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Wage Theft and Payroll Fraud Prevention Ordinance

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By Bruce Checefsky

On Monday, Dec. 5, 2022, the Cleveland City Council passed the Wage Theft and Payroll Fraud Prevention Ordinance, which prohibits the City of Cleveland from entering into contracts with all businesses, from construction companies to food vendors, who were found to practice wage theft in the past three years.

Wage theft is a violation of any federal or State of Ohio law regarding prompt payment of wages, minimum wage standards, prevailing wage rates, and hours worked. The most blatant wage theft is asking an employee to work overtime, work through breaks, report early, or leave late without pay.

The ordinance places the burden on employers entering into contracts with the city to disclose any adverse determination. An adverse determination is a denial or limited authorization of a requested service. Failure to do so will subject the individual or entity to criminal penalties. The employer is placed on an Adverse Determination List with the Fair Employment Wage Board (FEWB) where they will remain for the next three years.

An employer can be removed from the list before the period lapses by receiving a waiver if it results in disruption to city operations, a change in ownership since the adverse determination, or if they have complied with the requirements of the final action placing them on the list.

The measure is a victory for advocacy group Guardians for Fair Work, and organizer Nora Kelley, which has been lobbying city officials to deliver wage-theft protections for Cleveland workers since last year.

“This is an important first step at making clear that we have public policies supporting workers,” said Kelley. “Columbus and Cincinnati have similar ordinances to protect their workers. City of Cleveland Wage Theft and Payroll Fraud Prevention Ordinance will go into effect in January 2023.”

Businesses seeking contracts with the city or financial assistance will have to report to the FEWB; a seven-member board that will monitor the living wage ordinance. Board members include two from labor, two from business, one community representative, one from the Mayor’s office, and one from City Council. Mayor Bibb will make the appointments, except for the City Council seat.

City Council and the Bibb administration need to pass a 2023 budget that provides the Fair Employment Wage Board with the financial resources needed to implement the regulations before the Ordinance can take effect.

“Seating the Board within 180 days of passage of the Ordinance is key to its enforcement,” added Kelley.

Policy Matters Ohio reports that in the fiscal year 2017, food service, retail, construction, healthcare, and hotels were the top five culprits of wage theft, accounting for 14,523 cases and 125,716 affected workers between them. Childcare services, janitorial services, and temporary help also made the top 10.

Ohio ranked second in the number of low-wage workers reporting wages below the legal minimum wage. Six wage and hour agents monitor labor practices for over 5.5 million workers.

The City Council vote was a victory for Guardians for Fair Work and Policy Matters Ohio. Justin Strekal, Cuyahoga County Progressive Caucus (CCPC) Steering Committee Member and Organizer with Guardians for Fair Work, addressed a packed City Council chambers before the vote.

“There are over 250,000 documented cases of wage theft every year in Ohio. An average victim loses 24% of their take-home which is over $2,900 in Cleveland if they stay on the job for a full year,” said Strekal.

“I want to thank City Council for their vote of support and to let you know that we will be back next year to talk about how we can expand protection for workers in Cleveland, ”he added.