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Investigators, workers cite labor abuses in warehouse empire

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As a warehouse worker in the Inland Empire region of Southern California, the nation’s biggest distribution hub for consumer goods, Jorge Soto handles shipments for retail giant Walmart every day.

But Soto, who works for a subcontractor, claims that, along with routine jobs such as unloading trucks, he also has been ordered to perform an illegal task: falsifying employees’ time sheets to cheat them out of getting the minimum wage.

Mexican-born Soto, 47, said in a sworn court statement that his supervisors forced him, when he served as the lead member of his crew, to severely understate workers’ hours. He said the purpose was to cover up the widespread practice of paying well below the legal minimum, which is $8 an hour in California.

As Soto explained in an interview, “they wanted to wash their hands of it through me,” adding that workers sometimes received as little as $3 or $4 an hour.

A suit filed in federal court in Los Angeles on behalf of Soto and dozens of other warehouse workers charges three companies that handle Walmart goods with fraudulent pay practices. The case, along with recent investigations by California labor officials that have led to proposed fines of close to $1.4 million, depict what critics say is the underside of the vast Inland Empire warehouse business.

An economic juggernaut in the arid flatlands east of Los Angeles that employs about 100,000 people, the warehouses are a staging point for Apple computers, Gerber baby clothes, Polo apparel and other brand-name imports. They handle goods from Asia that come through the ports of Los Angeles and Long Beach, to be distributed around the U.S.

According to court documents and interviews with workers:

  • Crew leaders such as Soto were under orders at some warehouses to force workers to sign blank time sheets, a tactic that made it easier to cheat employees out of their rightful pay.
  • Workers often were paid only for the time they spent loading and unloading trucks – not for the time they put in sweeping warehouses, labeling and restacking boxes or waiting to find out if they would be assigned work.
  • High heat in the warehouses and constant pressure for speed created safety problems. These and other issues triggered an investigation that led the California Division of Occupational Safety and Health, or Cal/OSHA, in January to accuse four warehouses of more than 60 workplace safety violations and to seek $256,445 in penalties.
  • Many workers, classified as temporaries despite years of service, said they were threatened with being blackballed and never being hired again if they raised questions about their pay or took part in protest or unionizing efforts. Labor leaders, who announced plans in 2007 to recruit the warehouse employees, say that the intimidation and perpetual job insecurity are key reasons why their “Warehouse Workers United” campaign has failed to unionize any workers.
  • Workers also were subjected to other indignities, such as being forced to pay $1 per week to rent a shirt with a company logo, and being required to show up every day, only to be sent home some days for lack of work.

The Inland Empire warehouses help bring consumers low-cost goods, and they provide lots of sought-after jobs for unskilled workers, most of them Latino immigrants. Yet the relentless pressure to hold down costs that runs through the industry also means low wages and few or no benefits for warehouse employees.

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Warehouse workers in the Inland Empire — as well as in the next two biggest distribution hubs, the Chicago area and central New Jersey — are cogs in a system that stocks the shelves of stores such as Walmart, Target and Foot Locker. Even so, the big retailers are separated from the workers, and shielded from legal exposure, by layers of intermediary companies.

Audio of Soto talking about falsifying employees’ time sheets

In two federal suits in Chicago, for instance, scores of warehouse workers have charged three staffing companies with illegally failing to pay minimum wages. But the cases don’t include any retailers.

Likewise, the Inland Empire warehouse workers’ suit doesn’t name Walmart as a defendant, even though the case is based on practices at three warehouses run exclusively for the retailer in the Inland Empire city of Mira Loma. Walmart failed to respond to calls and e-mails seeking comment.

Instead, the litigation is against the operator of the three warehouses, Schneider National Inc., a company with annual revenue of more than $3 billion. The suit also names two staffing companies that have employed many of the workers at the Schneider warehouses.

One of those staffing firms is Soto’s employer, Impact Logistics, a national company that loads and unloads merchandise bound for retailers. The other staffing firm named in the case is Premier Warehousing Services.

The suit, filed in October, claims that the companies used an opaque piece rate pay system that based compensation on the number and type of semi-truck containers emptied or loaded. The system, according to the suit, left workers in the dark about what they were owed, and often kept their pay below the legal minimum.

Still in its early stages, the suit already has won the workers a court order requiring the companies to provide properly itemized wage statements, and the employees have since been switched back to an hourly pay system.

However, the defendant companies, in court filings and in response to questions from FairWarning, continue to dispute the suit’s contentions. Schneider said it isn’t responsible for the wages of workers involved in the suit. The company, more specifically, denied a claim that it replaced employees earning hourly wages of $12 to $17 by bringing in contractors that often paid their workers less than the minimum wage.

Schneider also disputed sworn statements by workers that, after the suit was filed, the company called a mandatory meeting where a supervisor threatened to “destroy” and “throw away” any employee supporting the litigation “like a crumpled piece of paper.”

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Premier said it properly compensated its employees but declined to answer questions. Following the court order, it stopped serving as a staffing company for the three warehouses, and Schneider now employs the former Premier workers directly.

Similarly, Impact Logistics said it “properly and adequately paid all employees identified” in the litigation but also indicated that it continues to investigate charges raised by employees. At the same time, Impact added that “erroneous payment of any wage was due to inadvertence, mistake or negligence” and was “not willful or intentional.”

The company, in an emailed statement, further said that it recently switched from piece rate compensation back to hourly pay “to have no appearance of impropriety.”

But during his seven years with Impact, both as an ordinary warehouse worker and, later on, as a lead on his crew, Armando Esquivel said he witnessed abuses first-hand.

In a sworn statement, Esquivel said that when he was underpaid by Impact and protested to his boss, “He always promised to look into it but my pay was never corrected, not even once. When I would repeat my complaints, he would tell me, ‘I have a pile of job applications on my desk more than a foot high, if you don’t like this job, you can go home.’”

As a result of being shortchanged, Esquivel said, he sometimes struggled to pay for basic necessities for his wife and two children.

As a lead, Esquivel said he “repeatedly” was directed “to record work time that was far less, sometimes less than half, of the time we actually spent working.”

Daniel Lopez, a loader who had worked for Premier, said in a court declaration that his manager told him two years ago he would earn more when the company switched to a piece rate system. But he and other workers say that, instead, the pay got lower.

What’s more, Lopez said, when it came time to fill out time sheets, “We were directed simply to sign our names on blank forms maintained by the supervisors. We did not write in the time we arrived at work or the time we finished.”

Some support for the workers’ complaints has come from an investigation by California labor authorities. October inspections at Schneider warehouses in Riverside County, which together with San Bernardino County forms the Inland Empire, “confirmed stories of abuses in the warehousing industry that must stop,” Julie A. Su, the California labor commissioner, said in a news release.

Based on the inspections, state authorities proposed fines against Impact and Premier of more than $1.1 million. They accused both companies of failing to provide properly itemized wage statements, leaving workers unaware of what they were being paid for their piece work.

“Employers cannot simply make up a piece rate and change it at their whim,” Su warned.

A separate state investigation at four other warehouses, carried out by workplace safety regulators with Cal/OSHA, backed up charges by the Warehouse Workers United campaign of hazardous on-the-job conditions. The probe focused on four warehouses in Chino in San Bernardino County.

Among other problems, Cal/OSHA cited the operator of the warehouses and its staffing company for allegedly failing to provide fall protection for “pickers” working at elevated heights, running machinery without safety guards and leaving boxes “precariously stacked,” where they could tumble down on employees below.

In addition, investigators cited a failure to deal with stifling 90-degree indoor temperatures, reflecting the heat problems that repeatedly have come up at warehouses around the country. Cal/OSHA investigators pointed to the case of a 49-year-old who became dizzy and nauseated while performing his work.

That worker, Domingo Blancas, said in an interview that there was “pressure to move fast” at his warehouse. One day last summer, when he became overwhelmed by the heat, he asked one of his bosses for a ride to a hospital, but she refused.

At that point, Blancas said, his son, a worker at a nearby warehouse, took him to Pomona Valley Hospital, where records show that he was admitted for dehydration and heat exposure.

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He recovered, but still has bitter memories of the incident. “These are people who don’t care about the welfare of their workers,” Blancas said. “What they did is just wrong.”

Tri-State Staffing, Blancas’ employer and one of the two companies cited by Cal/OSHA, indicated it is appealing the charges but declined to respond to repeated requests for comment.

NFI, the New Jersey-based firm whose National Distribution Centers unit is the other company charged, said in a statement that it is committed “to providing a safe working environment that meets or exceeds all state and federal workplace safety standards.”

Yet workers at NFI-run operations such as Jonathan Lopez, 23, challenge that portrayal. Lopez, who is taking premed classes at a community college, is unusual among the workers in that he speaks fluent English.

He said Tri-State asked him to sign a paper indicating that he received safety training – even though, at that point, he hadn’t. (He said he received training only weeks later, after state workplace safety officials began investigating the warehouse.) Lopez complied, however, rather than risk losing his job. For the same reason, Lopez said, his co-workers also signed.

“No one else was able to read it, but I told them what it said,” he said.

Looking to tap into discontent among warehouse workers, Change to Win, a national coalition of unions with about five million members, in 2007 launched a recruiting effort in the Inland Empire. It founded Warehouse Workers United, an organization advocating for higher wages, ending the practice of temporary employment and securing affordable health care coverage.

Led by activist unions such as the Service Employees International Union, Change to Win broke away from the AFL-CIO labor federation seven years ago to more aggressively recruit members. After more than four years, however, its campaign among the Inland Empire warehouse workers has failed to create any new union locals, or even bring about a single union representation election.

Union officials say warehouse employers have shifted from permanent workers to temporary employees largely to make people so fearful of losing their jobs that they won’t risk being identified as union activists. The industry, however, counters that it uses temps simply because the flexibility helps employers deal with busy and slow periods without resorting to layoffs.

Meanwhile, workers such as Soto, the Impact employee who claimed he was ordered to falsify other workers’ timesheets, say they still support the labor-organizing effort because they need a union to be treated fairly.

“They need to raise the pay, improve the conditions,” Soto said. “I’m going to stay there as long as I need to until that happens.”

FairWarning is a Los Angeles-based nonprofit investigative news organization focused on public health, safety and environmental issues.

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Lilly Fowler/FairWarning

Outside Schneider warehouses in Mira Loma, Calif.

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