The Milpitas City Council unanimously passed an ordinance last Tuesday that will impose harsh penalties on contractors and developers that participate in wage theft — a practice where employers deny pay to workers — and illegal labor practices.

The legislation, called the Responsible Construction Ordinance, was initially proposed last February by Councilman Anthony Phan.

“It’s heartbreaking,” said Ruth Silver-Taube, a spokesperson for the Santa Clara County Wage Theft Coalition and a law professor at Santa Clara University, about wage theft. “It’s also a public health issue. Because when you don’t get paid, you can’t eat, you can’t get medical care.”

As part of the ordinance, all private developers and construction developers on private projects will be required to sign a statement pledging to follow the state’s labor laws before the project is deemed compliant. It also requires project owners, contractors, and subcontractors to provide detailed pay documents to their workers and to the city. The city will not approve projects if developers have outstanding cases of unpaid wages to their workers, or until wage disputes are resolved.

“This really isn’t to burden the industry as a whole. It’s quite the opposite. It creates a level playing field in the industry,” said Phan. “It’s really unfair competition when these bad actors — who don’t pay their employees, who don’t play by the rules — get away with it.”

Labor unions have almost unanimously supported similar legislation, which they say fixes pervasive problems in the service and blue-collar industries. However, some local business groups and other developers aren’t so sure…

“These are bad solutions seeking essentially nonexistent problems because wage theft is not rampant throughout the construction industry,” said Dennis Martin of the Bay Area Building Industry Association during last Tuesday’s meeting.

Wage theft has been called an “epidemic” in the South Bay by some labor experts as the region’s tech companies have spurred demand for associated blue-collar and hospitality workers — many of whom are low-wage workers and people of color.

The state has introduced efforts to compel businesses to pay workers who have been shortchanged, including an enforcement program run by the state Labor Commissioner’s Office. Workers can take their employers to hearings, where a group of judges can either accept or reject their claims.

But even after winning a judgment for unpaid wages, many workers report that their employers still don’t pay up. A UCLA study found that between 2008 and 2011, only 17% of workers who won a claim were able to receive any unpaid wages. Workers who try to pursue their claims after a successful judgment often find that their employers have disappeared, hid their assets, shut down, or reorganized themselves into a new business, according to the study.

Unpaid wage theft judgments are a problem the new ordinance hopes to solve, which is why the ordinance bars any construction or development firms that have outstanding wage judgments from working in the city. Proponents of such legislation hope orders like Milpitas’s ordinance make workers more aware that they have recourse against withheld wages.

“A lot of workers just have no idea there is a labor board. They have no idea what the laws are around construction,” said David Bini, the executive director of the Santa Clara & San Benito Counties Building & Construction Trades Council. “They haven’t heard of…legislation that governs wage theft specifically.”

Before he became director of the council, Bini worked as an electrician trainee in a non-unionized construction job. Non-unionized contractors, according to Bini, are far more likely to engage in wage theft compared to those in union jobs, due to the lack of union oversight. That, along with a fear of retaliation from employers, deters many workers from filing complaints with the state.

Bini should know: He was once embroiled in a wage theft fight with a former employer. While working for that employer, Bini said he was cheated out of approximately $245 of overtime pay. He asked his employer repeatedly for his wages over the course of a month, but they still refused to pay him. He then filed a complaint with the state labor board.

“As soon as I left the labor board, about a half-hour later, I got a phone call from my employer who said, ‘I’ve got a check here for you.’”

Most workers, however, aren’t that lucky. Such is why labor leaders like Bini and Silver-Taube are looking to local governments to enforce wage theft legislation, in the hopes that other cities will enforce similar laws in the future.

“We need local governments to step up and deter this at the front end,” said Silver-Taube.

Milpitas’s ordinance is based on a similar one passed in 2017 by city officials in Morgan Hill. It is set to go into effect next month.