Fight against wage theft reignites in Minnesota as complaints rise

Roberto Jacobo is an immigrant who estimates he lost $90,000 in income over 15 years as a home remodeler because his employers did not pay him his owed overtime or prevailing wage on jobs.

For years he stayed quiet, afraid his employers would retaliate because he is an immigrant. Then he decided enough is enough and started to speak up for himself and others. He sued one employer and won his case last year, earning back wages and punitive damages.

"Most people say nothing. They are scared," Jacobo said.

Jacobo's case and others have reignited the fight against wage theft in Minnesota, with more enforcement this year on the local and state level and the Legislature considering tougher state laws.

In Minnesota's construction industry alone, wage theft hurts 1 in 5 workers, costing state taxpayers $136 million annually, according to the Economic Policy Institute's Midwest research arm.

Statewide, officials from the Department of Labor and Industry report receiving 600 to 1,300 complaints a year and recovering as much as $2.7 million in back wages and penalties for workers.

"Wage theft is a serious problem in Minnesota," said Minnesota Attorney General Keith Ellison. "It implicates both your ability to afford your life, and your ability to live with dignity, safety, and respect. It's also a problem that continues to fly under the radar, and can be invisible to middle-class and upper-middle-class people."

Labor abuses disproportionately harm unauthorized immigrants, non-English speakers, low-income laborers and their families, said Madeline Lohman, an associate program director with the Advocates for Human Rights in Minneapolis.

Violations vary, from bosses illegally deducting small fees from paychecks to "the most extreme cases where the employer says you can't quit or I will kick you out of your house or get you arrested or deported," which intimidates workers into staying quiet, Lohman said.

She said her group is seeing 40 to 50 people a year fall victim to the most egregious abuse.

Minnesota's wage theft law took effect in 2019, but once the pandemic hit, state investigations and claims themselves plummeted. Last year, activity against wage theft picked up again.

Officials at the state's Department of Labor and Industry have resumed education campaigns. They are bracing for an increase in complaints from workers this year.

The city of Minneapolis levied $571,000 in fines against employers last year.

The Attorney General's Office imposed $270,000 in fines and sued four employers for alleged payroll abuses, including Target's Shipt grocery delivery business (which has denied wrongdoing) and a Brooklyn Park siding subcontractor that worked on the 1,000-unit Vikings Lake apartment complex in Eagan.

On Dec. 30, prosecutors filed the first criminal charges against an employer under the state's new wage theft law.

"We expect that our enforcement activity will increase," said Ellison, who is adding three labor investigators to his new wage theft unit.

Violators often intimidate workers

While most employers obey labor laws, Ellison said there are those who will deny overtime, fail to pay minimum wage or misclassify workers as independent contractors as a way to bypass taxes or workers' compensation costs. Some employers even go so far as labor trafficking, where basic freedoms and housing are denied.

Last month, state legislators pitched two bills that would raise fines and allow for prison time for offenders.

Worker advocates and unions also have increased pressure.

Jacobo, who testified before the Legislature in late February, found help from the community group Centro De Trabajadores Unidos En La Lucha (CTUL). After winning his court case, he now teaches others about workers' rights and how to fight for wages via mediation, lawsuits, protests or filing complaints with the state and city.

CTUL has helped workers recover $5 million in lost wages over 15 years.

It's not easy work. Court and state records show cases where bosses threatened workers with violence, deportation and firings, Jacobo said.

First criminal case filed

On Dec. 30, Hennepin County prosecutors filed the first criminal charges against an employer under the 2019 wage theft law after painters working for Integrated Painting Solutions filed a whistleblower complaint. Frederick Newell, the company's owner was charged with shortchanging regular pay, plus overtime, for months of 13-hour shifts.

Workers who were part of the complaint — who are not being named by the Star Tribune because they are unauthorized immigrants and fearful of retribution — said Newell repeatedly promised to catch up on the next payday, but never did.

Court hearings are set to begin this week, Newell said.

"All the allegations will be proven false," he said. "Because of the pending litigation, I am limited in what I can say now. The city did a very sloppy and targeted investigation."

He balked at the alleged back wages attached to the case and complained that the city did not interview him during its investigation.

Newell's company was painting an apartment complex in Minneapolis' North Loop in 2020 and 2021 and agreed as part of a city contract to pay his painters and wallpaper installers a prevailing wage of $55.62 an hour, according to court papers. Prosecutors claim the company instead paid $15 to $25 an hour and owes the workers $37,001.

One of the painters, a father of four, said through an interpreter he was paid even less when Newell discovered he was without legal status. When he complained to supervisors, he said he was threatened with calls to the police.

As a result, he could pay rent but not food or utilities. Food shelves and borrowed money filled in the gaps.

"I never expected to have to ask for free food or receive free food because I was working so many hours, holidays, weekends. I worked all the time," the worker said.

The painters eventually put fears of deportation aside and sought help from the city.

"I do not have papers," the worker said. "But it was and is important to me that this does not happen to other people. I have a family. I have children. I am a human being, and so are other workers, whether or not they have papers."

The Minneapolis Labor Enforcement division fined Integrated Painting Solutions after an investigation found the company underpaid workers and threatened them with retaliation if they spoke up. The company also was ordered to pay its employees back wages. When the company did not follow through with the payments, the case was turned over to prosecutors who filed criminal charges Dec. 30.

Legislature weighing tougher laws

State labor officials say there are payroll abuse complaints in the restaurant, home health care, janitorial, security guard and retail industries but they can run rampant in construction.

Small subcontractors have changed LLC names to escape detection. And current laws do not hold general contractors and big property owners responsible for their subcontractors, said Brian Walsh, director of labor standards enforcement for the city of Minneapolis.

Most subcontracting arrangements "shield powerful companies from legal liability and accountability in cases where worker exploitation exists," Walsh said.

Legislators recently introduced two bills to change that practice and to protect more workers.

If passed, one bill elevates labor trafficking, debt bondage and coerced labor to felonies with sentences up to 25 years in prison and $40,000 in fines. A second bill would make general contractors and property owners liable if their subcontractors cheat workers.

Critics such as the Associated Builders and Contractors say the bills overreach as far as liability. They say current laws are tough enough.

Adam Duininck, a director with the North Central States Regional Council of Carpenters, however, thinks the bills will be game changers.

"We believe that if [project] owners know they will bear the consequences, they will hopefully make better choices about which subcontractors they use and vet them more properly," he said.

In 2021, the carpenters union helped bring a high-profile case to the state's attention. It accused subcontractors of stealing more than $100,000 from construction workers building Vikings Lake apartment complex in Eagan, a development of the Wilf family that owns the Minnesota Vikings.

A state investigation and a lawsuit ensued.

One worker on the site who is an unauthorized resident born in Mexico said he is owed thousands of dollars. He reported his case to the carpenters union and the state after Property Maintenance & Construction's (PMC) owner Leopoldo "Leo" Pimentel Jr. required him to put up siding 16 hours a day, six to seven days a week with no overtime pay.

When the worker complained about the flat $200 a day pay, bosses threatened to fire him and his co-workers and took other steps to intimidate the men and obstruct the investigation, according to a lawsuit filed by Ellison's office in October.

The lawsuit accused PMC of paying workers off the books in cash, underreporting payroll and failing to pay workers' compensation, unemployment insurance premiums and payroll taxes as required by law.

Calls to both PMC and Pimentel seeking comment were not returned.

Officials at MV Ventures, the property development arm of the Wilf family, denied knowing about labor violations and did not hire PMC for the second phase of the project. They noted PMC had signed documents promising to obey Minnesota wage and labor laws.

But the damage was done, the unauthorized worker testified before a recent House committee hearing.

"I stepped from the shadows to tell my story," after he was threatened on the job for refusing to use a fake identification card bearing a dead man's name and for encouraging other workers to report abuses to state investigators, he said.

He now is waiting for resolution of his case.

"It's taking too long to learn answers about, are they [at the state] really going to help us or not," he said. "I already put myself and my family on the fire with these criminals. ... We hope that we can get the support and the help legally from the state to solve this problem. It's been a lot of stress. We want justice."