Car Washes Settle Labor Violation Suit

Companies Cough Up $3.9M For Underpaid Wages

Attorney General Eric T. Schneiderman, joined by City Council Speaker Melissa Mark Viverito and labor rights advocates, announced last Thursday, Mar. 6, settlements totaling $3.9 million with two interrelated car wash chains owned and operated by John Lage, Michael Lage and Fernando Magalhaes, which together operate approximately 21 car washes in New York City.

The settlements are the result of the Attorney General’s investigation into widespread labor law violations, including underpayments, underreporting of employees on state unemployment insurance returns and failure to carry required workers’ compensation insurance for all employees.

Attorney General Schneiderman’s agreements require the car washes and their owners to pay restitution totaling more than $2.2 million to an estimated 1,000 car wash workers for nearly six years of underpaid wages, as well as more than $513,000 to the New York State Department of Labor’s Unemployment Insurance Division and nearly $1.2 million to the New York State Workers’ Compensation Board. In addition, the agreements require the car wash owners to pay for independent monitoring of their labor practices for up to three years, with unannounced on-site inspections and payroll audits, and with results reported to the Attorney General.

“When workers like these stand up for their rights, they need to know that state and city leaders will stand behind them. Today, we are doing just that, sending a strong message to all hardworking New Yorkers that we’ve got your back,” Schneiderman said. “These agreements will ensure that the car washes clean up their acts to comply with the law. And they ensure that New York businesses who play by the rules can do so on a level playing field.”

Mark-Viverito added, “Today’s settlement is sending a clear message: labor violations will not be tolerated in this city, period. After years of fighting against systemic abuse, the workers at Lage Carwash will finally have justice. Unfortunately, there are many workers in this city who may still believe they simply have to put up with abusive and unfair practices by their employer. There are those who fear that no one will come to their aid if they speak up, and that they may even face retaliatory action against them if they voice their complaints. Today, we are here to tell them that New Yorkers have every right to demand that their employers follow all labor laws, and we will be here to stand by their side if need be.”

Public Advocate Letitia James said, “It’s hard enough to make it in New York. To do so while your hardearned wages are being stolen is unimaginable. I commend Attorney General Schneiderman for helping nearly 1,000 car wash workers get restitution. All of us must continue to fight for economic justice for lowwage workers and all New Yorkers.”

From approximately Nov. 29, 2006, through Sept. 30, 2012, some of the car washes failed to pay all of their workers overtime and deducted pay for breaks that workers did not get. In some locations, managers improperly took shares of workers’ tips for themselves. The car washes also failed to pay “call-in pay,” required by law when workers must report to work but are sent home soon after. In addition, the car washes paid unemployment insurance contributions and secured workers’ compensation coverage for only a fraction of their total workforce, which is currently about 600 employees.

During most of the time period covered by the investigation, the applicable minimum wage was $7.25 per hour. New York’s minimum wage is currently $8 per hour, and it will increase to $8.75 per hour on Dec. 31, 2014, and to $9 per hour on Dec. 31, 2015.

Overtime laws require employers to pay covered employees 1 1/2 times an employee’s regular rate for hours worked beyond 40 hours in a given week.

In addition, the state unemployment insurance system requires employers to report all wages paid to workers and to make contributions to support the state unemployment insurance fund and cover benefits for eligible unemployed workers.

Finally, virtually all employers are required to secure workers’ compensation insurance coverage so that injured workers can obtain timely medical benefits and wage replacement.

Of the total settlement amounts, the workers will receive a total of $2,223,124 in restitution for underpayments; the New York State Department of Labor’s Unemployment Insurance Division will receive $513,733 for unpaid contributions, interest and penalties, and $1,163,143 will go to the New York State Workers’ Compensation Board.

Along with the restitution and monitoring described above, the Attorney General’s agreements provide additional protection for workers in case of sale or closure of a car wash location. Specifically, if any location closes or is sold, the employers must either ensure workers’ continued employment, with the new owner or at another Lage or Magalhaes car wash location, or must provide 60 days’ advance notice and priority for any new openings at another Lage or Magalhaes car wash location.

The attorney general thanked the New York State Department of Labor and the New York State Workers’ Compensation Board for their contributions in calculating penalties, interest, and unpaid unemployment insurance contributions, and for their assistance throughout the investigation.

The case was handled by Assistant Attorneys General Benjamin Holt and Haeya Yim, and Labor Bureau Section Chief Andrew Elmore. The Labor Bureau is headed by Terri Gerstein. Executive Deputy Attorney General for Social Justice is Alvin Bragg.

Lage currently has 14 car washes in the city with two in Queens. The locations are, Michaels Car Wash, 36-21 21st. St. in Ravenswood and Queensboro C.W. Corp., 38-26 21st St. in Queensbridge.

Magalhaes currently operates five car washes in Queens. The locations are, Mega Car Wash and Lube Corp. 135-13 Cross Bay Blvd. in Ozone Park; Metro Car Wash and Lube Inc. 91-10 Metropolitan Ave. in Rego Park; Sutphin C.W. Corp., 97-31 Sutphin Boulevard in Jamaical Smart Car Wash Corp., 193-11 Crocheron Ave. in Flushing; and Jomar Car Wash Corp. 57-34 Main St. in Flushing.

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