More Payroll Tax and Minimum Wage Issues
My interest in HomeFirst’s payroll tax and minimum wage
problems (9th and 10th Issues) were sparked by its smaller
competitor Downtown Streets, whose
program strategy had inspired HomeFirst’s New Start program.
After Eileen Richardson, ended her brief stint as Napster’s
first CEO, she wandered past the Palo Alto Food Closet, which distributed food
to the community’s homeless and very poor.
Soon she was volunteering for the operation, and after that she moved
beyond handing out food to trying to help individuals into jobs and housing. She started Downtown Streets in 2005, engaging
its clients to clean the streets and parking lots of Palo Alto. In time, services grew to include government
and private projects in four Bay Area cities.
Revenues come mostly from government grants and private fees
for its maintenance services and about a third from charitable contributions. The clients, wearing yellow, green, blue, or black
t-shirts to indicate their rank, are compensated with vouchers from Safeway,
Target, and other stores at a rate of $5 per hour of service for
yellow-shirted team members. In addition,
they receive advice on housing and employment.
As in a regular job, if they miss required meetings or job shifts, they are
kicked off the team.
Downtown Streets team members receive no benefits. Not only do they not receive health benefits,
they do not participate in the social security system, they do not enjoy
unemployment benefits, and they lack long term disability insurance. On the other hand, the arrangement helps both
Downtown Streets and team members avoid payroll taxes.
Since the vouchers are under-the-table, team members are not
forced to declare the income to anyone. If
they live in subsidized housing, where rent may be a function of tenant income,
the vouchers do not cause their rent to increase. Any payments for past taxes or child support would also be unaffected. As long as
the difference between the voucher rate and the minimum wage rate is small,
members may benefit along with Downtown Streets.
As was the case with HomeFirst’s New Start clients, much
hinges on whether Downtown Streets’ team members are employees under the law. Downtown Streets describes them as volunteers
who receive non-cash stipends. For
California’s purposes, anyone who renders service for another (except as an
independent contractor) is an employee. But
someone who performs services in return for aid or sustenance only received
from a nonprofit is not an employee. Nor
is someone who volunteers for a nonprofit.
The matter could be ambiguous.
To my mind, the case was clear enough: Downtown Streets was
paying vulnerable individuals less than they should to perform the maintenance services
that were the company’s business. In the
mind of Downtown Streets, it might also be clear: their clients were volunteers
without any employment agreement, and they received aid in the form of stipends
for volunteering.
Because Downtown Streets appeared to me to be in the wrong, I
complained. In June 2014, I mailed a
complaint to the California Labor Commissioner that the company was violating
minimum wage laws. In July 2014, I reported
the suspected payroll tax fraud to the California Economic Development
Department website. I never received a
response from either agency. Later I sent
the information to a reporter at a widely-read free local newspaper; no reply.
A year later, I emailed a complaint to the Palo Alto City
Attorney because the City contracted with Downtown Streets to clean its public spaces. He never replied. I copied that email to the local free
newspaper without receiving a response. I
sent an email to Palo Alto Council members, but never received a reply there
either.
My complaints about HomeFirst’s compensation for its New
Start workers (Issues 9 and 10) were based on inside information about those affected
and my responsibility for legal compliance.
As an officer of HomeFirst I also had an obligation attempt to work with
CEO Jenny and the Board to correct the company’s behavior. By contrast, I made no attempt to communicate
with Downtown Streets on this issue, my knowledge of the matter was limited, and
I was not a Palo Alto resident who could claim to be harmed by the situation. The team members with whom I talked about
their pay expressed no special concern.
With no skin in this game, why complain at all? In a threatening letter,
HomeFirst accused me of being obsessive and bizarre in continuing to pursue my
complaints nine months after they fired me.
Were my complaints about Downtown Streets any less obsessive and bizarre? Because whistleblowing is a long affair,
anyone on that adventure is vulnerable to such criticism.
Viewed differently, the Downtown Streets and HomeFirst
behaviors may demand continuing complaints: others will be harmed if I do
not act, I am able to act, I am in a position to act, no one else is likely to
act, and the act may not be entirely futile[1]. And the usual excuses for failing to complain
– loyalty to the employer and fellow employees, fear of retaliation – are
absent.
So, bizarrely or not, I act as well as I can until it proves
pointless.
[1] Duska, Ronald, Brenda Shay
Duska and Julia Regatz. Accounting Ethics. Malden, Mass.:
Wiley-Blackwell. 2011
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