Agents Stage Raid on Janitor Service
Agents from five government agencies seized business records from a major West Coast cleaning contractor this week after a yearlong investigation into possible wage, tax and insurance fraud involving janitors at supermarkets and discount stores, officials said Friday.
The contractor, Arroyo Grande-based Encompass/Building One Service Solutions, provides janitors to Albertson’s, Vons, Kmart, Wal-Mart, Target and other stores through a chain of subcontractors. Two of its Los Angeles subcontractors were convicted this year of felonies, including “theft of labor,” for severely underpaying their workers.
Investigators said they are seeking evidence that could connect those violations to Encompass, which signed the original contracts. The search warrant served Thursday sought business records, contracts and time and payroll records that could be used to establish such a link.
“If the review of evidence supports a criminal prosecution, it will be a big breakthrough,” said Susan Gard, spokeswoman for the state Department of Industrial Relations. “But we need to see what the evidence supports.”
Building One is part of a national building-services corporation formed during the last five years. Houston-based Encompass, which had $4.3 billion in revenue in 2000, is traded on the New York Stock Exchange. The company’s Web site says it is “the largest provider of facilities systems and services in the U.S.”
Encompass spokesman Russell Johnson said the company was “very surprised and quite disturbed” by the state search. “We’ve always cooperated fully with [state investigators], so we were quite surprised they chose to take this action,” Johnson said. “We have still not been notified that we are under any investigation. We have yet to be told the reason for this.”
Investigators from a multi-agency task force presented the search warrant just before 9 a.m. Thursday. Uniformed police officers were later called for support. Johnson said the 40 employees at the office were frightened and forced to stay in a small conference room for four hours.
“These are extreme and so far unexplained actions,” Johnson said. “We’re confident the facts will show that we are and always have been in full compliance with applicable federal, state and local labor and employment laws.”
Officials said the agencies involved in Thursday’s search included the state Division of Labor Standards Enforcement, Employment Development Department and Department of Insurance, the U.S. Department of Labor and the Los Angeles County district attorney’s office.
Task force investigators were unavailable for comment Friday. Gard said only that the search was undertaken because the “D.A.’s office had enough information to obtain a search warrant.”
The Los Angeles County district attorney prosecuted the two subcontractors, Cindy’s Cleaning and American Unique, which were convicted in the last year. Both were forced to pay back wages, and owners of Cindy’s Cleaning received two-year sentences.
Subcontracting has grown dramatically across a wide range of industries during the last decade. Labor advocates claim the practice allows companies to dramatically cut costs while avoiding liability for violations of labor, tax and insurance laws.
State investigators have said their jobs have been greatly complicated by having to sift through layers of contracts that separate workers from clients, such as janitors and the stores they clean.
The task force was formed a year ago after a Los Angeles Times article reported alleged abuses of contracted supermarket janitors, most of them recent immigrants from rural Mexico.
In interviews with The Times last year, more than a dozen janitors working for Encompass subcontractors said they worked six or seven nights a week with no overtime pay, often earning less than minimum wage. They said they were not covered by workers’ compensation insurance, and no payroll taxes were paid for their hours. Some worked for the subcontractors that were later convicted of felonies.
Encompass said then, and now, that it requires subcontractors to follow all labor laws.
“As a company, we insist on very high standards for ourselves and our subcontactors,” Johnson said.
However, several competing cleaning companies claimed Encompass submitted contract bids that were too low to cover minimum wages, workers’ compensation insurance and payroll taxes.
A class-action lawsuit was filed on behalf of 19 supermarket janitors last year, naming Encompass and several major markets, including Albertson’s, Vons and Ralphs. The lawsuit is still in its preliminary stages. Johnson said Encompass is planning to “vigorously” fight it.
Last February, Ralphs and Vons agreed to reverse the trend toward subcontracting janitors and signed a four-year labor contract that will eventually bring all its janitors back in house. Albertson’s said it would continue to contract out janitorial work but would raise wages to union standards.
