A Day's Pay For A Day's Work -- Maybe

Outsourcing means an explosion in casual labor. But it's a largely unregulated world

It's 5 a.m., and Salvador Mendoza and a dozen other men are lined up outside the Chicago office of Labor Ready Inc. (LRW ), a temp agency for day workers. He has already been up nearly an hour, and the 42-year-old Mexican is in for a long day. If he's lucky, his wait will be just an hour or two before he heads off to load trucks or clean floors at one of Labor Ready's client companies.

Mendoza -- not his real name -- typically makes about $6 an hour, earning nothing for the morning wait time. Fairly frequently, he says, employers don't even pay him for all the hours he works. Usually, he's not home till 6 or 7 p.m., with $50 or so to show for an eight-hour work day. But Mendoza is in no position to complain, since he says he's in the U.S. illegally. "I don't like [day-labor jobs]," he says. "But I need the work." Labor Ready says it requires every worker to show two forms of valid U.S. identification and to complete an I-9 form certifying U.S. employment eligibility.

Mendoza is part of an explosion in the day labor industry, which has doubled since 1995, according to a study last year by the General Accounting Office (GAO). While it's difficult to track such workers, who are mostly illegal immigrants, the homeless, and the transient poor, experts say there are several million of them. Based in Tacoma, Wash., Labor Ready alone employed 600,000 people last year, earning $863 million in revenue.

The growth is coming in large part because Corporate America is outsourcing more work, and day-labor agencies have sprung up to fill the demand. There were 685 of them last year, according to the Commerce Dept., mostly mom-and-pop operations capitalizing on the sharp increase of immigrant workers in the past decade, including illegals. There are only a few publicly traded companies like industry leader Labor Ready, which has mushroomed into a network of 790 dispatch offices in the U.S., Britain, and Canada. Several others, including Labor Finders International Inc. and Labor Connection Inc., have recently expanded in regions with high immigrant populations, such as California, Texas, and Florida.

Historically, workers were hired by the day to perform menial or unpleasant tasks such as ditch-digging or industrial cleanup. They still are, but more employers are using day labor in a wide range of jobs, from handing out food samples at Wal-Mart Stores Inc.'s Sam's Clubs to loading trucks at North American Van Lines, a unit of Sirva Inc., in Westmont, Ill. Wal-Mart (WMT ), which also hires day laborers as store cleaners and shelf stockers, has a contract with Labor Ready. Wal-Mart declined to comment, and Labor Ready wouldn't discuss details of the relationship. Hundreds of other big companies use day-labor agencies, too, according to both industry and worker-advocacy groups.


The primary lure: Day laborers are usually cheaper than other workers. They also entail even less commitment than traditional temps, since day-labor contracts typically specify that the relationship ends at the close of the day. And now, the agencies have removed the hassle of recruiting. "If you're looking at expanding your margins, you have to look at day labor," says Jeffrey M. Silber, an analyst at Harris Nesbitt Gerard (BMO ) in New York.

Still, labor-rights groups and government officials consider the growth of day labor a decidedly mixed bag. True, agencies provide steady work to people who often aren't able to hold down a regular post. "If they weren't working with us, they'd be on welfare or loitering around, causing trouble," says Labor Ready CEO Joseph P. Sambataro Jr.

At the same time, such workers are often among the most vulnerable to abuse, which day laborers and their advocates claim is widespread (table). The critics also contend that client companies routinely ignore the problems. Since August, for example, 25-year-old Michael Franklin has earned $5.15 an hour working the 2 a.m.-to-9:30 a.m. shift unloading newspapers on Chicago Tribune delivery trucks (driven by $28-an-hour Teamsters). Franklin says his paycheck from the day-labor agency, Elite Staffing Inc., often comes up short. When 12 hours were missing recently, Elite told him to straighten out the problem with Tribune Co. (TRB ). He did, but that delayed his pay three days. This causes hardships to him and his 100-odd fellow day laborers on the trucks. "You can't just tell the landlord you're short the rent," he says.

Elite, which was recently ordered by the Illinois Labor Dept. to return excessive fees it charged workers, says it pays workers in full, though there may be delays due to faulty paperwork. The Tribune declined to discuss its vendors. "Companies are passing their responsibilities to the agencies," charges Daniel L. Giloth, director of the San Lucas Workers Center, a Chicago day-labor advocacy group. "There's a willing ignorance."


Experts say a recurrent issue is the hefty fees agencies charge for transportation, equipment, and check cashing. Part of the problem is that day-labor agencies are loosely regulated and face few penalties when they violate labor laws. The GAO found that the Labor Dept. doesn't effectively enforce federal wage and hour laws or safety standards. A handful of states, including Arizona and Illinois, have passed day-labor laws that prohibit or cap excessive fees, but a bill in Congress setting out federal rules is stalled.

So the worker-advocacy groups have stepped into the breach, mostly by filing lawsuits and organizing protests. In October, a California court approved Labor Ready's settlement (without admission of liability) of a class action over excessive check-cashing fees. The company faces four other suits alleging sex discrimination and failure to pay properly. Labor Ready says litigation is a routine part of being a large employer.

Sambataro and others in the industry concede, however, there's room for improvement. In June, Labor Ready initiated a voluntary agreement with the Labor Dept. to educate its managers about workplace law. It also gave day laborers a card listing labor rights and a phone number to file complaints with the Labor Dept. In October, the American Staffing Assn. (ASA), a temporary-help industry group that also represents day-labor agencies, adopted a code of ethics for them after hearing repeated complaints. Says ASA General Counsel Edward A. Lenz: "There are some very unsavory operations" in the day-labor industry.

Still, worker-rights groups are pushing for more. In December, the North American Alliance for Fair Employment, based in Boston, plans to launch a national reform campaign. Tactics will include pressuring Labor Ready customers and shareholders, such as FMR Corp.'s Fidelity Investments, which owns 12.6% of the company's stock. Until the industry cleans up its act, it's likely to generate more controversy than praise for providing jobs to marginal workers.

By Brian Grow in Chicago

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