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Wage Theft Rampant in Aftermath of Hurricane Harvey, Report Finds

Port Arthur, Texas, after Hurricane Harvey. (David Goldman / AP)

Just days after Hurricane Harvey released its grip on Texas a year ago, Guillermo Martinez Ayme was hard at work in the rebuilding effort.

He was one of more than 100 workers laboring from sunrise to sunset seven days a week, gutting a MainStay Suites hotel in Ingleside, 20 minutes north of Corpus Christi, that had been totaled by the storm. They worked 10- and 12-hour shifts in stifling summer heat, tearing down mold-infested walls, discarding storm debris and moving rotting furniture out of the four-story building.

But when payday came a few weeks later, several workers found their paychecks were short. Others had no checks at all.

Guillermo Martinez Ayme said he is owed about $900 for work at MainStay Suites in Ingleside. Since learning his wage claim was dismissed in January, Martinez Ayme gave up on recovering his money and moved to San Antonio to focus on his martial arts career. (Smiley N. Pool/The Dallas Morning News)

“It wasn’t just me,” said Martinez Ayme, who said he is still owed about $900. “There were many of my fellow workers who were also ripped off.”

More than a dozen workers eventually complained they had not received payment for their work, while the construction companies in charge of the project blamed one another for the lack of payments. Nearly a year later, many of those workers say they still have not been paid.

Experts have known since at least Hurricane Katrina in 2005 that wage theft – as these unpaid wages are often known – increases dramatically after natural disasters. Employers looking to profit off rebuilding take on transient and vulnerable workers they can easily exploit.

And yet, Texas officials were unprepared.

An investigation by Reveal from The Center for Investigative Reporting and The Dallas Morning News found the state failed to implement the most basic defenses against wage theft after Hurricane Harvey, leaving some workers in the rebuilding effort to fend for themselves against employers. The hurricane made landfall in Texas on Aug. 25, killing 68 and destroying hundreds of thousands of homes and businesses and causing more than $125 billion in damage.

Lisa Givens, spokeswoman for the Texas Workforce Commission, defended the state’s work, saying the agency saw no spike in claims for unpaid wages after the hurricane.

“We’re tasked with performing this function, and we use the resources that are available to us to the best of our ability,” she said. “We continue to improve on the use of those resources to make the process more efficient.”

The state made no significant outreach to low-wage workers in high-risk industries such as construction – a basic strategy experts say discourageswage theft.

And Texas’ process for investigating unpaid wages is ill-suited to tackle the problem. Over the last nine years, the commission investigated an average of 13,180 wage claims annually. Splitting the claims among the 19 labor law investigators on staff gives each one nearly 700 cases a year.

The investigation process takes months to resolve and is inconsistent. Workers accusing the same employer with similar evidence receive different judgments; some get their money, while others don’t. And nearly half of all the wages the state orders paid never end up in a worker’s pocket.

The amount of money not paid to workers after Hurricane Harvey is unknown. The state did not track cases of unpaid wages related to the storm’s recovery. But the Fe Y Justicia Worker Center, a small nonprofit based in Houston, received more than 30 calls reporting more than $109,000 in unpaid wages from February to July.

Reveal and The News documented 19 cases of workers whose wages were not paid. The amounts ranged from just over $500 to more than $4,000.

Unless the state changes its practices, workers are guaranteed to not be paid after the next natural disaster. Wage theft also slows down rebuilding because labor shortages in the construction industry are exacerbated when employers fail to pay their workers. Other much-needed workers won’t take construction jobs.

Lack of Outreach

A. Mauricio Iglesias, an organizer with the Workers Defense Project, visits labor corners in Houston once a week to educate workers about their rights if their wages are withheld or if police stop them.

The workers – many them immigrants without authorization to be in the U.S. – are often hesitant to talk and scatter when they see anyone resembling a government official. In the last two years, fear of deportation has intensified as President Donald Trump’s administration has focused on cracking down on illegal immigration, and a state law banning “sanctuary cities” known as Senate Bill 4 has allowed police officers to ask people about their immigration status during any interaction.

About three-fourths of the day laborers who worked on post-Harvey recovery efforts in Houston were immigrants, according to a November study commissioned by labor groups. Many of them were unauthorized, making them easier to exploit. It’s illegal to hire such immigrants, yet construction relies heavily on their labor. Companies often hide behind layers of subcontracting to avoid being penalized, passing the blame for hiring those immigrants – and exploiting them – to the companies underneath them.

“It’s so important in Houston because most of the construction workers are undocumented,” Iglesias said. “After Harvey, it became much more important because there was exploitation going on.”

Nearly three-quarters of day laborers who are living in the U.S. illegallysaid they had been victims of wage theft, and 64 percent said they were too scared to ask for help from government officials.

More troubling, the study found, almost none of the workers knew where to turn for help if their wages were stolen.

Rolando Torres Quindelan (left) and Andy Chacon say they were not paid for gutting a MainStay Suites in Ingleside that was damaged during Hurricane Harvey. The two have sought help from the nonprofit Texas RioGrande Legal Aid to recover their wages but still have not been paid. (Smiley N. Pool/The Dallas Morning News)

Out of 361 day laborers surveyed in Houston four weeks after the hurricane, none reported knowing they could seek help from the workforce commission, the state agency in charge of investigating wage claims.

Ninety-two percent of the workers could not name a single organization to which they could turn for help if their wages were stolen.

“The outreach that is necessary into informal hiring sites hasn’t occurred,” said Nik Theodore, a professor of urban planning and policy at the University of Illinois at Chicago, who oversaw the study. “If agencies had been out there, workers would know about them.”

Labor experts say outreach to workers in high-risk industries is essential in the fight against wage theft. Creating media and advertising campaigns – especially in Spanish – is key. And partnering with worker centers that already have ties to workers on the ground, such as the Workers Defense Project, also can help.

The workforce commission took none of these steps, even as state and local officials warned that other disaster-related crimes such as price gouging and looting would not be tolerated. Instead, it waited for workers to file complaints and did not increase staffing or outreach.

“If you are solely relying on complaints, you are going to miss where you probably have substantial problems of wage theft going on,” said David Weil, dean of the Heller School for Social Policy and Management at Brandeis University in Massachusetts and the head of the Department of Labor’s Wages and Hours Division under President Barack Obama. “People who often are the most hit by wage theft are the least likely to complain.”

Givens, the commission spokeswoman, said after the hurricane, the agency sent fliers on how to file wage claims in English and Spanish to its28 local offices and created a web page dedicated to Hurricane Harvey.

“If you do an online search for a wage claim, we’re pretty high in the search results,” she said. “We feel that people would make their way to us for that information.”

‘There Is No Information’

That information did not trickle down to Hector Menjivar, a day laborer who was not paid his wages while demolishing the hurricane-damaged Ravinia Apartments in Spring, north of Houston.

Menjivar became suspicious after going two weeks without a paycheck. When he asked his supervisor when he would be paid, his boss waved him off and told him he’d be paid Monday.

Monday became Wednesday. Wednesday became Saturday. And on Saturday, they were told it would be Monday again.

Eventually, Menjivar and two other workers had enough.

“We had to stop and tell them we’re not working until we get our money,” he said. “But they still didn’t want to pay us.”

They walked off the job but had no idea how to recover their wages. Combined, all three were owed more than $3,450, according to lien notices filed with Harris County. To some people, the amount might be trivial. But to Menjivar, who was owed $1,566, it meant not being able to pay the rent that month and buying groceries to feed his son.

Menjivar found the Workers Defense Project, which helped him win back his wages by filing a mechanic’s lien against all the companies associated with the project – essentially tying up the property’s sale until the workers were paid.

Don Gross, a subcontractor on the site, said he did not know the workers were not paid and sent them checks when he found out. He said the three workers were hired by a subcontractor who never paid them.

Through a spokesman, Interstate Restoration Services of Fort Worth – the general contractor in charge of the project – said the company pays its workers and vendors on time, adding that it can’t control subcontractors who don’t.

“We understand there were some complaints in connection with one subcontractor on the restoration of Ravinia Apartments, and to our knowledge those complaints have been resolved,” Steve Caulk, an Interstate spokesman, wrote in an email. “Interstate severed ties with the subcontractor, hired others to complete the job, and worked with the terminated subcontractor’s vendors/suppliers/sub-subcontractors to see that they were compensated appropriately.”

Menjivar was paid. But most workers don’t know where to begin to recover what they’re owed or have the money to hire a lawyer.

Without government agencies reaching out to workers, Menjivar said, wage theft will continue.

“People don’t do anything because there is no information,” Menjivar said. “They’re scared and they’re not informed about organizations that can help you.”

Inefficient System

When workers file claims with the state, it often takes months before they find out whether they won their case. And if they win, it could be several months before they collect their pay – and some never do.

Bookkeeper Melinda Brown of Corpus Christi won a wage claim against Welco Construction Services, which fired her in October, but that hasn’t helped so far. “I haven’t gotten my money back,” she said. “I honestly think I never will.” (Smiley N. Pool/The Dallas Morning News)

In February, the Texas Workforce Commission ruled that San Antonio-based Welco Construction Services violated state law by not paying Melinda Brown, the company’s former office manager, for work she did on the MainStay Suites job in Ingleside after Hurricane Harvey.

But Brown said she has yet to be paid.

“I won my wage claim,” said Brown, who also won an appeal of the claim in March. “I haven’t gotten my money back. I honestly think I never will.”

Al Wells, owner of Welco Construction Services, said he paid Brown – a statement contradicted by state records.

“I don’t have much to say about it except it’s not accurate,” he said. “We paid all the wages.”

On average, about half of the wages the state ordered employers to pay for the last nine years were never recovered, according to commission data.

“The collections actions can be difficult and time consuming,” Givens said. “We take every action we can in order to quickly identify and take action.”

For workers trying to get their money back, the agency’s administrative hurdles are the least of their worries. They still have bills to pay and wages to make up.

Some simply give up.

“It is what it is,” said Kevin Dawson, 22, who also worked on the MainStay Suites job. He won his wage claim against United Machine Shop in January and still has not been paid. “Bad things happen and you gotta move on. I would like to agree that maybe one day I’ll get paid, but I won’t hold myself to that.”

Givens said the commission could not comment on specific cases.

Worker advocates say the agency’s capacity to investigate and enforce wage laws is limited.

Ana Gonzalez, a policy advocate for Workers Defense Project, with Agustin Villanueva as he prepared to testify to state lawmakers about wage theft during a hearing in Houston in July. Villanueva said he was not paid for repairing houses after Hurricane Harvey. (Smiley N. Pool/The Dallas Morning News)

“The TWC I see as equipped to handle very straightforward claims,” said Shana Khader, a lawyer with the Equal Justice Center, a legal nonprofit in Texas that helps low-income workers recover their wages. “If it’s kind of a more complicated situation, I wouldn’t always count on the TWC to get it right.”

At the MainStay Suites, more than a dozen workers alleged they were not paid.

The trouble began Sept. 7, when Welco pulled its workers from the site just a few days into the job. The general contractor, LSDG Roofing in Allen, was not sharing timesheets, making it impossible to pay his employees, Wells said.

Brown, the bookkeeper, said Wells told her to round up all the workers and record their hours for the company’s seven days of work.

“Everyone said, ‘I worked this, this and this,’ ” Brown said. “I took them on their word.”

It’s often unclear in such situations exactly which employer is at fault. It becomes a game of he said-she said.

But some workers did not sign out, Brown said, and when Welco started cutting checks a week later, many of the workers didn’t get one. Four filed wage claims against the company, but Wells said he paid every one who signed.

“I’ve paid every single person that signed in and out of the timesheet,” he said. “The real story is with LSDG.”

After Welco walked off, another company, United Machine Shop, took over. Six workers later filed claims with the workforce commission that owner Angel Martinez had not paid them. Only two had been paid as of August.

Martinez said he paid all his workers but had not cleared those payments with the state. He said some people who had worked for Welco mistakenly filed against him. He said there were delays in paying workers, but only because LSDG was slow to pay him.

“I haven’t been paid everything that I’ve been owed,” said Martinez, who filed his own claim against LSDG. “What was paid to me was paid out to the employees.”

Billy Mitchell, president and owner of LSDG, said all its employees and subcontractors were paid on time. He said the company was not involved in disputes between subcontractors and their workers and was not under investigation.

“None of those people worked for LSDG. We’re just a general contractor,” said Mitchell, whose company paid two workers who had filed liens against the company for unpaid wages. “They were the subcontractors that provided the labor. We vet to the best of our knowledge, but they’re a subcontractor. … These are all separate companies. I can’t tell another company how to run their business.”

The commission could investigate “joint employers” if two companies are involved in a claim. But even though the company was named or alluded to in at least three of the claims, the state never investigated LSDG.

Without such actions, experts say, smaller subcontractors that interact directly with workers are punished while companies that hire subcontractors aren’t.

“This is a special problem in many industries where employment is fragmented into multiple layers of contractors and subcontractors,” said Bill Beardall, executive director of the Equal Justice Center. “The construction industry is almost a lawless jungle when it comes to misuse of subcontracting.”

With meager resources dedicated to fighting wage theft and collecting those stolen wages, Texas is essentially enabling bad employers to not pay workers, advocates say. The workforce commission issued a wage violation in 2013 to Welco for failing to pay a worker. Since 2015, the U.S. Department of Labor has issued Welco two violations for similar infractions.

Welco did not pay any of the Harvey workers who filed wage claims – even those who won their cases, according to the state. Nor did it pay $2,971 in “bad faith” penalties the state levied against it.

Brown, the bookkeeper Wells fired in October, said her car was repossessed when she couldn’t make the payments after not receiving her pay. She began pawning household items to put food on the table for her daughter, son and three grandchildren.

Brown got an $800 loan for her wedding ring. She pays interest on the loan every three months so the pawnshop won’t sell the ring.

“I pray I get it back,” she said.

In early August, Brown called the state for an update. A worker in the collections department told her the office received the claim in May. It had still not been assigned.

Fear of Retaliation

Fear of retaliation keeps many workers from fighting for their unpaid wages, advocates say – especially the estimated half of construction workers who are immigrants without authorization to be in the U.S.

“We could never tell anyone that there is no risk, but we could tell folks that the risk is extremely low,” said Khader, the attorney with the Equal Justice Center. “That’s harder now, both thinking of federal policies and also SB4 – folks just not feeling comfortable with police.”

Texas, unlike California, New York and other large states, has no laws to protect workers against retaliation for filing a wage claim with the state. The federal Fair Labor Standards Act and the National Labor Relations Act protect workers, but not all wage claims filed with the workforce commission fall under federal labor and employment protections. The labor standards law, for example, covers employers whose annual sales total $500,000 or more or are engaged in interstate commerce. The labor relations law protects only “concerted efforts” by multiple workers, not individuals.

In many cases, an employer in Texas could fire a worker for filing a wage claim and face no legal consequences.

Hector Menjivar, the worker who won his claim for back wages after filing a lien, said he hesitated to seek help because he doesn’t have legal immigration status.

“A lot of people are affected by this, but they don’t do anything because they are scared,” he said. “There are employers who know you’re undocumented and they tell you that if you try to report them, they will send immigration on you.”

Because some workers just leave a job or continue to work in hopes they’ll get some pay, bad employers can continue to exploit workers – citizens and immigrants – without consequence.

The problem of workers not being paid is taking a toll on the busy construction industry in Texas because there already is a shortage of workers.

The state has had a labor shortage in construction for years, slowing recovery after Hurricane Harvey. Last year, 69 percent of construction companies in Texas polled by the Associated General Contractors of America said they were having a hard time hiring craft workers. Another poll by an industry recruitment group showed that Texas is short more than 617,000 construction workers.

“With or without Harvey, the industry is facing a huge shortage problem,” Andy Adams, a representative of the Texas Construction Association, told members of the House Business and Industry Committee during a July meeting.

Some lawmakers hope the 2019 legislative session will give hurricane recovery enough attention to spur change. Rep. Eddie Rodriguez, a Democrat from Austin, said he plans to file an anti-retaliation bill next year, as he’s done without success in the last three sessions.

“I wouldn’t be filing legislation if I thought the state was doing enough,” he said. “Obviously, this is a big problem, and it has been a big problem for a while.”

Lasting Impact

Andy Chacon is one of more than a dozen workers who say they have not been paid by employers for construction work at the MainStay Suites in Ingleside after it was damaged by Hurricane Harvey. For two weeks of work, Chacon says, he is owed more than $2,400. (Smiley N. Pool/The Dallas Morning News)

An anti-retaliation law could have helped Andy Chacon last year.

After working two weeks at the MainStay Suites site, Chacon calculated he was owed more than $2,400. He quit Sept. 17 but returned days later to ask for his pay, according to his lawyer at the legal nonprofit Texas RioGrande Legal Aid.

Chacon had become the spokesman for about 15 workers who said they had not been paid. He invited news outlets to cover their story Sept. 22.

By the end of the day, Chacon was in the San Patricio County jail.

According to a police report filed by Martinez of United Machine Shop, he was driving away from the site when Chacon stepped into the roadway and threatened in Spanish to kill him, making a gun gesture with his fingers.

Chacon, who immigrated to the U.S. from Cuba just months before the hurricane, was arrested on charges of making a terroristic threat. But the San Patricio County attorney declined to pursue the case.

“He started off as a good employee and just like everyone else got pissed off,” Martinez said. “I don’t blame him. … I understand why he was mad. (But) he was mad at the wrong guy.”

Chacon denies making the threat and said the arrest was punishment for speaking against his bosses. He said he’s still living with the trauma of the arrest and has had a hard time finding another job because of his record, he said.

Guillermo Martinez Ayme has accepted that he will never receive his pay.

By the time an investigator opened his claim in late December, Martinez Ayme had moved to another apartment and changed his phone number, so the workforce commission’s requests for more information never reached him. In January, they closed his case against Martinez, saying it had insufficient information because investigators could not read his writing for the employer address field.

Martinez Ayme didn’t find out his claim was closed until he was interviewed in March.

“The state has to address this and take responsibility because otherwise this is going to keep happening to other people,” he said. “Otherwise, this company will keep ripping people off and nothing is going to change.”

Martinez Ayme moved to San Antonio in May to focus on his mixed martial arts career.

“Why keep fighting it?” he said. “I just decided to leave it alone.”

Back in Ingleside on a recent July afternoon, several trucks filled the parking lot of the MainStay Suites where Martinez Ayme toiled last fall. Nearly a year after the hurricane, workers are still rebuilding the hotel.

James Barragán / Reveal

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