Chicago’s lax enforcement of minimum wage hike leaves workers in the lurch

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Sabrina Jackson looked forward to a raise last summer at her job as a crossing guard near her children’s Englewood school.

Chicago’s minimum wage was slated to increase from $10 to $10.50 per hour under a city ordinance, providing a small but welcome boost to Jackson’s paycheck.

But when the new school year rolled around, Jackson discovered, “I didn’t get a raise.” Chicago Public Schools refused to pay the higher wage for the 1,300 crossing guards, telling nonprofit groups that run the program that the district had budget problems and claiming the workers were exempt. The district never explained why it considered the workers an exception.

The underpayment of Safe Passage workers is just one example of how the city’s minimum wage ordinance has fallen short since it took effect in July 2015. A Reporter analysis estimates that thousands of workers have been left behind because of exceptions in the law, which will raise the city’s minimum hourly wage to $13 by 2019.

Meanwhile, the city department responsible for enforcement has investigated just a quarter of 454 wage complaints, recovered lost pay for only a few dozen people and has yet to fine a single company for violating the ordinance. Following repeated questioning by The Chicago Reporter about the department’s lax enforcement, city officials now say they will levy fines. Also following the Reporter’s inquiries, CPS reversed course and said it would cover the wage increase, as well as back pay, to its crossing guards. “CPS is committed to meeting the city’s minimum wage ordinance, and we have begun the process of guaranteeing that all Safe Passage workers will be properly compensated this year,” said district spokesman Michael Passman in a statement in late January.

Other cities that have passed higher minimum wage laws, like San Francisco and Seattle, have had much greater success with more rigorous enforcement.

Ald. Carlos Ramirez-Rosa (35^th Ward) agreed that Chicago needs to consider ramping up its oversight of the law. He recalled intervening last year to resolve a wage dispute in his ward between the owner of an Albany Park warehouse and a worker, who was undocumented.

“I’m happy to use that leverage,” Ramirez-Rosa said. “But ultimately we need to make sure there are better enforcement opportunities. It’s extremely important that the City of Chicago put teeth behind its existing ordinances. And if what we’re doing is inadequate, we need to get serious about having the right resources and enforcement mechanisms in place.”

For Jackson, who continues to look for higher-paying work and depends on food stamps and a public housing subsidy to support her four children, even a small pay increase is significant.

“It will help out a lot. That 50 cents does add up,” she said. “Maybe it’ll be an extra bill that you don’t have to worry about, extra things I can now get for my kids.”

How Chicago raised pay—for some workers

In the months leading up to his re-election campaign in 2014, Mayor Rahm Emanuel formed a task force to look at raising the city’s minimum wage. Community groups, including those involved in the national Fight for $15 fast food workers’ wage campaign, lobbied for $15 an hour. Business groups pushed back, warning that small businesses would close down or cut workers.

While cities such as Seattle, San Francisco and Los Angeles adopted a $15 minimum, Chicago City Council approved a $13 minimum in December 2014. The task force acknowledged that $13 fell far short of a living wage, given the city’s high housing costs. (The Living Wage Calculator, a project developed by the Massachusetts Institute of Technology, sets the amount at $24.91 per hour for a single adult with one child in Cook County.)

Still, Emanuel touted the increase as a way to lift working families out of poverty, and supporters viewed it as just a first step. “It’s a big part of the puzzle for people to be upwardly mobile, to start getting paid fairly and have a better way to make ends meet,” said John Bouman, president of the Chicago-based Sargent Shriver National Center on Poverty Law, who co-chaired the task force. (Since Chicago’s ordinance, Cook County passed a $13 minimum wage in 2016. State legislators are considering a proposal to raise the Illinois minimum to $11 an hour.)

City officials estimate that more than 270,000 low-wage workers have benefited from the increase. Yet the Reporter’s analysis found that more than 20,000 workers are exempt, in part because the ordinance incorporated a number of exceptions in state law. The list of exemptions includes certain younger workers, such as those in the city’s One Summer Chicago program, other teens under 18, and student workers at public colleges and universities; disabled workers; workers in transitional employment programs, such as those for the homeless and former-inmates; new employees in their first 90 days on the job; workers for certain small businesses and other groups.

Bouman called that a “tactical decision” to avoid a bigger battle over the ordinance itself. Neither the city nor the task force came up with its own estimates of exempt workers. “The idea was it was going to be hard enough to get a substantial increase in the minimum wage, that it would fracture and get more and more complicated the more of the exemptions and sub-provisions were included in the debate,” Bouman said.

Yet advocates for several groups called on the city to use the ordinance as a chance to level the playing field for all workers.

The exemptions make it “more difficult for people with disabilities to contribute to the workforce and live independently,” said Gary Arnold, spokesman for Access Living, a disability rights group.

Other groups, including those that help place youth in the One Summer Chicago program, were surprised to learn of the exemptions after the ordinance took effect.

“They should be getting paid the minimum, especially those youth who were placed in businesses where there are other employees getting the minimum wage,” said Juliet de Jesus Alejandre, youth program director for the Logan Square Neighborhood Association. “It was a disproportionate number of young people of color, who applied to many different places and this opportunity was the only one that called them back.”

Alejandre sees this as an issue of equity, as white youth from higher-income families tend to have more connections and job opportunities in their neighborhoods. In fact, she recalled that one of the few white participants in the program last summer ultimately turned down a slot after her mother helped her find a higher-paying internship elsewhere.

Once the ordinance passed, the mayor formed a Working Families Task Force to analyze other issues, including sick leave policies and worker scheduling practices. That group heard from fast food workers whose hours were cut as their hourly pay rose. They were workers like Aiesha Meadows McLaurin, who works at three Burger King restaurants to make ends meet. “They cut back on a lot of our workers’ hours,” she said. “Now I’m running between three jobs and still relying on public assistance.”

The city’s 2016 ordinance mandating paid sick leave for workers was recommended by the Working Families group. But the task force decided to table recommendations to improve scheduling, citing the need for more study.

“You can get a huge increase in your hourly rate, but what happens if the hours you work get cut?” said Robert Bruno, director of the labor education program at the University of Illinois at Urbana-Champaign and a task force member. “The honest answer is nobody knows what the impact of the higher minimum wage has been. Nobody has done a good, statistically comprehensive assessment.”

The university’s Project for Middle Class Renewal will analyze the impact of the higher wage on working hours, scheduling and earnings as part of a larger study on low-wage work.

Chicago enforcement spotty

As more cities enact measures to raise the local minimum wage or guarantee sick pay, some have created specialized departments to police the new labor laws. Chicago has not. Instead, the city dumped oversight of three labor ordinances — minimum wage, paid sick leave and a 2014 measure that guards against wage theft — onto the Department of Business Affairs and Consumer Protection without hiring additional employees.

“The scope of this department has changed and expanded, and yet the resourcing and supports and restructuring of that agency that will be necessary has not happened,” said Adam Kader, who directs the worker center at the nonprofit Arise Chicago. Wary of the city department’s capacity, labor activists like Kader often encourage aggrieved workers to consider negotiating with employers or taking other action to resolve pay issues, or even to file lawsuits in particularly egregious cases.

The department declined to provide copies of the minimum wage complaints or files from its investigations, or to allow the Reporter to inspect the documents, which would provide more details and identify the businesses involved. The department claimed this would be “unduly burdensome” and that all files are kept on paper, scattered across different departments.

But data obtained by the Reporter through a Freedom of Information Act request show that the department received 454 complaints from July 2015 (when the ordinance took effect) to December 2016.  So far, only 112 complaints, or about 1 in 4, have led to investigations, mostly because workers don’t submit the required affidavits.

Source: City of Chicago Department of Business Affairs and Consumer Protection. Data show status of minimum wage ordinance violations complaints filed between July 2015 and December 7, 2016.

Yet the department’s procedures appear to discourage workers from doing so. The department sends employers a copy of the affidavit, which activists say creates a fear of retaliation among workers (especially undocumented immigrants). Other cities, like San Francisco and Seattle, keep worker affidavits confidential and allow employees to give information over the phone without having to fill out the paperwork.

Department spokesperson Angel Hawthorne said the city doesn’t hesitate to take action. “When we receive complaints we fully investigate them and take action when necessary,” she said in a statement. “We have recovered tens of thousands of dollars in wages owed to workers and stand ready to shut down any business found to be violating wage theft laws.”

City officials told the Reporter that the department recovered wages for 51 workers. The total amount recovered: $82,000.

However, the city has not issued a single fine to or revoked the license of any of the companies found in violation of the ordinance, which states that businesses “shall be” subject to fines of $500 to $1,000 per day.

Hawthorne said the department’s goal during the initial 18 months was to “educate Chicago businesses and ensure proper compensation for workers.”

“Going forward the department will take a stronger approach and issue Administrative Notices of Violations to employers who fail to follow the law,” Hawthorne said. “This may result in fines imposed by the administrative court.”

What other cities do

San Francisco, Seattle, New York City and Washington, D.C., are among those cities that created separate departments to enforce local labor laws. Their departments also conduct community outreach to educate workers and business owners about the rules.

There are major differences in approach to enforcement in Chicago when compared to cities like Seattle and San Francisco. Investigators there automatically assume that reports from individual workers are the result of a systemic problem, so investigations are company-wide. The premise is that if a company is cheating one worker, co-workers are probably being cheated too.

“In most cases, it’s likely to be that the violation is across the board,” said Dylan Orr, who directs Seattle’s Office of Labor Standards.

Seattle is one-fourth the size of Chicago but has an independent, 12-person office that enforces nearly a half-dozen local labor standards. Seattle’s civil rights department initially handled the work, until city officials and community groups agreed that labor issues demanded a specialized workforce. The department is doubling in size this year to about 24.

“People recognized that there was a lot of work out there for us to do,” Orr said. “We were drowning in investigations. Cases were taking a lot longer to conclude than we wanted. And we wanted to be as effective on the enforcement piece as possible.”

Investigations by the Seattle office include a review of the employer’s complete payroll, not just records related to one worker’s case as in Chicago. That protects the confidentiality of the worker who filed the complaint and reduces fear of retaliation. Investigators have subpoena power and can ask to see payroll records and interview workers on site.

Seattle has had significant results since taking steps to implement a $15 minimum wage in April 2015. As of December 2016, Seattle’s labor department had opened 132 investigations; 37 led to settlements and payment of back wages. Because multiple workers were affected in almost every case, the department recouped nearly $400,000 for 683 workers. That’s more than 13 times as many workers helped in Chicago.

The office imposes penalties on egregious violators who refuse to settle up quickly, works in partnership with other city departments to pull business licenses and even brings city attorneys on board to file suit in court on behalf of workers.

But the vast majority of employers – about 90 percent – pay up before the process gets to that extreme. “We’ve only sent a handful to businesses through the license revocation process,” Orr says. “So far the threat has been enough.”