| Register/Subscribe Home |
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | AUGUST 7, 2000 STAFF & BENEFITS A Day's Pay for a Day's Work? Temp service Labor Ready is being sued for charging workers for cashing daily paychecks
The lawsuit questions the company's practice of charging a fee to their workers -- most of whom come from low-income households -- if they want to receive their pay in cash rather than by check. The practice netted Labor Ready, a Big Board-listed company, $4.8 million in 1999. According to the suit filed July 19 by two Labor Ready workers in Fulton County, Ga., employees receive their pay at the end of each day and are given the choice of cash or check. If they want cash, they have to get it from a cash machine installed in the lobby of the building -- and they have to pay a fee. Documents filed with Securities & Exchange Commission say the cash-dispensing machine deducts $1 per transaction. What's more, says the SEC filing, the machine rounds off the worker's pay and keeps the change. Average take: $1.50 per person, says Ron Junck, executive vice-president and general counsel for Labor Ready, which has more than 830 offices and 700,000 temporary workers in North America, Peurto Rico, and Britain. LITTLE TAKE-HOME. Not fair, say the plaintiffs, who charge the practice violates Georgia law. Levoyd Williams of Stone Mountain, Ga., and one of the plaintiffs in the case, says although the deduction may seem small, it hits home when you consider the shortened hours and transportation costs. He says a Labor Ready employee who works four hours at a rate of $5.15 an hour brings home very little money. "I feel as if Labor Ready should not be able to take advantage of people like me," say Williams, who adds he no longer works for Labor Ready but for Labor Union #438 as a temporary contractor. Labor Ready says its day laborers are mostly men between 18- and 40-years-old from low-income neighborhoods. Each dispatch office works with a pool of 40 to 200 workers who are hired for lifting, hauling, cleaning, assembling, digging, painting, and other types of manual or unskilled work. Labor Ready's customers are primarily businesses in the freight handling, warehousing, landscaping, construction, and light-manufacturing industries. It pays workers' compensation coverage, unemployment compensation insurance, and Social Security and Medicare taxes, but it doesn't provide health, dental, disability, or life insurance. The company says the cash machines enhance Labor Ready's ability to attract temporary workers, but Williams says it is too high a price to pay. The typical pay voucher is less than $50, making the $1.50 average fee perhaps a 3% cut of a day's pay. A worker making $25 in a day will have to pay 6% to get the money in cash. If that worker was owed 99 cents in change, his fee of $1.99 would amount to nearly 8% of his pay. A BARGAIN? Junck says no law is being broken, and he denies the fee is onerous. "It is far less than what most cash-checking places charge," he says, adding that the majority of workers prefer the convenience of being paid in cash and choose to use the cash machines because most don't have bank accounts. "The deduction is intended to offset the costs of maintaining the machines and cash supply," says Junck. But according to the Tacoma (Wash.) company's 1999 SEC records, the practice -- which Labor Ready promotes as "Work Today, Cash Today" -- actually has been highly profitable over the past two years. Last year, the company's $851 million in revenues included $7.7 million in CDM fees, while related expenses came to just $2.9 million -- a difference of $4.8 million, equal to about 20% of last year's net profit. Fees in 1998 totaled $3.6 million, and CDM-related expenses were $1.9 million, leaving the company with $1.7 million made from the "Work Today, Cash Today" service. That's up from zero in 1997. The company adds in a filing this year that the practice "is unique among its direct competitors." Says Dick King, president and CEO of Labor Ready: "The cash-dispensing machines provide a quick and simple way for our workers to receive daily cash at nominal cost. Having the choice on a daily basis to choose between a check and cash, about 60% of our workers use the cash machine. We intend to aggressively defend the right of our workers to make this choice for themselves." Neither King nor Junck returned phone calls asking for clarification about the CDMs and for comments on how profitable the payment system is to Labor Ready. PATENTED SYSTEM. Norman Slawsky, the lawyer for the plaintiffs, says the case is based on three Georgia statutes that ban the practice of discounting workers' wages. The workers and local labor officials are seeking to have the lawsuit certified as a class action. On July 26, the AFL-CIO's Building & Construction Trades Dept. sent a letter to King asking for details about Labor Ready's arrangement for the use of the patent on its cash dispensing machines. The company's 1999 SEC filing says it has filed with the U.S. Patent & Trademark Office for registration of the service mark "Work Today, Cash Today" and has been granted a patent for the system of controlling a network of CDMs for payroll disbursement. The Building & Construction Trades Dept., which says it is a Labor Ready shareholder, launched a campaign in April to investigate possible "abuse of temporary agency workers in the construction industry." Whether the Georgia lawsuit will actually hold up in court is another matter. Richard Brennan, deputy director of enforcement policy at the U.S. Labor Dept.'s Wage & Hour Div. says Labor Ready cannot be accused of breaking any federal laws if the cash machine deduction does not reduce employees' checks to below the minimum wage or any overtime payment. Perhaps the practice will ultimately prove legal. Still, the specter of a big public company making money off the paychecks of its lowest-paid workers seems like an odd twist on the idea of a day's pay for a day's work.  By Robin J. Phillips and Taeyma Sapp Edited by Rick Green  | | |
 Copyright 2000, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Policy |
Printer-Friendly Version
