According to an article in last week's New York Times by reporter Sarah Maslin Nir, when low-wage workers win court judgements against their employers they often have a hard time collecting. The problem is it isn't true.
Nir's key example actually contradicts her main argument. The whole episode is indicative of the Times' approach to covering labor issues, which is essentially advocacy not journalism.
The article opens with the story of a lawsuit against a small chain of car washes in New York and New Jersey owned by José Vázquez. After 18 employees were awarded $1.65 million in a settlement, Nir reported, they were unable to get their money:
The workers who toiled at the Vázquez carwashes have seen little of their settlements after the owners filed for bankruptcy, appearing to take advantage of a well-worn tactic used to avoid paying exploited workers, according to labor advocates.
The plaintiffs in the Vázquez case actually collected the last installment of the settlement on June 21, 2016. Reuters even published a news item with a photo of one of the workers receiving a check at a celebratory news conference.
The Times eventually caught the mistake, reworded a sentence in the article, and noted the correction. But the new version of the story further mangles the facts in the case.
The reworded article asserts that the workers "battled for nearly six years before receiving the money they were due, their efforts hampered by the owners having filed for bankruptcy…"
None of this is true.
The Vázquez case, which was filed in December of 2011, is the story of a wealthy yet emotionally troubled business owner who failed to act in his own best interests. His erratic behavior during litigation enabled the plaintiffs and their attorney to walk away with much more money than is common in lawsuits of this sort.
While the plaintiffs benefited handsomely, the outcome also led to the elimination of over a hundred low-wage jobs—the sort of unintended consequence that the Times rarely considers in its labor market coverage.
Were the workers at the Vázquez car washes actually paid less than the minimum wage? They were compensated in cash and the bookkeeping was shoddy, so it's hard to say. But the plaintiffs almost certainly would have won a court judgement, which is why the rational course of action would have been to settle.
So why did José Vázquez, the defendant and principal owner, decide to litigate? According to court transcripts, he suffers from bipolar disorder and suffered a manic episode during the proceedings. He also fired one attorney, didn't pay another, and at points refused to acknowledge that he had ever employed the suing workers.
The Times claims that when trying to collect their money the workers "were hampered by the owners having filed for bankruptcy," but the opposite is true. Vázquez' bizarre decision to enter Chapter 11 (which was later converted to a Chapter 7 bankruptcy)* was a calamity for his side because it led to the liquidation of his assets, which were worth more than enough to pay the workers. Once in control of his estate, the bankruptcy trustees settled with the workers for $1.65 million. Vázquez also had to pay the plaintiffs attorneys' bill of $1.2 million. (The judge permitted them to charge $500 an hour, which is on the high side for litigation of this sort.)
Because the case was litigated, the workers had to wait longer to get their money, but they also came away with more than they probably would have in a settlement.
The Times also claims that the workers "battled for nearly six years before receiving the money." Actually, they received nearly half the award roughly three years after the lawsuit was filed and exactly three months after the settlement was reached. The final payment came a year and a half later because the bankruptcy trustees needed to raise cash by selling off Vázquez's property. The workers received 9 percent annual interest in compensation for the delay.
What if instead of trying to impose a preconceived narrative on the facts in this case, the Times had carefully analyzed the details to see what could be gleaned?
The Vázquez case represents the sort of nightmare scenario that scares many business owners into settling wage and hour lawsuits even when there's little evidence of wrongdoing. That's because wage and hour laws heavily favor plaintiffs, and litigation is expensive. "Over 90 percent of these cases settle, especially when they involve small businesses that can't afford litigation costs" says Michael Yim, a labor attorney at Sedgwick, LLP.
And, contrary to the Times' reporting, cases in which small businesses transfer assets to avoid paying court judgements are extremely rare. "Chasing after employers isn't that difficult when they have assets," says Yim, "and it's also possible to seize their personal assets."
The problem with the Times' labor coverage is that the paper sees itself as "having essentially an advocacy mission," as Moody's Analytics economist Adam Ozimek once observed, and thus it seeks merely to "shine light on stories where workers are being taken advantage of, where working conditions are poor, and in general where the employer/employee relationship reflects poorly on the employer."
Another takeaway from the Vázquez case that eluded the Times is that labor litigation is pushing employers to eliminate low-wage jobs through automation.
José Vázquez owned three car washes in New York, and one in Elizabeth, New Jersey. As a result, three out of the four are now closed after having been sold for the underlying land through the bankruptcy process. (The Times inaccurately reported that they've all been shuttered, but Webster Hand Car Wash in the Bronx is still running after being sold to a different operator.)
Two of the closed facilities, Harlem Hand Wash and J.V Car Wash in Manhattan, were massive operations. The closing of the three Vázquez car washes destroyed over a hundred low-wage jobs. And they're not coming back.
As I detailed in a feature story in the July 2016 issue of Reason, the U.S. car wash industry started replacing men with machines in the 1970s, and today almost every new facility that's built is fully automated. New York City car washes, however, bucked the national trend because they were able to draw on a large immigrant labor pool willing to work for cheap.
Today, New York City operators have started automating in response to an explosion of labor litigation, a unionization drive, a new punitive licensing regime, and the $15 minimum wage, which takes full effect in 2019. An advantage of machines is that they're "headache-free," as one veteran car wash operator put it to me.
In just the last few months, two major car washes (one in Manhattan's Chelsea neighborhood and the other in Queens) installed new machinery to eliminate workers, and a former labor-heavy wash on Jamaica Avenue converted to a fully automated system, allowing it to eliminate its entire workforce.
Many more conversion projects are in the planning stages. Pretty soon there might not be any car wash workers left to sue their employers.
For more on the Times' flawed labor reporting, see my three-part critique of Sarah Maslin Nir series on labor exploitation at New York nail salons. The Times' public editor subsequently found that the paper's nail salon "investigation went too far in generalizing about an entire industry" and that "[i]ts findings, and the language used to express them, should have been dialed back — in some instances substantially."
*The original version of this story stated that Vázquez decided to enter Chapter 7 bankruptcy. In fact, he initially entered Chapter 11, and it was later converted to Chapter 7.