A Consumers Union report warns that prepaid bank cards are “loaded with fees” and short on consumer protections, the Sun Times  reported last week. Most cards surveyed charged fees for card activation, withdrawals, paper statements and even for checking balances.
The prepaid cards are similar to the payroll cards with which many Chicago area warehouse workers are being paid, as Newstips  reported in August. Workers say they have to pay fees to access their money, and that it’s difficult or impossible to make sure they’ve been paid for all their hours without a paystub.
Warehouse Workers for Justice  thinks the arrangement could violate laws requiring pay stubs, and is investigating the possibility that the fees charged to use the cards could amount to wage theft, said organizer Abraham Mwaura.
It’s just one of many ways that vulnerable workers can be exploited. A special report from American Prospect  highlights another issue faced by workers in warehouses and in many other industries – the misclassification of regular employees as temps or as independent contractors.
At a UPS warehouse, one worker tells Harold Myerson  of working for ten different contractors over a period of five years – doing the same job the entire time. She’s still a temp.
The Department of Labor is studying regulations to guard against misclassification, but the federal government could also use its power of procurement to require contractors to improve conditions, particularly in port trucking and ground express delivery, write David Bensman and Molly Greenberg .
The misclassification issue is playing out at FedEx, where the feds could use the leverage of $1.5 billion in contracts from the Department of Defense, Bensman and Greenberg write.
In May, Illinois FedEx drivers in a multi-state class action lawsuit won a summary judgment on their claim to be company employees under state law (pdf ). The drivers own their own trucks but must paint them with the company logo and can’t use them for other business; they’re required to dress in FedEx uniforms “down to the color of their shoes and socks”; and they “make pickups and deliveries on routes assigned by the company,” Bensman and Greenberg point out.
“The court found that FedEx Ground misclassified its [Illinois] drivers as independent contractors as an illegal means to avoid paying state unemployment insurance and workers’ compensation insurance,” they report.
In July, FedEx announced a $3 million settlement  with Massachusetts over claims that the company’s misclassification of drivers cost the state revenues from payroll taxes, unemployment insurance and workers comp.
The Government Accountability Office has estimated that misclassification of employees as independent contractors results in a loss of $2.72 billion a year in unpaid Social Security, unemployment, and income tax, according to a new report by the National Employment Law Project (pdf ).
The problem is large and growing in Illinois, according to a 2006 study (pdf ) by economists at the University of Missouri-KC cited by NELP, which found that 19.5 percent of employers in 2005 were found to have misclassified employees as independent contrators, with misclassification rates up 55 percent from 2001.
Such misclassification costs the state hundreds of millions of dollars, according to the study. Income tax revenue lost due to misclassification could be as high as $248 million for 2005, and misclassification cost the state’s unemployment insurance system $53 million (in 2005) and the workers’ compensation program $97.9 million (in 2004). The cost of workers comp is the single biggest reason employers misclassify, according to the report.
That doesn’t include the costs to the state and federal government of the use of permatemps, a massive and growing employment sector offering lousy jobs. And it’s just a portion the cost to the regional and national economy of economic development strategies focused on low-wage jobs.
It would be difficult to apply new regulations or contract provisions to warehouse workers who work as temps for subcontractors, says Meyerson. He calls for strict enforcement of wage and hour laws – and recalls the labor department’s 1990s anti-sweatshop effort, which held large retailers accountable for labor law violations by their contractors and subcontractors.
In the Chicago area, though, WWFJ is exploring the possibility of structuring development deals to limit the use of temporary labor in warehouse complexes built using state subsidies, as the region’s shipping industry continues to expand.
Why not use economic development subsidies to promote good jobs?