New Regulations Crack Down on Wage Theft Epidemic

For Immediate Release
April 26, 2016

Contact: Gladys Vega, Chelsea Collaborative, 617-889-6080
Phillip Reason, Community Labor United, 617-723-2639 

New Regulations Crack Down on Wage Theft Epidemic

As Momentum Grows for Statewide Reforms, Chelsea Joins Boston, Cambridge in Combatting Contractors Who Fail to Pay Workers

CHELSEA, MA – Contractors and subcontractors who have faced punitive actions for wage theft violations will be sidelined from bidding on contracts with the City of Chelsea for at least three years unless they obtain a wage bond and adhere to additional mandatory reporting requirements included under new regulations passed yesterday.

Advocates and workers packed a Chelsea City Council meeting last night to hail the victory for workers’ rights. The regulations would also apply to the city’s food and liquor license holders.

The vote by the City Council to put new restrictions on businesses who have been subject to criminal or civil actions resulting from a failure to comply with the Massachusetts Fair Labor Standards Act is a major step forward for workers and advocates who are simultaneously pushing statewide legislation (S. 2207) to crack down on employers who fail to pay workers in accordance with the law.

Sen. Sal DiDomenico is the lead sponsor of the legislation, which is currently under consideration by the Senate Committee on Ways and Means. Reps. Aaron Michelwitz and Kate Hogan are lead sponsors of the corresponding House legislation. Advocates say they hope to see the bill passed into law before the current legislative session concludes.

Led by Community Labor United and the Good Jobs, Strong Communities coalition, the campaign to curb rampant wage theft in the Massachusetts economy has already notched several significant victories, including the passage of similar measures in Boston and Cambridge. Under the regulations in Chelsea, employers who have been found to commit wage fraud in recent years would be required to submit monthly certified payrolls to the city when engaged in municipal contracts, among other requirements.

“We are thrilled that Chelsea has joined the growing list of cities that are refusing to do business with entities that are cheating workers,” said Rich Rogers, Secretary-Treasurer of the Greater Boston Labor Council and Chairman of Community Labor United.

The groups also recently released a hard-hitting report describing the wage theft crisis in Massachusetts, entitled “Gaming the System – How Employers Short-Change Workers and Get Away With It.”

“This ordinance is important because it is unfair that these companies rob us of our wages and overtime. I worked for a company based in Chelsea and I suffered a wage theft,” said painter and Chelsea Collaborative member Arturo Palacios. Chelsea Collaborative played a key role leading local efforts to advance the ordinance. “I was going to be thrown out of my apartment because my boss didn’t pay me and I couldn’t pay my rent. I had to take out a loan just so I wouldn’t get kicked out. We need this ordinance to show that the city will hold companies that commit these violations accountable.”

Such ordinances sideline employers who have been found to have committed wage theft from bidding on city business for a period of time unless they meet key requirements, helping to ensure workers are not cheated out of wages that have been promised and earned.

In Massachusetts and across the country, employers are subcontracting and outsourcing their work and distancing themselves from their responsibilities to their employees. While sometimes these practices reflect more efficient ways of producing goods and services, they too often are the result of explicit employer strategies to evade labor laws and erode worker protections.

Advocates say that the penalties and regulations on the books in most cities and in the state are too weak to prevent employers from misclassifying and stealing from employees, particularly lower-wage employees. According to data cited in the report issued by Community Labor United, misclassification costs the state as much as $259 million annually in payroll taxes and $87 million annually in unemployment insurance taxes.

Wage theft is estimated to cost workers in the United States billions each year, only a fraction of which is currently recovered through state and private litigation.

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Community Labor United (CLU) is the convener of the Good Jobs, Strong Communities Campaign. CLU and its partners work to protect and promote the interests of working class families in Massachusetts. Through coalition building, research and policy development, public education and grassroots mobilization, CLU moves policies that promote quality jobs and sustainable neighborhoods.

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