The vulnerable and exploitable immigrant workforce and the need for strengthening worker protective legislation.

• Author: Foo, Lora Jo
• Position: Symposium: The Informal Economy

Lora Jo Foo examines the underground economy in "sweatshop" industries, particularly garment-making. She argues for stronger labor laws and stiffer penalties so that the profitability of violating the law disappears. She also advocates the creation of private rights of action to augment state enforcement of federal minimum wage and maximum hour laws.

1. INTRODUCTION

   On October 26, 1993, California Governor Pete Wilson issued an Executive Order creating a Joint Enforcement Strike Force to target the underground economy.(1) State labor agencies had just concluded an eighteen-month survey of 13,000 California businesses suspected of engaging in underground economic activities, such as paying employees cash "under the table." The survey revealed that thirteen percent of the employers failed to report and pay employment taxes as required by law. The labor agencies issued more than 3200 citations and assessments, amounting to $9.5 million, for labor code violations and failure to carry workers' compensation insurance.(2) As a result of these violations, the state was losing approximately three billion dollars each year in income taxes alone,(3) and millions more in unemployment and disability taxes.

   California's new found interest in clamping down on the underground economy is not surprising. The state has been unable to balance its budget for four years running. This year's deficit stands at two billion dollars.(4) Meanwhile, the underground economy, which supplants an estimated sixty billion dollars in legal business transactions in California, is depriving the state of much-needed tax revenues by evading sales taxes, payroll taxes, and fees.(5) Businesses in the underground economy, where transactions are conducted in cash, are largely outside the reach of state licensing and regulatory agencies.(6)

   In reality, underground economic activities consist of more than under-the-table cash transactions. Hundreds of thousands of California workers, primarily immigrants, who toil in "sweatshops" in the garment and restaurant industries, have been cheated out of billions of dollars in wages owed to them under federal minimum wage and maximum hour laws.(7) The state coffers lose much more than the estimated three billion dollars in uncollected income taxes, since lower wages also translate into less tax revenue.(8) Although these sweatshop businesses operate in the open, they violate labor laws with impunity. Accordingly, included in the definition of the underground economy must be those "sweatshops" that operate with the official sanction of state permits, licenses, and registrations, but that nevertheless chronically violate labor laws.(9)

   What "strike force" will go to bat for the workers who are trapped in these "sweatshops," the open sores of the underground economy? The Governor's Strike Force on the underground economy focuses only on assessing fines and retrieving revenues from employers for the state's coffers. The Strike Force has not concerned itself with assuring that minimum wages and overtime are paid to exploited workers. A concerted effort to recover minimum wages and overtime pay would require a different kind of commitment by the state. To carry out the commitment, there must be both: (1) a marked increase in staffing levels for enforcement agencies at a time when California has not pulled itself out of its current economic slump, and (2) the political will to pass legislative reforms that will directly impact the profits of such key industries as garment-making, tourism, and agriculture. When the state fails to stem widespread labor law violations, illegal businesses compete with legitimate ones and drive down wages generally, leading to the further expansion of the underground economy. Thus, a vicious cycle is created.

   This Essay argues that states should strengthen labor laws and stiffen penalties to eliminate the profitability of violating labor laws. More importantly, this Essay argues that private plaintiffs should have a greater role in enforcing stricter labor laws. It is time for the state and federal labor agencies to concede that they are overwhelmed by the daunting task of controlling the underground economy. Without the assistance of private plaintiffs, such as the exploited employees themselves, labor unions, and other workers' advocates, governments will lose the battle against the underground economy. Part II begins by describing how sweatshops serve as a blatant example of the dangers of the informal economy, exploiting vulnerable immigrant workers right underneath the eyes of law enforcement agencies. Part Ill explores the need for tougher labor laws to clean up the sweatshops, and suggests model legislative reforms aimed at closing loopholes in the law, assessing stiffer penalties, and awarding larger damages. Part IV reviews the problem of dwindling inspection staffs of labor agencies, and argues for statutory provisions permitting private rights of action to augment governmental enforcement of labor laws.

2. SWEATSHOPS: THE OPEN SORES OF THE UNDERGROUND ECONOMY

   The working definition of a "sweatshop" is a business that regularly violates both wage or child labor laws and safety or health regulations.(10) The terms "chronic labor law violators" or "multiple labor law violators" have been used synonymously with the term "sweatshops."(11) In 1988, after a nationwide survey by more than one hundred state and federal officials, the United States General Accounting Office (GAO) identified the garment, restaurant, and meat-processing industries as those most frequently considered "sweatshop" industries.(12) The surveyed officials believed that these three industries had the most widespread problems, committing multiple violations of labor laws and safety regulations.(13) The GAO officials also believed that in the past ten years, "the severity of violations in the restaurant, garment and meat-processing industries has either remained the same or become more severe."(14)

   Among the factors believed to be responsible for the existence of sweatshops, the GAO report points to the following as major ones: the presence of a vulnerable and exploitable immigrant workforce, the labor intensiveness and low profit margins of these industries, and the rapid growth of subcontracting, particularly in garment-making and electronics.(15) Certain enforcement-related factors, such as insufficient inspection staff, inadequate penalties for violations, weak labor laws, and limited coordination among enforcement agencies were cited as reasons for the continuing existence of sweatshops.(16)

   In the six years following the GAO report, all of these conditions have persisted. Furthermore, as will be discussed in detail below, several additional factors have caused the number and severity of labor law violations in the 1990's to increase.

   1. The Exploitable Labor Supply of Immigrants

      The wheels of the labor-intensive garment, electronics, agriculture, and restaurant industries turn because of the ready supply of immigrant workers concentrated in urban areas. These labor-intensive industries generally have low profit margins and thus offer generally low wages to their employees. Immigrants, both legal and illegal, constitute a significant percentage of the workforce in the nondurable manufacturing, retail trade, and personal services industries.(17) Because immigrants often have limited English-speaking abilities, language barriers and cultural obstacles limit their work options. Thus, they are more willing than others to work in low-skilled, low-paid entry level jobs. Moreover, employers in these industries typically prefer immigrant workers, because their vulnerability keeps them silent about the abuses they endure in sweatshops. Undocumented workers are especially vulnerable because of employers' express or implied threats to report them to the INS if they complain.

      The vulnerability of undocumented workers became especially clear after the passage of the Immigration Reform and Control Act of 1986 (IRCA).(18) Since IRCA went into effect, a whole sub-class of workers ripe for exploitation has developed. IRCA prohibits the employment of undocumented workers and imposes civil and criminal penalties for violations of its provisions.(19) According to the federal government's own studies, however, employer sanctions have not worked. The Commission on Agricultural Workers, a federal panel created by Congress to study the impact of immigration law, concluded that instead of the anticipated effect of stopping the flow of undocumented workers from Third World countries, IRCA has invited a booming market in false documentation to accommodate those workers.(20) Many employers readily hire immigrants with false documentation, knowing that these workers will not risk losing a paycheck to report abuses to labor agencies. Employers are shielded from legal penalties merely by claiming that they believed in good faith that the "green card" appeared authentic.(21) The immigrant worker has no protection. He or she is forced to accept slavery-like conditions under the constant threat of deportation.

      In California, for example, private plaintiffs have brought hundreds of cases against restaurants, vineyards, poultry and cheese producers, farmers, and dairy ranchers for abusing an undocumented workforce.(22) In a four-month investigation, the San Francisco Examiner found that "immigrants in the Bay Area are beaten and abused because of their race and intimidated because of their often tenuous legal status in this country."(23) In Sonoma County, for example, the Examiner reported that a Mexican immigrant dairyman had charged in a lawsuit that he was living in unsanitary housing and working thirteen-and-a-half-hour shifts, with no overtime pay and few breaks.(24) In San Francisco, the Examiner discovered a Mayan immigrant from the Yucatan, who said he worked in a restaurant ten to twelve hours a day, seven days a week, with no...