the burden of proof to employers in showing a wage deduction was lawful, rather than the current inverse

• Require employers to keep three years of payroll records, with worker hours and wages

• Double the penalty against employers found to have not contributed to the state’s unemployment fund by willfully misclassifying a full-time employee as an independent contractor.

Of last year’s bills, Hunter said, “They’re still live, but I would be the most shocked person in the state of Iowa if they received even a subcommittee hearing with the current shape of the legislature.”

Hunter said the last time he recalls an unpaid wages bill receiving such a hearing was more than five years ago.

State Sen. Joe Bolkcom, D-Iowa City, said he attributes the “dead on arrival” status of those bills to resistance from the business community.

“For them, it’s just another regulation, I think,” he said. “They don’t really have a good argument why it’s so onerous when an employer hires somebody to keep track of what the contract is, here are the wages, here are the days off, and the employee signs it and they’re off to work.”

As a result of legislative inaction, Bolkcom said, there’s hardly anything to deter wage theft under Iowa law.

“There’s nothing that comes close to $600 million in theft from an entity or group of people,” he said. “This is without a doubt the biggest crime in Iowa, wage theft, and it’s largely ignored by people that could do something about it.”

Of the issue’s importance, Hunter said, “The people that are being impacted are the people that live in our neighborhoods. “They’re Iowans. ... If someone is being taken advantage of, we need to make sure that that is being addressed, because the next time, it could be one of us.”

Comments: (319) 398-8366; thomas.friestad@thegazette.com