Sweeping Decision: Janitorial Firm to Pay $4 Million for Bilking Workers

E & R Services Inc., a Las Vegas-based subcontractor that provided janitorial services to retail businesses in California, has been ordered to pay $3.9 million in owed wages and penalties after California Labor Commissioner Angela Bradstreet filed a civil suit seeking a default judgment. The company had janitorial contracts with FoodMaxx supermarkets and Fry’s Electronics.

The California Department of Industrial Relations (DIR) Division of Labor Standards Enforcement first launched its investigation after initially receiving wage claims from 15 employees who worked in several northern California cities including San Jose, Oakland, Sunnyvale, and Fremont. DIR discovered that E & R Services failed to properly pay at least 50 employees who worked across California from December 2006 through January 2009.

“This case is nothing short of routine and systematic fraud,” said DIR Director John C. Duncan. “It is a testament to the fact that workers who are being denied their rights can make a difference. Cases like this help fight California’s underground economy that not only robs hard-working people of the money they deserve but also impedes the success of companies that are following the law.”

A default judgment was filed in State Superior Court in Los Angeles County after E & R Services failed to make an appearance or respond to an initial complaint. This is the first default judgment ever to include a violation of Labor Code section 2810, which makes it illegal to subcontract janitorial and other services without providing sufficient funding to allow the subcontractor to comply with all laws. The Labor Commissioner’s Office determined that E & R Services provided insufficient funds to subcontractors for janitorial work. E & R Services is no longer in business.

“California will not tolerate employers who operate in total disregard of the law and try to increase their profits by underfunding subcontractors, cheating workers out of wages, and undermining the ability of legitimate competitors to compete for work in this tough economic climate,” said Labor Commissioner Angela Bradstreet. “Labor Code Section 2810 was created specifically for violations like this to address the particular problems faced by low wage workers who are oftentimes more vulnerable to being exploited.”

The investigation found that the company paid employees a fixed sum of $60 a day, which resulted in minimum wage violations. E & R Services also failed to pay overtime, did not provide employees with meal and rest breaks, and evaded payroll taxes.

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