Though wage theft is a crime, few DAs file charges for it

It took two shifts to clean the five-story central Los Angeles office building where Edith Lopez worked as a janitor.

From morning to dusk she vacuumed, wiped down kitchens and took out trash, and her employer, Pacific Commercial Co., paid her like a regular employee. Then from 5 to 10 p.m. she did the same but Pacific classified her as an independent contractor and paid for those hours with personal checks that left out typical payroll deductions such as income tax or Social Security withholding, she said.

Over her eight years working for Pacific Commercial the company sometimes paid her late and cut her hours, she said, and she didn’t receive any time-and-a-half overtime premiums. Lopez, a single mother who emigrated from Durango, Mexico, fell behind on rent and worried about supporting her three daughters. A doctor warned the 52-year-old that stress was causing her blood pressure to spike.

In September, she got a break. She received $30,000 in restitution, the result of the successful criminal prosecution of her former boss, Moon Hyuk Hahn, by the Los Angeles District Attorney’s Office in partnership with the state’s Labor Commissioner, the California Department of Insurance and a janitorial industry watchdog group called the Maintenance Cooperation Trust Fund.

“It feels like retribution for the suffering that this company has put me through,” Lopez said. “This company has caused me to lose out on time with my family and made my family suffer.”

Rare criminal charges

Hahn, who owns Pacific Commercial, faced more than a dozen counts of grand theft of wages and other allegations. He pleaded guilty to a count of insurance fraud and wage theft and has agreed to pay $1.6 million in restitution.

He declined to comment to CalMatters but his attorney, Keith Kim, said the plea was a “safer route” than going to trial.

Most of California’s wage theft cases aren’t handled this way.

Wage theft has been a federal crime for decades but in California, where felony cases are punishable by up to three years in jail, prosecutors across the state rarely filed criminal charges based solely on wage theft.

Some prosecutors say that is beginning to change.

Since 2015, the state’s Labor Commissioner’s Office has investigated 16 labor violation cases that resulted in criminal charges, spokesperson Paola Laverde said in an email; 11 of those cases involved wage theft.

Few local prosecutors contacted across the state could tell CalMatters how many wage theft cases they’ve brought charges for since 2015.

By contrast, the Labor Commissioner’s office conducted investigations of worksites and issued 141 minimum wage violation citations and 102 overtime violation citations in the 2019-2020 fiscal year. Those wage theft citations were handled administratively or in civil court.

Also workers who think their wages were stolen usually file claims with the Labor Commissioner’s office, rather than reporting it to law enforcement. Last year California employees filed 19,000 unpaid wage claims for a total of $320 million, which also are usually handled administratively.

Prosecutors’ attention

As California continues to grapple with the scope of wage theft, prosecutors say criminal charges could become more common. Several prosecutors’ offices in recent years have announced units that will focus on labor violations such as wage theft.

“The goal here is to increase our prosecutorial attention to wage theft,” said George Gascón, LA’s district attorney who last year agreed to take referrals and investigate wage theft alongside the Labor Commissioner’s Office. “This (wage theft) is bad for the entire community.”

The initiatives coincide with an increase in what some call “progressive prosecutors,” who seek to refocus their offices’ attention on issues that disproportionately affect low-income and minority residents, such as labor violations and human trafficking. Studies show wage theft primarily affects the most vulnerable workers — those who make low wages, often people of color or immigrants.

These efforts often draw on law enforcement that already is targeting related forms of white-collar crime, such as workers compensation fraud or tax evasion — where victims are other businesses or the government, rather than workers.

“Wage theft affects far more individual people who are living on the margins and therefore is a greater impact on public safety than many of the categories of crime that DAs traditionally focus their resources on,” said Chesa Boudin, a former San Francisco district attorney who created a unit investigating workplace crimes in 2020.

Five years ago, the criminal investigation unit in the Labor Commissioner’s office forwarded three cases to prosecutors. So far this year, it has referred more than a dozen, Laverde said.

‘More scary’

Nationally there is a rise in criminal prosecutions of labor abuses, according to a report released last year by the left-leaning Economic Policy Institute. The study noted that since 2017 prosecutors in 15 states have brought new criminal cases against employers.

“My strong sense was that the employer community really responded differently to criminal versus civil cases,” said Terri Gerstein, the report’s author and a former labor bureau chief in New York’s Attorney General’s office. “It felt different when there was a criminal case. It was much more scary.”

Some labor experts question whether criminal prosecution is an effective tool for recovering money. After all, many workers who win civil wage judgments against their bosses still end up collecting nothing, and some businesses operating in the so-called underground economy don’t even have liquid assets, workers’ attorneys say.

When a business owner gets convicted, “if they’re behind bars, they’re definitely not paying their workers,” said Tia Koonse, legal and policy research manager at the UCLA Labor Center.

Others say the threat of jail time and the negative press associated with criminal charges are stronger deterrents than other labor enforcement methods.

The prospect of jail also can force a business owner to pay restitution, said Joel McComb, a deputy district attorney in San Mateo County.

Recently a Half Moon Bay hemp farmer paid $128,000 in restitution to 31 former employees who, authorities say, he had stopped paying in December 2020 and January 2021. Initially the farmer faced 33 felony counts of theft of labor, but he pleaded no contest to two counts and was sentenced to a year in jail, to serve concurrently with a two-year sentence in an unrelated case, McComb said.

Risks and benefits

In the Pacific Commercial case in Los Angeles, Lopez and 16 other workers received a total of $240,000 in restitution. The money came from $522,000 the California Department of Insurance seized from the company during the investigation. The state kept the rest for back taxes.

Hahn still owes about $1 million, to be split among the state and two insurance companies authorities say he defrauded, a spokesperson for Gascón’s office said.

In that investigation, Gascón said, his office focused on returning money to victims and the cash seizure created a “clear path” for repayment.

But a cash payout isn’t always possible in wage theft cases, he said, and prosecutors have to weigh the risks and benefits of criminal charges.

The threat of losing a business is a “substantial deterrent” to wage theft, he said.

“But we’re also cognizant of the fact that there are many people working in this company that depend on this work for their livelihood,” he said. “And then the evaluation is, we want to make sure that we are not creating a situation where … you’re gonna have a whole bunch of unemployed people as well. So it’s really striking a balance.”

The human toll

As a Santa Clara County District Attorney’s investigator focused on insurance fraud, Michael Whittington said he often saw employers paying employees off the books or shorting their wages.

But few workers were willing to come forward to testify as victims, he said, so his office was charging wage theft “intermittently, when we could identify it.”

In the wake of nationwide protests for racial equity in the criminal justice system, the Santa Clara County District Attorney’s office announced in 2020 it was forming a Worker Exploitation Task Force, bringing together state and federal labor agencies to refer wage theft cases to the prosecutor’s office.

“We truly turned our focus to finding what we called the human toll of fraud investigations, and focusing on wage theft first,” said Whittington, captain of the office’s Bureau of Investigation. He said the partnership has helped encourage workers to come forward and cooperate with law enforcement; now he hears from workers who want to report cases directly to him.

The right thing

Alongside the task force launch, the DA’s office announced charges against Robert Foster, then a San Jose police officer, and his wife, who they accused of running an off-the-books private security business. Prosecutors said the business engaged in insurance fraud, tax evasion and money laundering and that Foster failed to pay workers overtime, under-reported worker injuries, and threatened employees.

He pleaded no contest in January and this March was sentenced to three years in jail.

His attorney, Ronald Richards, said Foster has paid full restitution, including money owed to workers and $1.13 million to the state and to insurance companies.

Richards said his client got caught up in his bookkeeper’s business decisions and “wanted to rectify the situation and do the right thing.” The case hinged on whether the workers could be classified as contractors rather than employees, he said.

When to charge the crime

Richards opined that Foster should have had a chance to pay a penalty and settle the matter outside of criminal court.

“He wasn’t stealing any wages,” Richards said. “A lot of times people pay after an audit. Why are you going to discourage people from paying? If you charge them criminally they’re just going to pay the criminal lawyer.”

Similarly, in San Diego County, District Attorney Summer Stephan last year launched a Workplace Justice Unit dedicated to investigating wage and hour violations and labor trafficking.

Before, the office had charged wage theft when it was secondary to insurance fraud or tax evasion cases.

So far, the unit has secured a guilty plea in one wage theft case, a spokesperson said.

Several prosecutors said there aren’t general rules about when to file criminal charges in wage theft cases; they decide on a case-by-case basis.

Criminal cases come with a higher burden of proof than civil ones; prosecutors must prove an employer is guilty beyond a “reasonable doubt.” And to convict an employer of wage theft under California law, a prosecutor also must prove that nonpayment was intentional, not merely an oversight.

More victims

Last year California lawmakers gave law enforcement additional flexibility when charging wage theft as a felony.

While the state’s felony grand theft statute already includes stolen wages of at least $950 from a single worker in a one-year period, the new statute allows charges if multiple workers lose at least $2,350 in unpaid wages combined.

The new law “allows us to aggregate the losses of multiple employees of the same company,” said Tanya Sierra, spokesperson for the San Diego County district attorney. “This would allow us to prosecute cases where an employer steals a little bit from many employees rather than a large sum from just one employee.”

Several DA offices and the California District Attorneys Association said they know of no cases filed under the new law, which went into effect in January.

Boudin said his office in San Francisco was conducting multiple investigations under the new statute prior to his recall by voters last spring.

A spokesperson for Gascón’s office in Los Angeles said officials expect to file at least one case under the new statute by the end of the year.