Area companies violated labor laws

More than 2,000 local workers not paid in full.

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By Cornelius Frolik, Staff Writer 10:43 PM Saturday, February 25, 2012

More than 2,000 workers in the Miami Valley in the last five years were not paid more than $2.3 million in wages owed to them by companies that failed to pay overtime; minimum wage; or violated other federal compensation laws, such as misclassifying employees, according to a Springfield News-Sun analysis.

“Wage theft” occurs when employers illegally withhold wages or underpay their workers, and a News-Sun examination of U.S. Department of Labor data shows that at least 120 businesses in the region in the last five years agreed to pay back wages to workers for a variety of violations of labor laws.

Businesses in low-paying sectors — such as food services and retail — had the most federal wage violations in the Miami Valley, and low-income workers are often the most vulnerable to wage theft. Some labor advocacy groups suspect that wage theft is growing because of the poor economy and tight job market.

Many wage violations are not reported because of a lack of education about worker rights and a fear of retaliation for filing complaints against an employer, according to some labor and employment-law experts.

They claim wage theft is costing the state hundreds of millions of dollars in lost revenue.

But some legal experts who represent employers said very few wage violations result from companies deliberately cheating their workers out of money. Instead, they said misclassification occurs because of a lack of education on labor rules and statutes.

Misclassification costs company

WinWholesale Inc., a supplier of domestic and industrial supplies that is headquartered in Dayton, agreed last year to pay almost $1.56 million in back wages to about 839 employees who were misclassified, according to federal records.

WinWholesale has 3,934 employees, including 175 at the Dayton headquarters, and it boasts 458 locally owned wholesaling corporations and 66 companies under Noland, a wholly owned subsidiary, according to the company. Its website lists Springfield Winnelson Co., 1919 Commerce Road, as part of its group of companies. WinWholesale had sales of $1.76 billion in the fiscal year ending Jan. 31.

The company worked with the federal agency’s Wage and Hour Division to resolve errors in the payroll classification of some employees working for Win Companies and Noland Company between January 2009 and January 2011, said Steve Edwards, vice president of marketing with WinWholesale.

He said any misclassified employees were paid last year to reimburse them for overtime they were estimated to have worked during that two-year period.

“WinWholesale and the Win/Noland Group of Companies are committed to complying with applicable payroll requirements and appreciate the assistance and support provided by the U.S. Department of Labor throughout this process,” Edwards said.

The company was not assessed any civil penalties, and the federal agency did not take any legal action because the company complied with the findings in the case and took appropriate action, said Rhonda Burke, spokeswoman with the Department of Labor.

WinWholesale was one of about 120 across the Miami Valley that, in total, agreed to pay almost $2.36 million in back wages to about 2,040 workers for violations of federal labor laws dating back to 2007, according to a News-Sun review of data from the Department of Labor’s Wage and Hour Division.

Only closed cases were available for review. Workers who believe they are victims of wage theft can file complaints with the labor department or the state, depending on the type of violation. They can also file a civil lawsuit.

Misclassification of employees as independent contractors and unpaid overtime are the most common types of wage theft and they are often connected, said Michell McIntyre, the project director for the National Consumers League’s Special Project on Wage Theft.

McIntyre said businesses often wish to hire workers as independent contractors instead of as employees because then they do not have to pay payroll taxes, unemployment insurance or workers compensation.

She said this saves businesses lots of money, and it can give them an unfair competitive advantage as far as bidding for contracts and controlling costs. It typically also means workers do not receive overtime.

Although misclassification is common, it is under-reported like all forms of wage theft because some workers are reluctant to anger their employers by filing a complaint while others are either unaware of the violations or the proper channels to lodge a complaint, McIntyre said.

“What (investigators) are able to get to is just a drop in the bucket,” she said. “I would say that it’s 50 to 100 percent (higher) than what’s being reported, and I would say that’s just people being scared.”

A 2009 report by the Ohio Attorney General’s office estimated the state is losing hundreds of millions of dollars in state and local revenue from employers who misclassify their workers and underreport their income.

The report said also wage theft gives other businesses an incentive to cheat to compete with the “artificially low prices of their dishonest counterparts.”

Employers that play by the rules often find themselves undercut by competitors that reduce their labor costs 20 to 30 percent by misclassifying their workers, said Scott Allen, spokesman with the labor department.

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