Schneiderman’s investigators probed 21 city carwashes owned and operated by Lage, his son Michael and associate Fernando Magalhaes and found widespread violations, including underpayment of workers.
New York City’s carwash kingpin must pay millions to workers he cheated out of wages and clean up his businesses after an investigation uncovered massive labor violations, the Daily News has learned.
State Attorney General Eric Schneiderman will announce Thursday that John Lage and two associates agreed to pay $3.9 million in a settlement to stave off potential prosecution.
“It’s a huge thing for me to know that justice is being done,” said Ernesto Salazar, 39, who has worked for Lage since 2001 and says he started out making just $3.50 an hour plus tips. “We’ve advanced in this industry, thank God.”
Schneiderman’s probe of 21 city carwashes owned and operated by Lage, his son Michael and associate Fernando Magalhaes, found widespread violations, including underpayment of workers and skimping on employees’ compensation and unemployment insurance costs by paying for coverage for only a fraction of the staff.
“These agreements require the car washes clean up their acts to comply with the law. And they ensure that the New York businesses, those who play by the rules, can do so on a level playing field,” Schneiderman said.
An attorney for Lage, Dennis Lalli, did not comment Wednesday.
Lage, who lives in a sprawling, turreted lakefront home in Westchester County, and the other owners failed to pay overtime at some carwashes, and would deduct pay for breaks that workers didn’t get, according to investigators, who examined business records from 2006 to 2012.
At some of the carwashes, managers improperly confiscated a share of workers’ tips and failed to pay washers who showed up to work on days of inclement weather but were sent home because business was slow, the probe found.
More than $2.2 million of the settlement will be divvied up among roughly 1,000 immigrant workers, who largely hail from Mexico or Central America and call themselves “carwasheros.”
A source close to Lage said the overtime violations occurred at washes where he is just part-owner and not in charge of operations. They also said he now reports all employees on payroll tax returns and follows all wage payment laws.
“This makes you feel valuable, to feel like the laws of this country apply to you,” said Salazar, who left El Salvador in 2001 for the Bronx’s Belmont neighborhood. He has worked at three different Lage washes.
“The managers wouldn’t respect us, or value the worker at all. This doesn’t have a price. The work is pretty hard, and the pay is little,” he said.
He said working conditions improved drastically after the investigation began in 2012.
The rest of the settlement will go to the New York State Department of Labor’s Unemployment Insurance Division and the New York State Workers Compensation Board.
Lage will also have to pay for independent monitoring of labor practices — with unannounced inspections and payroll audits — in his carwashes for three years.
As part of the settlement, Lage needs to either guarantee workers their jobs if he sells or closes locations — with the new owner or at another Lage shop — or give them 60 days notice and priority for new openings.
This is not the first time Lage has had to pay millions to his workers after the fact – in 2009, he agreed to pay some of his workers $3.4 million in back pay and damages after a federal law suit was filed.
“After years of fighting against systemic abuse, I’m thrilled the workers at Lage-owned car washes will finally have justice,” said City Council Speaker Melissa Mark- Viverito, who has proposed legislation to regulate the industry and require licenses.
The carwashes in the new settlement initially came under scrutiny as a unionization push began in 2012; it was part of a campaign by the Retail, Wholesale and Department Store Union and advocacy groups Make the Road New York and New York Communities for Change.
Since then, workers at six city carwashes – four of them Lage-owned – have secured union contracts. At Webster Car Wash in the Bronx, where Salazar works, a boost in pay as part of the union contract – combined with a rise in the state minimum wage – gave him new pay of $8 an hour plus tips.
“We are poor, but we have rights in this country too,” Salazar said.
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