Heartache on Aisle 3: Sweatshop for Janitors

His name is Guadalupe Flores, and he works the midnight shift seven nights a week, stripping, waxing and buffing the floors of an upscale Fullerton supermarket.

He says he earns far less than the minimum wage, and just laughs when asked about overtime pay for his 56-hour weeks. Strong chemicals make his nose bleed, burn his fingers and eat the soles of his cheap sneakers. He operates powerful, potentially dangerous machines but isn’t protected by workers’ compensation insurance.

Flores sleeps on the floor of a tiny unfurnished one-bedroom house, where seven other supermarket janitors--all from remote ranching towns in central Mexico--stretch out on the dirty carpet. Most are young and new to California; some are still paying off the $1,500 smuggling fees that got them across the border.

Frightened, desperate and isolated, they and thousands of other vulnerable immigrants constitute a new class of sweatshop labor. Late at night, as unionized stockers tear through cartons of merchandise and a few bleary-eyed shoppers fill their carts, they are the anonymous figures at the end of the aisle, polishing the linoleum.

“It is shocking that it occurs so openly, and that the people who are responsible for this believe they can get away with it,” said Tom Saenz, lead attorney for the Mexican American Legal Defense and Educational Fund, which is preparing a class-action lawsuit against one major janitorial contractor.

Albertsons, Ralphs, Vons, Pavilions, Food-4-Less and many smaller chains contract out at least some stores to janitorial companies that state investigators consider problematic.

Spokesmen for several supermarkets said they require all contractors to comply with state and federal laws, and have no reason to believe that any are being broken. “I would think the appropriate labor agencies would be looking into that,” said Kevin Herglotz, a spokesman for Vons and Pavilions. “I’m not aware of any complaints that have come through Vons.”

But interviews with state labor officials, union-backed investigators, former subcontractors and more than 20 janitors indicate that violations are blatant and widespread throughout California and the West. State regulators say that the supermarket industry is comparable to garment production and agriculture, notorious for abuse.

Not only are many janitors earning subminimum wages--about $550 to $750 twice a month for 56-hour weeks--they also are untaxed. Typically paid in cash or personal checks, with no deductions for Social Security, Medicare or federal and state income tax, they are part of a thriving underground economy that robs billions of dollars from U.S. and California treasuries every year.

“The underpayment of payroll taxes is tremendous,” said Bob Shute, chief of underground economy operations at the state Economic Development Department, which recently began targeting the janitorial industry. “Society loses out. We all lose out.”

Legitimate janitorial contractors said the nonpayment of taxes and workers’ compensation premiums puts them at a 25% disadvantage when bidding for work at supermarkets. “Our members are . . . continually being beat out of contracts by people with no scruples,” said Pete Conaty, Sacramento lobbyist for the Pacific Assn. of Building Service Contractors. “The difference is so large that store managers ought to realize there is no way to do it legally.”

How did it get this way? After all, most supermarket janitors were at one time in-house employees, earning union wages. Now the Service Employees International Union represents only about 20% of the market janitors in Southern California, said David Stillwell of SEIU Local 1877.

“Albertsons was the first,” he said. “They started outsourcing in a big way in the early 1980s. Now they’re almost completely outsourced. Lucky was next. Vons has done a good deal [of outsourcing]. Ralphs started a couple of years ago.

“About four years ago it started to reach a crisis stage for us and led to a two-month dispute in contract negotiations,” Stillwell said. “All this consolidation was going on in the industry, creating these mega-companies that were left with huge debt loads. The pressure to cut costs was greater than ever. And since janitors are at the bottom of the financial food chain, they’re the first to feel it.”

Limiting Liability

In a sense, the story of supermarket janitors is no different from what’s gone on elsewhere in the economy. Outsourcing of non-core services such as packaging, customer service and building maintenance more than doubled in the 1990s. And that growth is likely to continue as businesses look for ways to shave costs and limit liability, according to a survey by the Outsourcing Institute, a trade group.

Outsourcing is not necessarily bad news for a worker. Some contractors are unionized; others offer comparable wages and benefits, as well as a chance to move up to supervisory jobs.

“They’re not a commodity to me. They’re human beings,” said Art Rose, co-owner of San Bernardino-based Mr. Clean and a 30-year veteran of the janitorial business in Southern California. Mr. Clean pays beginning janitors about $6 per hour, just above the state minimum wage of $5.75. Veterans earn about $9 per hour. Rose said he would like to be able to pay more, but can’t because of competition from underground firms.

“There are still people out there who want to do business with people who are honest and are willing to pay a fair price,” he said. “But over the years we’ve lost a lot of business to guys who went the other way.”

There have always been small outlaw contractors who paid their employees in cash, often at subminimum wages. What has changed recently, according to several state investigators, is that the underground element has grown and consolidated, building the legitimacy needed to land large accounts.

Flores, like many janitors, was swept along in that consolidation. Since he started cleaning market floors in 1988, he has worked under the contracts of at least five ever-larger companies. He never bothered to learn most of their names. He didn’t have to, because his direct boss, like his hours and pay, rarely changed.

For most of the last decade, he has reported to a subcontractor who moved Flores from Reno to Las Vegas, Phoenix, San Diego and Los Angeles as he picked up new stores. The subcontractor, who did not return phone calls for this story, was assigned to those stores by a fast-growing entity now known as Encompass Services Corp.

The Houston-based firm is the largest building maintenance contractor in the nation, according to its Web site. Supplying a full range of services--mechanical and electrical as well as janitorial--it pulls in nearly $4 billion a year and has workers in almost every state.

Encompass was created in February by the merger of two large building maintenance companies, neither of which existed five years ago. One of them was called Building One Services Corp., traded on Nasdaq as BOSS.

That company was created in 1997 by a group of investors looking for fragmented industries that they could consolidate and market nationally. They quickly found a gold mine in the janitorial sector, where thousands of small operators divvied up a $67-billion market. Within a year, the investors decided to focus exclusively on building services and changed their corporate name from Consolidation Capital to Building One. In two years, Building One bought more than three dozen contracting firms and began scoring major accounts, including Wal-Mart and Kmart. Then came the February merger with Group Maintenance America Corp. that created Encompass, traded on the New York Stock Exchange as ESR.

Strong Prospects

The new company hit the ground running, closing $75 million in new accounts in its first six weeks. Bear Stearns analyst Kim Howard, who helped broker the merger, said the firm’s prospects are strong.

Howard said Building One brought a strategic bonus to the partnership: janitors. Although janitorial makes up less than a tenth of Encompass’ overall sales, it is a potential entry point for retailers and office building owners. After dipping their toes into the outsourcing pool, managers may go on to contract for pricier electricians and mechanics. “That is going to be the primary driver for double-digit internal revenue growth,” Howard said.

In the west, the company’s janitorial division already handles more than 4,000 accounts, most of them grocery stores, said Encompass spokesman Joe Fairley. And the number is growing fast. Vons, for example, recently doubled the number of its stores with Encompass contracts to 250.

But Encompass does not consider the thousands of janitors who clean those stores--including Flores--to be employees. Instead, they are separated by at least one layer of subcontractors.

The subcontracting system is “relatively unique” to Encompass, Howard said. “And it’s worked really well for them [the firm],” she added. “They’re getting paid for managing. That leaves someone else accountable for hiring issues.”

In turn, many subcontractors say their janitors are “independent contractors,” paid by the job, not the hour. That would theoretically exempt them from wage-and-hour laws and hold the janitors themselves responsible for paying all taxes.

However, California tax auditors have consistently found the janitors to be “common-law employees” because they don’t own the equipment they use, and they have virtually no control over schedules and wages.

The system guarantees healthy profits at the top while pushing down risk and responsibility. As the personal stories of janitors such as Flores illustrate, the heaviest price is paid at the bottom.

“Sure, we’re exploited,” the 55-year-old father of six said with a shrug and an embarrassed laugh, standing in a corner of the cramped kitchen he shares with seven men, including a son. “We know that. But what can we do? What options do we have?”

Flores is typical in many ways. His view of the world is limited to a rural outpost in Mexico and urban supermarkets in the United States. He works extremely hard, usually without a day off. He is sleep-deprived and disoriented by his strange hours. And he regards his direct boss, who comes from the same region of Puebla state, with a mixture of gratitude and resentment.

What sets him apart from his housemates and many other supermarket janitors is that he gained legal U.S. residency under the 1986 amnesty program. Because of that, Flores was willing to be identified in this story, while more than 20 others--all illegal immigrants--declined.

“If they knew I was singing to you, I’d be in big trouble,” Flores said. “But ni modo, I don’t care. It’s time to do something about it.”

He was born and raised in San Ysidro Tecomate, an outpost of 10 families in the foothills of Pico Orizaba, connected to the outside world by nothing more than a dirt trail. He had three months of education, then he tended the few family cows and helped his father and neighbors in the fields.

In good years, they subsisted on rain-fed agriculture, growing corn, beans and squash. But what the rancho and dozens more surrounding it really depended on was exported labor. Every family sent at least one son to the United States, and through the quirks of network hiring, many have ended up cleaning markets.

Flores still calls San Ysidro Tecomate home. Periodically, when his body “wears out,” he heads back to the cinder-block house he built with his own hands, to rest and reacquaint himself with his wife and children.

Two sons followed Flores to U.S. supermarkets. One was deported and refuses to try again, resigned instead to working $5-a-day factory jobs back home. Another, Apolinar Garcia, joined his father in Fullerton four months ago, and now sleeps next to him on the carpet.

During a recent visit to the dingy house, everyone had a complaint. Several janitors were owed a month’s pay for work done in Phoenix supermarkets; their subcontractor had disappeared, stranding them. Flores’ son had recently split open a finger when a large buffing machine skidded up against a counter. Not only did he miss four days’ work, he also was stuck with a $326 medical bill.

And then there were the standard daily problems:

The lack of safety equipment, the overpowering smell of floor wax and propane used to power the buffers and the harsh sting of stripping chemicals on the skin.

The grueling schedule: At most, one day off every two weeks. No exceptions for Christmas or New Year’s.

The demanding store managers. “They say, ‘These floors are not up to standard.’ They always want us to stay late and do them over,” one janitor said.

None of the eight janitors could name the company for whom they worked. They knew only the subcontractor, who showed up twice a month to pay them in personal checks, from $550 for Garcia and other beginners to $750 for veterans such as Flores.

In interviews with more than a dozen other janitors, such stories became repetitious. Anyone with time in the business, it seems, has missed a paycheck, or been injured on the job, or at the very least felt harassed by a host of people more powerful than they are. Their subcontractor may change overnight, without any explanation.

Fairley, the Encompass spokesman, said if any laws are being broken, it is due to unscrupulous subcontractors. The system itself is completely legal and fair, he said.

“We have checks and balances in every part of our organization to make sure that we are providing enough resources into the system so that all contractors can operate legally,” said Fairley, an executive vice president for business development.

“I don’t believe the industry has any guarantees that some contractors out there could not come up with a method of working around a system,” he added, noting that similar complaints have been made about contractors in other industries. “As long as there are companies that are using contract management models,” he said, “there will always be this question.”

But several industry veterans said problems are built into the system of Encompass and its predecessors. Frank Munoz, a competitor who owns Kern Commercial Cleaning in Bakersfield, and a founder of the building services contractors association, said that he offered to contract with Building One last year.

Munoz said negotiations broke down when Building One offered the equivalent of $7 per hour per janitor to clean the stores. That wouldn’t cover minimum wage, taxes and workers’ compensation premiums, let alone a profit, he said. The industry standard is $10 to $12 per hour, he said.

“The bottom line was, after weeks of haggling, they said that’s our price, take it or leave it.”

Five former Building One employees and subcontractors who spoke on condition of anonymity also said deals made between markets and Building One make it impossible for subcontractors to pay the legal minimum.

“The subs want to do business legally but they aren’t able to. They got sucked into it,” said a former Building One employee in Utah. “I can’t think of one store that doesn’t have wage-and-hour violations.”

A California subcontractor who was recently fined for nonpayment of payroll taxes said he was assigned stores under contracts that forced him to cheat. “The calculator doesn’t lie,” he said, adding that he is gradually getting out of the business. “We are so messed up from every angle you wouldn’t believe it.”

To date, however, only subcontractors have been penalized for violations, and even those numbers are small.

California investigators said they have been hampered by small staffs and lack of political will. But that is starting to change.

Last year, a bill by Assemblyman Scott Wildman (D-Los Angeles) added the janitorial industry to the Targeted Industries Partnership Program, a joint investigative team that looks into wage, hour and tax violations. The program, with only 45 investigators statewide, also targets garment production, agriculture and restaurants.

This year, state Sen. Hilda Solis (D-La Puente) proposed adding 15 investigators solely to police janitors. “We have not been in this area really fully enforcing our laws for the last two administrations,” she said. “It’s a very serious problem.” However, Gov. Gray Davis deleted the new positions when he signed the budget Friday.

The program is just starting to yield results, said Roger Miller, an assistant chief for field enforcement in the Department of Industrial Relations. “We have pretty strong evidence [of wage-and-hour violations] in certain cases,” he said. “What makes the investigation a little more difficult is that you need to tie in the prime contractor. They’re the ones that are generally doing the deals with the retailers and dictating the price.”

Investigations also are heating up on the tax side, said Shute of the Economic Development Department, who has just 1 1/2 investigators on janitorial but expects at least three more under the new state budget.

The department has audited 19 subcontractors since November, assessing average fines of more than $100,000--far higher than a typical case. Shute said he is working on a major criminal case. “We try to follow the money,” he said. “We believe it’s a scheme. The large janitorial businesses know these are common-law employees.”

A bill written by the contractors’ trade association sought to make the supermarkets jointly liable for wage and tax violations committed by janitorial subcontractors. Recently, however, to win the support of retailers, the bill was changed to require the licensing of janitorial subcontractors. If it becomes law, California would be among a handful of states to license janitorial subcontractors, said Conaty of the building contractors group.

Also, a class-action lawsuit is expected to be filed soon by the Mexican American Legal Defense and Educational Fund and private attorney Janet Herod, alleging that Encompass and possibly other contractors have systematically violated the rights of janitors.

“We are investigating the relationship to ascertain who bears legal responsibility for the rampant violation of these workers’ rights,” said Saenz of MALDEF. “In terms of moral responsibility, I know what the answer is. The supermarkets, the prime contractors and subcontractors all share in the responsibility.”

The lawsuit and state investigations were bolstered by the work of two private investigators based in a borrowed union office and funded by contributions from union contractors. The Maintenance Cooperation Trust Fund was established two years ago in response to the proliferation of underground janitorial contractors in all industries.

Early on, Javier Gonzalez and Javier Amaro decided to focus on the supermarket industry, which they said was the most egregious offender in the business.

For dozens of nights, Gonzalez and Amaro have met for all-night tours of Southland supermarkets, interviewing janitors when and where they work. They have logged more than 300 contacts so far, the names listed in a chart that covers the office wall. In every case, their stories include allegations of violations.

One typical night took in six stores, from a Santa Monica Pavilions to the Fullerton Stater Bros. where Guadalupe Flores has worked for more than a year.

(On Monday, the day a reporter called Stater Bros. to ask about its janitorial contracting, the family-owned chain canceled its contract with Encompass. The contractor had been cleaning 10 former Lucky stores bought by Stater Bros. last year. Don Baker, a Stater Bros. executive vice president, said the company prefers to use union contractors or staff janitors. A new contractor will be brought in, he said, and efforts will be made to retain current janitors, including Flores).

On the night of the investigators’ tour, 11 janitors warily told their stories; in every case, there were indeed wage, hour and tax violations.

They worked in street clothes, some bringing plastic gloves from home to protect their hands. They told of wrapping steel wool pads around their sneakers when stripping floors, to keep from slipping on the slick chemicals. They told of weeks they went unpaid, of arbitrary schedule changes.

The Stater Bros. where Flores worked was closed at 5 a.m., so Gonzalez tapped on the window and the janitor came out for a quick break. Sharing a cigarette with Gonzalez, he leaned his compact frame against the car and blew smoke up at the sky. A stocker yelled out from the store, in a good-natured ribbing, “Hey, don’t take him away from us. We need him!” Flores laughed: “They’re good people,” he said.

Standing nervously beside him was a young recruit, fresh up from Puebla state. Sebastian Sanchez said he was 19, but he looked younger. Shivering in the predawn cold, he said he had just received his first paycheck, $550 for 15 days’ work. It was good money compared to anything back home. But the work was hard, the hours grueling. And Sanchez would be tied to it for months to come, at least until he repaid the $1,500 border-smuggling fee.

“No, this isn’t what I expected,” Sanchez confessed, turning away to hide his tears.