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Know Your Rights
Source: ProPublica
Subject: Uncategorized

In New York, Wage Theft Violators Get Millions in Government Contracts

In the lobby of its midtown Manhattan headquarters, Fedcap Rehabilitation Services has a large wall display that pays homage to its near 90-year history of leading “the fight for equity and opportunity” for the disabled community.

The nonprofit is known in New York as having pioneered the field of vocational rehabilitation, a service that helps find jobs for people with disabilities.

Fedcap has received dozens of contracts worth more than $110 million from 10 New York City and state agencies since 2018.

That’s despite the fact that the company has committed millions of dollars in wage theft against hundreds of its workers in recent years.

Under New York City and state procurement laws, contracting agencies are required to check vendors’ backgrounds, including for labor law violations, and award contracts only to those deemed “responsible.”

But who is a “responsible vendor” is vaguely defined. And New York state’s contracting rules are more lenient than some other places when it comes to approving wage theft violators for contracts. Advocates and officials in those places say tighter rules have been an effective deterrent against wage theft.

In New York, a company is only banned from receiving contracts if it committed multiple “willful” violations of wage laws, and that ban only applies to public construction projects and building service work, such as janitorial and security services. Many wage theft cases, including Fedcap’s, are not deemed willful, meaning that the federal Department of Labor did not determine that it knowingly broke the law.

As a result, city and state agencies repeatedly award contracts to companies even after the vetting process flagged histories of wage theft, an investigation by Documented and ProPublica has found. Joseph Brill, a spokesperson for the state Office of General Services, which oversees many centralized contracts for the state, said in a statement that “we are not aware of any vendor that has been deemed non-responsible solely because of a failure to pay appropriate wages.”

At least 25 companies and organizations, including Fedcap, have received a New York City or state government contract within three years of federal and state investigators finding that they had owed at least $100,000 in back wages to their workers, according to an analysis of nearly six years of contract records beginning in 2018, as well as wage-theft databases obtained from the U.S. and New York Labor departments.

Between January 2018 and September 2023, those employers received about 160 contracts collectively worth more than $500 million from dozens of city and state agencies — all within three years of committing wage theft, according to the analysis. The contracted work included catering, career assistance, nursing, security services, and highway and subway construction.

With Fedcap, its history of wage theft was hardly hidden. A 2018 investigation by the U.S. Department of Labor found that Fedcap had failed to pay required retirement benefits for over one year, then subsequently failed to pay the correct amount for workers at a New York City location. The agency expanded its investigation to 18 other federal offices and facilities served by Fedcap, and it also found that the company illegally deducted third-party administrative fees from its workers’ wages. The company agreed to pay $2.8 million to more than 400 workers to resolve the violations.

“When employers receive federal funds to provide services to the government, they must comply with all applicable laws to ensure that their employees receive legally required pay and benefits,” said David An, Wage and Hour Division District Director in New York City, in a press release about the case issued by the agency.

Then, in 2021, a worker for Fedcap’s job placement program filed a class-action lawsuit on behalf of herself and co-workers, alleging that the company committed wage theft against them.

In court documents, the lead plaintiff, Brickzaida Aponte, alleged that she regularly worked long hours — sometimes 100 hours a week — but was denied full wages. Aponte, who worked for the company for eight months ending in January 2019, also alleged that Fedcap made her work through unpaid breaks and required her to work double shifts that involved commuting to other locations without compensating her for the travel time.

Fedcap denied wrongdoing but settled the case last year, agreeing to put $850,000 into a settlement fund for approximately 4,000 workers, as well as attorney’s fees and other expenses.

Among the 25 contractors, Fedcap committed the highest amount of wage theft, according to our analysis of state and federal wage theft databases. Within three years of the 2018 Labor Department investigation, the company received 25 city and state contracts worth nearly $100 million. Since then, it has also received at least five additional contracts worth $18 million. (One of those was initiated within months after settling the class-action lawsuit last year.) The contracted work included providing rehabilitation services for mentally ill and formerly incarcerated people, as well as job placement programs.

In an email to Documented and ProPublica, Fedcap spokesperson Josh Vlasto defended the company, noting that some of the problems with payments occurred during a “change in systems” and that once it became aware of the issue, Fedcap “immediately corrected the error and paid the required funds with interest.” Vlasto also said that other than determining that back wages were owed, the Labor Department didn’t issue “any fines, penalties, or other punitive assessments.” The law that Fedcap violated — which sets wage and benefit standards for employees working on government contracts — does not authorize penalties or fines, according to the Department of Labor.

Vlasto added that his company had been willing to “vigorously contest” the class-action lawsuit but decided to settle the case “not because of any admission or finding of fault but because as a nonprofit we could not afford a lengthy litigation.”

Aponte, the lead plaintiff in the class-action lawsuit, declined to comment.

Worker advocates said New York’s current rules are too vague and loose to be effective.

“The system is broken,” Elizabeth Joynes Jordan, co-legal director at Make the Road New York, an immigrant-rights organization that has advocated for workers in labor disputes, wrote in an email. “The city and state must do more to ensure that they are not awarding major contracts to wage thieves.”

The ability of wage-theft violators to receive government contracts in New York stands in contrast to Washington state and a number of cities across the country — such as Houston, Philadelphia and two Ohio cities, Cleveland and Columbus — that have much tighter restrictions.

In Washington, for instance, companies and organizations are banned from bidding on all government contracts after a single willful wage-theft violation. In Cleveland and Columbus, companies are banned from bidding on government contracts after they’re found to have committed any amount of wage theft, whether intentional or not. The ban stays in place for three years in Washington, Cleveland and Columbus — regardless of whether they pay back wages to their workers.

Washington Attorney General Bob Ferguson said in a statement that his state’s ban is based on a premise that “taxpayer-funded government contracts should only go to those who play by the rules and pay their workers the wages and benefits they’ve earned.”

Others, including New Jersey and cities like Philadelphia and Somerville, Massachusetts, have gone even further, passing laws that allow them to strip wage-theft violators of their business licenses.