The Warehouse Archipelago pt. 3

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As many as four million workers labor in clusters of warehouses scattered across the United States. Many are mislabeled as ‘temps’; all are poorly paid, and on-the-job injuries are high.

In the article “The Warehouse Archipelago”, John Lippert and Stephen Franklin investigate the current state of staffing in the warehouse industry.

Part Three of the weekly Chicago Reporter series Lippert and Franklin explore how staffing companies exploited the 9/11 terror attacks to get workers at lower pay rates.

In the wake of the 9/11 terror attacks, when many employers fired workers who lacked papers showing they were legally in the U.S., staffing companies stepped into the breach. According to Tim Bell of the Chicago Workers’ Collaborative, they told employers they could have the same workers back on the job but at the lower pay rates of the agencies.

The fissuring of the warehouse economy accelerated accordingly, and the pay of the people who worked there was reduced, as a lawsuit that involved several Walmart warehouses in Southern California made clear.

The company had hired Schneider Logistics, one of the nation’s largest logistics firms, and Schneider had turned

to two staffing firms to hire the predominantly Latino immigrant workforce. A nearly three-year court battle resulted in a $21 million class action suit settlement in 2014 for the workers.

Under an alleged scheme triggered by the hiring of the staffing companies, according to the workers’ complaint, employees’ wages were lowered. They weren’t paid for overtime work. They also were fired or threatened with retaliation if they inquired about their pay.

In 2020, at the pandemic’s peak, OSHA’s warehouse inspections not only didn’t rise with the number of warehouse outbreaks; they dropped by more than a half.

Once Walmart’s effort to be dismissed as a defendant

was rejected by the court, and it saw that a jury trial would expose its role, Walmart, then the world’s largest company by revenue, agreed to a settlement (as did Schneider). It’s not clear, says Michael Rubin, an attorney for the workers, which company made the payment, since Walmart and Schneider were both sued by the workers. What made the suit unique, according to Rubin, was that it laid out the dealings of the giant retailer, the logistics firm, and the staffing company. “It was a three-tiered joint employer case,” he explained. Staffing companies have been cited for several questionable strategies. They have been cited for price-fixing and agreeing not to hire from other firms.

Laura Padin, an attorney with the National Employment Law Project, points to other staffing company strategies.

One is their use of the federal Work Opportunity Tax Credit (WOTC), which rewards companies for hiring minorities and workers with troubled histories, such as former prison inmates. It can provide more than $6,000 for each worker. The problem with this, she explains, is it doesn’t launch new careers for struggling workers hired under this program. Rather, the staffing companies hire the workers “for a few months in dead-end jobs.” At the same time, staffing companies, operating on low profit margins, rely on the subsidies “to make their money,” she said.

An equally troubling staffing company strategy, experts say, is a conversion fee. Some staffing firms, according to data collected by Temp Worker Justice, charge a potential employer up to $2,000 or 10 percent of a worker’s yearly salary if a company directly hires the worker after several months on the job. “The whole model is built on keeping workers in temp worker conditions,” Padin said.

Dan Shomon, a spokesman for the Staffing Services Association of Illinois, refutes such criticism, saying that agencies want to benefit workers. “Illinois has one of the strongest laws in the country to protect temporary staffing workers,” adds Shomon, whose group represents ten firms that hire lightindustrial workers.

But some of these agencies have had legal problems with Illinois officials. In 2020, three staffing agencies that belong

to the organization were accused in a lawsuit by the Illinois attorney general of colluding to set low wages and agreeing not to “poach” workers from each other. The case is ongoing.

In Part Four of the “The Warehouse Archipelago” series, the reopening of the economy battered by COVID-19 mitigations provides new hope for warehouse workers.

“The Warehouse Archipelago” was first published in The American Prospect.

About the writers:

JOHN LIPPERT

John Lippert was a line worker for eight years at General Motors before becoming a reporter at the Detroit Free Press and then Bloomberg, where he was a senior writer.

STEPHEN FRANKLIN

Stephen Franklin is a former labor reporter for the Chicago Tribune and author of ‘Three Strikes: Labor’s Heartland Losses and What They Mean for Working Americans.’