California Leading the Way in Wage Fraud Prosecution


San Diego DA Summer Stephan with San Diego County Supervisor Nathan Fletcher looking on

The battle to prosecute criminal contractors is ramping up nationwide and new indictments in California suggest the state is leading the charge in thwarting the scourge of worker exploitation that plagues the construction industry. The office of California Attorney General Rob Bonta is exercising its full power in going after scofflaw contractors. New bills are being written into law and labor enforcement teams are emboldened.


Last year, two bills were passed by California's Governor Gavin Newsom that have given the state labor department teeth in its battle against unscrupulous contractors. Assembly Bill AB1003 authored by Assemblywoman Lorena Gonzalez specifies that intentional theft of wages or tips by an employer will be punishable as grand theft. And Senate Bill SB 727, authored by Senator Connie Leyva, aims to directly recoup unpaid wages, fringe benefits, and labor fund contributions through penalties and liquidated damages. SB 727 also includes a process by which contractors can avoid these actions by demonstrating that the violations have been mitigated.


These new laws exemplify the state of California's commitment to stamping out illegal practices and instigating change that has been needed for decades


Recent successes


In October, JPI Construction was cited by the California Labor Commissioner for $1.7 million for wage violations while earlier this summer, Visalia-based NGC Construction was slammed with $7.2 million in fines, also for wage theft. In both cases, the employers skirted the law by paying fixed rates while disregarding overtime pay. Additionally, in the case with NGC, workers were cheated out of travel time pay between worksites and were penalized for rest breaks. In both cases, workers' pay amounted to less than the hourly minimum wage and both companies doctored documents to hide the theft.


“Paying workers a flat rate is not an excuse to deny them the overtime hours they earned and should be paid,” said California Labor Commissioner Lilia García-Brower. “The laws in California protect workers. It is critical that workers keep track of their hours and pay so they can defend themselves."


In San Diego, County District Attorney Summer Stephan's Workplace Justice Unit was initiated earlier this year and has already won an achievement award from the National Association of Counties (NACo). Stephan's team is comprised of a dedicated prosecutor, a DA investigator, and a paralegal. The Unit is charged with prosecuting unfair business practices, wage and hour violations, payroll tax evasion, wage theft, and labor trafficking cases.


The tactics Stephan's team is utilizing aim to not only hold employers accountable but to educate workers on their rights. The DA's office provides information on dual language wallet cards and on a public web page where victims of workplace crimes can report offenses directly to the DA's office. There is also a hotline where infractions can be reported over the phone. This can all be done anonymously if there is a fear of retribution.


“Wage theft and labor trafficking are serious problems that we are working to contain in partnership with the community. We’re not going to allow workers in San Diego County to be exploited by greedy employers who break the law to line their own pockets," said Stephan. Regarding the honors, she continued, "...and this award confirms we are on the right track."


Ramping up nationwide


In 2018, the Department of Labor incorporated an addendum to 2011's Memorandum of Understanding between the Departments of Homeland Security and Labor Concerning Enforcement Activities at Worksites. The purpose of the addendum is to bring multiple agencies together in the effort to stop rampant fraud and worker exploitation:


This Addendum recognizes the importance of interagency coordination between law enforcement authorities when enforcing labor, employment, and immigration laws relating to the worksite and the need for these authorities to work together to ensure that respective civil worksite enforcement activities do not conflict and are not manipulated by third parties while advancing the respective missions of each agency.


The coordination of multiple state agencies against wage fraud and worker misclassification underscores the pointed approach State AG's now employ. An Economic Policy Institute Report covering state attorney general activities from 2018 to 2020 states that, in addition to California, seven other states and Washington D.C. have dedicated workers’ rights units within their respective state AG offices. Six of these units were started within the last five years. The report states:


The creation of a dedicated bureau ensures that an office will be involved in workers’ rights in a continuous, proactive, strategic, and in-depth manner—not as a one-off in relation to a particular case or issue. Having a dedicated unit also allows specialized attorneys to develop expertise on the relevant legal doctrine, case law, and new developments, as well as expertise in understanding common types of violations, the structures of high-violation industries, and how to use their office’s particular tools to protect the workers in their jurisdiction.


The addendum further equips state authorities in their efforts and fosters communication between multiple agencies in their policing of unscrupulous contractors.


Moving forward


California is setting an example of how properly run state agencies can be effective in combating wage fraud and worker misclassification. Statewide agencies are working together to incorporate new laws and develop strategies to combat these crimes that cost taxpayers hundreds of millions of dollars yearly and exploit legions of workers who until now have not had a voice.


The spotlight on workers' rights is casting a wide net that is highlighting the many ways in which fraud and exploitation are perpetuated and how profoundly it is integrated within many workplaces. Now that Labor task forces are stepping up with the support of an established protocol, these injustices will be accounted for. Scofflaw contractors across the country will soon find it impossible to continue with criminal practices as more states join the fight.










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