Do San Jose’s wage theft policies lack teeth?

San Jose has a long history of wage theft on construction projects throughout the city—what are officials doing to prevent it?

A recent San José Spotlight investigation revealed numerous allegations of wage theft and unsafe working conditions on a public works project built last year intended to provide emergency shelter to the city’s homeless.

Days after the article’s publication, Public Works Director Matt Cano released a memo insisting all workers are “required to be paid prevailing wages” set by the state, and that the city “proactively” enforced labor compliance. The memo also stated the city is withholding final payments on the contract until all violations are corrected.

But union leaders and legal experts say contractors routinely violate labor laws in San Jose because the city does not have strong protections or penalties.

Ruth Silver Taube, a San Jose attorney who staffs Santa Clara County’s labor standards complaint hotline, said strengthening city law to prevent wage theft stagnated once the COVID-19 pandemic hit.

“The city, before COVID, said they were willing to add (protections), but they’ve taken no steps at all to do that so we’re very frustrated,” she said. Silver Taube is also coordinator of the Santa Clara County Wage Theft Coalition.

For example, the city’s existing wage theft protections explicitly exempt public works projects because “there is already a proactive and rigorous system in place to ensure workers are paid a prevailing wage on existing public works contracts through the department’s Office of Equality Assurance (OEA),” according to the city’s code.

The Office of Equality Assurance, part of the city’s public works department, fields wage theft complaints from public works projects and enforces the city’s wage laws. Last August, a San José Spotlight report revealed severe staffing shortages at the overburdened office and a growing backlog of complaints, some taking more than a year for a response.

“However, the purpose of the the Wage Theft Policy is to ensure that the city enters into contracts only with high-road employers, while the OEA’s compliance procedures apply only after a contractor has already been selected to do business with the city,” labor and employment attorney Eileen Goldsmith wrote to the City Council in February 2020. “A contractor’s history of prior wage violations is certainly relevant to determine what employers the city wants to do business with.”

Goldsmith was part of a group—including Councilmembers Sergio Jimenez, Magdalena Carrasco and Raul Peralez—recommending an update to the city’s wage theft policies to adequately protect workers, particularly those in construction.

The three members also fought to bring public works projects under the purview of the city’s main wage theft ordinance. In a 2019 memo to the rest of the council, the trio wrote the changes would “ensure another Silvery Towers does not occur again and that the city is not blindsided by another atrocity.”

A 2018 federal investigation revealed enslaved immigrant workers on the site of the Silvery Towers luxury condominium project, held against their will in filthy conditions without pay.

As councilmembers discussed the public work exemptions in February 2020, they voted to expand wage theft rules to include private contractors, with a so-called “responsible construction ordinance.” Calls for revising the city’s wage theft rules to include private development subsidized by city dollars have grown in recent years.

However, San Jose has not negotiated or implemented the ordinance, which would bar private contractors from working within the city for unresolved wage theft and workplace safety violations. The rule would affect projects greater than 5,000 square feet or with a contract amount greater than $50,000.

“(Councilmembers) have been taking a look (at this) for a very long time,” Silver Taube said. “We’ve had several meetings with them. But now with COVID, it has pushed things to the background.”

Silver Taube said there’s arguably more worker exploitation happening during the pandemic.

“There’s even more of an urgency,” she said. “I do understand COVID has caused people to pivot and focus on COVID, but it’s also important that we see these essential workers that are exposing themselves to risk, and so I’d really like to see (the city) move on this expeditiously.”

If the ordinance is implemented, the city can levy additional financial penalties and potentially revoke all funding if abuses are committed on projects using city funds.

In February, Cano detailed the difficulty of enacting the responsible construction ordinance, and made suggestions for alternatives, pushing back on the calls from labor activists.

In a memo to the council, Cano pointed out that inaccurate data, as well as the large number of companies with outstanding wage theft claims, threaten to compromise the city’s contractor vetting and slow down important projects.

A 2018 Good Jobs First report showed that more than 450 Fortune 500 companies had more than $1 million in wage theft penalties — and San Jose did business with at least 91 of them in a variety of sectors.

“None of the city’s vendors disclosed previous wage theft violations or existing final judgments,” the memo said. “For many industries, it appears highly unlikely the city could find competitors likely to comply with the policy.”

Opponents also argue state law already provides protections for all workers through the Department of Labor Standards Enforcement. But Silver Taube pointed out that while the department does pursue judgments against local violators, the judgements often go unpaid.

“In this COVID pandemic workers need their money,” Taube said. “(Wage theft) is anticompetitive. It’s not fair if you make money by cheating your workers.”

Contact Madelyn Reese at [email protected] or follow @MadelynGReese on Twitter.