County attorneys take aim at criminal wage theft

Ramsey County Attorney John Choi’s office recently hired Jacob Shawback (L) to investigate prevailing-wage and wage-theft allegations. Shawback previously worked at the Fair Contracting Foundation of Minnesota, which monitors labor standards on publicly funded construction projects.

Local prosecutors intend to shine a search light on the shadowy corners of the economy where wage theft and labor trafficking have found a home, especially the non-union construction industry.

Ramsey County Attorney John Choi recently hired a full-time investigator to begin delivering wage-theft cases for potential prosecution under the state’s theft-by-swindle statute. Choi, who co-chaired a Labor Advisory Council with Hennepin County Attorney Mike Freeman, said the hiring is a step toward moving more wage-theft cases into the criminal justice system.

The most common types of wage theft occur when employers misclassify workers as independent contractors, fail to pay minimum wage or don’t follow overtime laws. The state’s labor and commerce departments investigate those violations, but the investigations often result in civil penalties – a warning, a fine or being temporarily barred from bidding on public projects.

“In a way, it can all be just looked at as a cost of doing business,” Choi said.

“Both Mike Freeman and I have this really strong belief that some of this conduct should be looked at from a criminal prosecution perspective,” Choi added. “Oftentimes, it’s not until people are subject to potential jail or prison time – or that negative publicity of being prosecuted – that you get people’s attention.”

‘Rampant’ wage theft

The advisory council led by Choi and Freeman pulled together prosecutors, regulators and labor advocates to work collaboratively on best practices for holding wage thieves accountable in the criminal justice system.

Earlier this year, the council approved a report that found “rampant wage theft” in the non-union construction industry in Hennepin and Ramsey counties, noting that it comes at a significant cost to local communities.

The report estimated that 4,872 construction workers in the two counties are victims of payroll fraud, that employers steal over $3 million in wages each year and that wage theft diverts over $11 million from Social Security and Medicare funds.

For unions and labor advocacy groups like CTUL, the report’s findings validated the complaints they have heard from people working in the non-union construction industry, where layers of subcontractors and labor brokers too often conceal illegal dealings.

“Wage theft cannot be tolerated in an industry that is so essential to our city’s infrastructure,” CTUL Co-Director Merle Payne said. “Not only does wage theft hurt workers and their families, it also puts a strain on taxpayers when developers off-load the cost of labor and insurance onto the public.”

Raising the profile

The Labor Advisory Council also worked to create a “handoff process,” so that civil investigators could deliver relevant information to agencies pursuing criminal prosecution without hindering either process. The council also reached out to both county sheriffs to get buy-in from law enforcement.

“We know there’s a lot more we can do in the criminal justice system if we get the right kind of investigation done,” Freeman said.

The Hennepin County Attorney’s Office demonstrated as much with its high-profile prosecution of Ricardo Batres. The notorious wage broker pleaded guilty in November 2019 to felony charges of labor trafficking and insurance fraud, and received a nine-month jail sentence.

But even as they celebrated the Batres case, labor advocates warned that his crimes were just the tip of the iceberg when it comes to wage theft in the Twin Cities. Choi said the Batres case was a turning point in his office’s decision to get proactive about criminal prosecution.

“I just realized, we’re sitting here waiting because we’re usually the recipient of cases,” Choi said. “But sometimes to get something done, you just have to go and do it yourself. So let’s go out and hire somebody to be our investigator.”

Choi’s office gained funding from the county board to replace a retiring, part-time employee who investigated prevailing-wage violations with a new, full-time investigator to help deliver cases related to prevailing wage and wage theft.

The new investigator, Jacob Shawback, previously worked for the Fair Contracting Foundation of Minnesota, which monitors labor standards on public construction projects across the state. “You’ve got to love working on behalf of working people, and Jacob has the background of working with labor unions around this issue,” Choi said.

The county attorney said he hopes the increased public attention on wage theft as a crime will have a deterrent effect and raise awareness among other prosecutors in the state. Choi compared it to his office’s focus on sex trafficking a decade ago, which drew nationwide attention.

“I remember when I first started talking about it, people would ask if it’s really happening here,” Choi said. “A lot of people weren’t aware of it. But we gained a greater awareness, and that greater awareness came, in part, because we started having cases.

“Our labor partners are telling us they know for a fact these violations are happening. It’s not a clerical mistake; people are actually stealing. And I think this is one of those areas that needs improvement to make sure these cases get the attention of the justice system.”

Learn more

Choi and others involved in the Labor Advisory Council’s work will offer a presentation at the May 11 St. Paul Regional Labor Federation (RLF) delegate meeting, beginning at 6 p.m.

“Despite the strongest wage theft protection law in the country, we know workers in Minnesota continue to experience wage theft,” RLF President Kera Peterson said. “I’m glad for the opportunity to serve on the Labor Advisory Council, and I’m thankful that County Attorney Choi and the Ramsey County Attorney’s Office are working to enforce our existing wage theft law.”