Politics & Government

At NC Department of Labor, little help for unpaid workers

Critics: N.C. Labor Commissioner of Labor Cherie Berry lets workers fend for themselves.
Critics: N.C. Labor Commissioner of Labor Cherie Berry lets workers fend for themselves. cliddy@newsobserver.com

In the spring of 2014, investigators from the state Department of Labor needed to have a word with Byron Williams.

Six employees at his Raleigh mental health care company were in a bind. They said they hadn’t been paid for one month.

The investigator called. She wrote. He never answered.

Finally, records show, the investigator reached a human resources manager for Reaching Your Goals, who explained the company was broke and had shut down. The investigator then visited what appeared to be an abandoned office.

With that, the state Department of Labor quit. It mailed letters to the employees, telling them if they wanted their paychecks, they could take Williams to court on their own.

North Carolina has a simple requirement of employers: Pay your workers what you promise. When bosses don’t, Labor Commissioner Cherie Berry’s team has the duty under state law to step in and try to make it right.

But for years, Berry’s Labor Department has rarely pushed uncooperative companies to settle debts to their employees. The News & Observer reviewed reports from nearly 50 cases in fiscal year 2014 that resulted in little or no money for workers. If a company owner pleaded poverty or refused to pay, state investigators nearly always gave up. If the employer simply ignored them, the department closed the case.

Jessica Hendricks, a social worker from Cary who says Williams owed her $3,000, couldn’t believe the Labor Department retreated so readily. “The labor board said there was nothing they could do about it, which is crazy,” Hendricks said. “Whether he shut down or not, that money is still owed to me.”

The Labor Department left hundreds of workers hanging in 2014. For some, like Hendricks, investigators closed the books on the case the moment they discovered the business had shuttered.

For claims that investigators were fully able to investigate and validate for 1,521 workers, roughly 40 percent of the workers didn’t get the help they requested. Investigators did not collect $1 million in wages they determined were owed to 617 workers.

That amount was nearly half of the money investigators found was due. Those wages were, in effect, stolen from workers who count on each paycheck to pay bills and buy food.

Across the country, officials are getting tough on companies that don’t pay workers. In states such as New York and Illinois, investigators have pursued criminal charges in cases of wage theft.

Some states in the Southeast are aggressive in going after companies that cheat their workers. Labor officials in Kentucky won’t accept a company’s unwillingness to pay; they file a lien against a company and continue pursuing the wages for at least a decade. In Tennessee, the state fined companies nearly $70,000 for breaking state wage laws in the last fiscal year. Officials in Arkansas get their legal team involved in wage payment cases far more often than in North Carolina, 77 times last year alone.

In North Carolina, Berry’s agency broke its own rules by not considering litigation in cases where workers weren’t paid in 2014. She also has the authority to seek restraining orders against companies to order them to stop withholding pay, but she didn’t use it.

Berry, 68, is a Republican elected in 2000 after being aggravated about a Labor Department safety inspection at her spark plug factory. She describes regulations as often unnecessary and nearly always cumbersome. She has styled her department to work in concert with employers, even when they run afoul of laws she is obliged to enforce.

Berry blamed any deficiencies in her Wage and Hour Bureau on management problems, which she said she started to correct this year with staffing changes. This spring, Berry hired Christine Ryan, a lawyer who has worked for the state for more than 15 years, to try to improve the Wage and Hour Bureau.

Val Eucare, the administrator Berry pushed out in December, said the bureau had been plagued by inattention from top brass.

“We were the red-headed stepchild of the unit,” Eucare said.

Berry said collecting wages owed to workers is important to her.

“Is it always possible to collect? No,” Berry said. “Do we try our best to collect it? Yes.”

Staying out of court

But state records reveal a department that’s only willing to go so far. If a business has closed shop, for example, the investigator walks away before checking to see whether there are assets to leverage for wages. In 2014, complaints that 142 other businesses didn’t pay went unresolved after an investigator determined the companies were out of business.

“I am very concerned that there is little substantive work being done to enforce the wage and safety and health statutes in the state in an aggressive manner by the current Department of Labor,” said former Rep. Rick Glazier, a Democrat from Fayetteville who resigned in September to lead the North Carolina Justice Center, a nonprofit that advocates on behalf of low-income residents. “I think the department probably does the minimum required by the law.”

Berry and her team have the power to take employers to court or levy fines. State law urges her to give weight to workers’ needs, noting that she should apply a “liberal construction to the end that the welfare of adult and minor workers may be protected.”

The department has a team of nine lawyers available to fight these companies in court, but it seldom does. During Berry’s 15-year tenure as labor commissioner, she has sued companies for failing to pay wages only 35 times, an average of less than 2.5 times a year, according to a summary of cases the state Attorney General’s Office handled for the Labor Department.

15 Years Cherie Berry has been labor commissioner

35Number of times her department has sued an employer for unpaid wages

$18 million Amount of money Byron Williams’ companies took in from Medicaid since 2006

$11,800 Amount that six employees from one of his companies said they were owed in 2014

The bureau’s operating manual calls for cases involving unpaid wages of more than $1,000 to be forwarded to supervisors to consider litigation. But that has not been done for years, Ryan said. More than 110 cases involving 439 workers fit that criteria in fiscal 2014, records show.

The workers are left to fend for themselves, trying to navigate a court system that requires time and money.

It’s unclear how Berry’s litigation history compares to her predecessors’; records prior to her administration are incomplete.

Ryan said investigators weren’t trained to prepare cases for a possible lawsuit. That, she said, is now changing.

“This is a mind shift in the way they approach their cases,” Ryan said.

MaryBe McMillan, secretary-treasurer for the state’s chapter of the AFL-CIO, said the department’s rate of collection is unacceptable.

Workers “are desperate, and they are looking to our state Department of Labor to help them,” McMillan said. “The fact that our Department of Labor is not willing to do whatever it can to ensure that these workers get paid is shameful.”

A lucrative business

The business of caring for children with mental impairments has been good to Byron Williams and his wife, Reba Royster.

They built a business on public money, taking in more than $18 million in Medicaid reimbursements since 2006 to care for the most fragile children in the state, records show. Medicaid is the federal-state program that helps pay for health care for poor children, some of their parents, and people with disabilities.

By 2013, after a decade in business, they had hired more than 300 caregivers to offer intensive care to children with mental and physical limits, according to a profile of the couple in a 2013 edition of Shaw University’s Alumni Magazine. Reaching Your Goals was successful enough that Williams, who graduated in 2001, and his wife, who graduated in 2002, began helping to endow a scholarship for students at Shaw.

They live in a 5,000-square-foot North Raleigh house valued for taxes at $910,000. The couple bought it in 2010.

The state labor investigator never knocked on that door in 2014 when she tried to help Williams’ employees recover the $11,800 they said they were owed. In fact, she didn’t research Williams’ assets at all, according to a summary of the investigator’s work.

She never called or visited Champion Health Care, the other publicly funded mental health agency where Williams continues as president. At the time, the state Secretary of State’s Office listed Williams as the registered agent for both companies.

The department’s marching orders for state Wage and Hour investigators are clearly spelled out in a manual: Don’t bother looking for assets belonging to companies that have shut down.

The investigator’s letter closing the case because Reaching Your Goals was out of business angered Hendricks, the social worker who is Williams’ former employee. She fell behind on bills and had to move out of her apartment and find a roommate. She remembers not having enough money to pay for help preparing her taxes that year; she knew she didn’t have the resources to go to small claims court and fight the company.

Hendricks wishes Williams had tried harder to pay the debt. When he didn’t, she expected labor investigators to force his hand.

“(He) could have taken out a loan to pay the employees. (Williams) didn’t do anything,” Hendricks said. “He was like ‘Oh, sorry you didn’t get paid ... whatever.’ 

Williams described a difficult transition when Reaching Your Goals went out of business last year. He said he thought all the workers had been paid but acknowledged that his company’s account manager, who told investigators the company had no money to pay, would have had more accurate information.

“We didn’t get a major contract, then we started downsizing,” he said in a telephone interview. “I think we initially had a couple of complaints. But I think a lot of the workers transitioned to other jobs, and once they transitioned to other jobs, we kind of faded away.”

Reaching Your Goals went out of business, but Williams has not. In the past year, his other company, Champion, was paid just more than $1 million in Medicaid reimbursements, according to the agency that contracts with the company.

Williams and Reaching Your Goals have run afoul of tax obligations in recent years. Court records show his company failed to pay unemployment taxes and payroll taxes of more than $500,000.

Williams and Royster are unlikely to be able to avoid that obligation. The state Department of Revenue and Division of Employment Security placed liens against them, ensuring that the state will eventually collect those taxes when they sell their house.

A former investigator’s regrets

Private lawyers in North Carolina who sue for wages owed to employees sometimes pursue a company owner’s private assets by arguing that the person, in addition to the incorporated company, is an employer under state law. In Kentucky, when an employer won’t voluntarily settle wage complaints, labor officials file a lien against a company’s assets.

“We don’t give up,” said Daniel Lowry, a spokesman for Kentucky’s labor agency. “We are always in the process of getting that money the workers earned.”

The Labor Department’s annual report brags about the agency’s collections. Berry’s department said in its 2014 annual report that it helped collect $1.6 million in wages for 1,600 workers.

Some of that money came easily: A simple phone call or letter to the employer resolved the matter. Sometimes, the check arrived before the department started an investigation. Those cases account for roughly $425,000 of what was collected.

For the cases that required more work, the rate of collection was far less.

The N&O examined fiscal 2014 cases in which Berry’s investigators validated claims of workers not being paid, finding $1 million owed to workers that wasn’t collected.

The money that labor investigators left on the table each year wore on Tyrome Davis, who worked as a labor investigator from 2012 to 2014. Davis, of Charlotte, said he felt like he was doing half a job: He would often find money due, but he wasn’t encouraged to push hard to get it.

The employers “don’t go to jail for this sort of thing,” Davis said. “So, basically, employers can keep doing it over and over and over. ... There’s really no teeth.”

Davis recalls dealing with defiant employers who ignored his requests for information or absolutely refused to pay. His supervisors wouldn’t authorize any action, he said.

“It would go to them, and that’s pretty much where it would stop,” Davis said. “There was no enforcement thereafter.”

Ryan, the new administrator, said that was the standard procedure for years. When a company refused to pay, workers were sent letters saying the agency would do no more.

During Davis’ nearly two years at the department, the struggles of workers he couldn’t help broke his heart. He knew many of the workers lived paycheck to paycheck and that missing a payday could derail their lives.

(Employers) don’t go to jail for this sort of thing. So, basically, employers can keep doing it over and over and over. … There’s really no teeth.

Tyrome Davis, former state Department of Labor investigator

But Davis, like all of the investigators, had quotas to meet. Each needed to close 22 cases a month to keep pace. He never had time to dwell on one case. The system wasn’t serving those it needed to help, Davis said.

“The only person it was beneficial to was the employer,” Davis said, criticizing the department’s tactics and the weakness of wage and hour laws in the state. “He got labor or services for free.”

Under state law, failing to pay workers carries no fine.

Berry has been required by state law to point out needed improvements in the law. But she has not lobbied for more punishment for companies that cheat workers out of pay, a spokeswoman for the agency said.

At Berry’s request, the legislature this year relieved her of the responsibility to advise them of changes needed in the law, part of a broader update of laws governing the office.

Berry said she does not believe high fines deter bad workplace behavior.

Berry: ‘Not easy’

The state’s wage and hour laws give Berry and her department heft they don’t use.

The law enables lawyers for the department to petition a judge to order the company to stop breaking the law. Violating that judge’s order could trigger criminal penalties. A review of court cases the department asked the Attorney General’s office to handle shows that the department has not used that tool during Berry’s tenure outside of the 35 cases in which it sued for unpaid wages.

Employers who fail to keep accurate employment and payroll records can be fined up to $2,000. In fiscal year 2014, the department fined only 13 companies $500 or more for record-keeping violations related to complaints from workers that they weren’t paid; only five of those companies paid the fine. Overall, nearly 80 percent of fines were less than $200.

Not paying a worker is not an automatic record-keeping violation. And failing to pay workers doesn’t carry a fine – which befuddles Ryan.

“I don’t know why you have laws that don’t have penalties associated with them,” she said. Ryan said Berry has asked her to keep an eye out for potential reform needed within the bureau.

Over the last year, the bureau has seen heavy turnover. Seven out of 19 investigators left and another died; three of four new trainees departed. Ryan has hired three new trainees since July, but they are not yet able to handle cases. The bureau has three vacant investigator positions.

Berry said her focus has been on customer service and efficiency. She said she has been reluctant to spend public resources on lost causes.

“We’re all about customer service ...,” Berry said. “We get lots of calls. We try to handle those as expeditiously as possible.

“It’s not as easy,” she said, “as people would believe it to be.”

Database editor David Raynor contributed.

Tomorrow: A failure to cooperate

The series

Sunday: No action ‘on your behalf’

Monday: Public funds, private cheating

Tuesday: Commissioner aims to help business

Wednesday: Workers ruined by loss of pay

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