Wage theft on Eat Street

Federal crackdown highlights need for enforcement 

Pancho Villa
Eat Street restaurants like Black Sheep and Pancho Villa were among 12 local restaurants found to owe workers back pay in a federal investigation. Photos by Andrew Hazzard

The U.S. Labor Department announced in September that 12 Eat Street restaurants owed employees more than $300,000 in back wages.  

The restaurants, including Marissa’s Supermarket and Bakery, Rainbow Chinese Restaurant and Bar, Pancho Villa, Eat Street Social, Black Sheep Pizza and Salsa a La Salsa, had committed wage theft — mostly by not properly paying workers for overtime,
a Labor Department spokesperson said.

The federal investigation illustrates the scope of a crime that takes a huge toll on workers yet frequently goes unreported. Academic studies estimate workers lose millions of dollars from wage theft each year in Minneapolis, according to Brian Walsh, an attorney who manages labor standards enforcement for the city’s department of civil rights. 

Additional resources for fighting wage theft are on the way. In August, the City Council passed an ordinance that will allow Walsh’s office to enforce violations by local businesses starting next year. The ordinance is essentially a municipal code version of the Minnesota Wage Theft Prevention Act that Gov. Tim Walz signed into effect in July, which creates more protections for workers and adds criminal penalties for employers who commit wage theft. 

Right now, enforcers in the city’s office of civil rights only have authority to compel compliance with Minneapolis’ ordinances on minimum wage and sick and safe time. In January 2020, they’ll be able to enforce all aspects of the state law.

“This is frankly a huge expansion of authority and we do not take it lightly,” Walsh said.

Wage theft chart

Eat Street violations

The Eat Street crackdown found cases of wage theft big and small along Nicollet Avenue in Southwest. All told, 12 restaurants owed $367,000 to employees. Some, like Salsa a La Salsa and Pancho Villa, owed money to workers at multiple locations. 

Marissa’s Supermarket and Bakery was the largest violator, with a reported $67,128 owed to 27 workers. Rainbow Chinese owed $42,756 to eight employees. Pancho Villa owed $37,523 to the 29 workers at their Nicollet Avenue location, plus $21,000 more to their employees in Monticello. 

Most restaurants did not respond to questions from the Southwest Journal. Rainbow Chinese owner Tammy Wong said she had no comment. 

Colleen Doran, who co-owns Black Sheep Pizza with her husband, Jordan Smith, said their violations came from employees working at multiple locations. Their three locations each have different tax identifications and have separate payrolls, Doran said, which meant they didn’t track if a worker logged more than 40 hours between multiple locations. A Department of Labor inspector went over their records and determined they owed 17 employees a total of $7,560 due to uncounted overtime over a three-year period.

“We paid each of the affected employees immediately as well as the corresponding fines, which also went directly to the staff,” Doran said in an email. 

The Labor Department’s Wage and Hour Division found the violations during an education and enforcement initiative aimed at the restaurant and grocery industry in the Midwest in 2018. 

Overtime violations are among the most common and costly forms of wage theft in Minneapolis, according to Walsh. If employees’ hours aren’t tracked properly and they aren’t paid the time-and-a-half they’re owed, workers can be out a lot of money.

“It can add up real quick,” he said. 

Black Sheep

More cops on the beat

Wage theft is any underpayment or non-payment of earnings. In Minneapolis, it is most common in the construction industry, Walsh said. He said low-wage, immigrant workers are the most vulnerable to wage theft.  

The nature of wage theft ranges from deliberate stealing by employers to poor payroll systems that employers don’t bother to update, Walsh said. Often, in a purely economic sense, it’s in employers’ interest to cut corners, he said. 

Most labor laws on the books date back to the Fair Labor Standards Act of 1938. The Minnesota Wage Theft Prevention Act and the overlapping ordinance approved by the City Council in 2019 are attempts to create a system that works for laborers in the modern economy, where many employees are subcontractors.

“Essentially, the rules had not caught up to evolutions in our economy,” Walsh said.

The Minnesota Department of Labor and Industry (DLI) estimates around 40,000 workers are not paid what they’ve earned each year.  

The new law requires employers establish a regular payday, keep better records of their employees’ hours and wages and provide workers with information about their wage, pay date, benefits and rights at the start of employment. It also gives the state labor department more resources to investigate payroll violations and establishes a new misdemeanor criminal statute to charge employers who hinder labor department investigations. 

The law gave the state labor department $3 million to establish its wage theft program. Over the next year the DLI is hiring and training seven wage theft investigators to enforce the law, according to DLI Commissioner Nancy Leppink.

The city ordinance essentially puts more cops on the beat in Minnesota’s largest city. 

“We know the problem is so widespread that there’s no way the state, even with additional resources, could enforce all the violations,” Walsh said.

Although the state law budgeted for more staff to crack down on wage theft, the city’s enforcement team is not expanding. The department has three full-time lawyers and one support staff member, Walsh said, and does not have plans to add more staff at this time.

In bigger cases, the city will likely look to bring in help from Attorney General Keith Ellison’s office for enforcement, which is allowed by the state law, Walsh said. 

Because wage theft generally targets low-income workers, cracking down on the practice can put more money in the pockets of people who need it most. 

“The policy intent really is to keep our local economy healthy by recognizing that workers are consumers, too,” Walsh said.