How contractors with ‘ghost’ workers give big companies a buffer against immigration officials

Seven days a week, Martha Lopez arrived before dawn at the Target in Brentwood, Tenn., to make sure the store in the Nashville suburb gleamed for shoppers. For about two years, Lopez said, she emptied trash, scrubbed the toilets and polished the white floors to maintain the “wet look” the retailer demands. The pay wasn’t bad, but payday gave her pause.

Twice a month, her wages — $11.50 an hour — were loaded onto an electronic pay card she’d been given. The card was stamped with somebody else’s name: “M Hernandez Cleme.”

Lopez didn’t ask questions. As an immigrant who had entered the United States illegally, she had learned long ago to accept all kinds of oddities and indignities at work. Then, this year, the pay card stopped working. She complained to her boss and eventually got a new card. This one had no name. Lopez lost several weeks’ pay in the transition, she said, but her boss told her she could gripe all she wanted — no one would listen. She’d been working under the name of a person who’d left long ago, she recalled him saying, so there would never be any record that she’d even picked up a broom on this job.

“They always told me I didn’t exist on their system,” Lopez said. “Como una fantasma.” Like a ghost.

Lopez wasn’t working directly for Target but rather for a company called Diversified Maintenance Systems, which has had contracts to clean Target Corp. stores across the country since 2003. The company has faced serious allegations of labor violations in lawsuits and regulatory actions previously — including claims that it put undocumented immigrants to work under assumed names, as Lopez describes.

Amid the searing debate over President Trump’s immigration crackdown, Diversified and other contractors have provided a way for some of America’s biggest employers — including Target and Walmart Inc. — to effectively benefit from cheap, undocumented labor without fear of meaningful penalties. Diversified, Walmart and Target all say they don’t hire undocumented workers.

It’s illegal, of course, to hire such workers, but the law says that to be in violation, an employer must “knowingly” make the hires. That has created opportunities for U.S. staffing companies, an industry that employs an estimated 15 million people. As they provide major U.S. companies with workers for the dirty, low-paid or dangerous jobs that few Americans want, many such firms also give their clients something else: plausible deniability regarding the workers’ immigration status.

This backdoor labor supply sometimes involves the use of assumed names, including those of former workers. In one case, undocumented Venezuelans helped repair a storm-damaged Walmart, but the contractor for that job said a subcontractor supplied the workers and should be held responsible. That template — using layers of contractors — can frustrate attempts to hold companies accountable. Despite Trump’s call for stepped-up enforcement, it has been rare for federal agents to unearth corporate wrongdoing in such arrangements. When they do, it’s rarer still for any executives to face consequences.

Some labor contractors “are kind of like a shield for major companies that are bringing in immigrant labor,” said Tim Bell, executive director at the Chicago Workers’ Collaborative, an advocacy group for temp workers. “They reap the fruits of their labor but don’t take on any potential liability that that kind of hiring would incur — liability for violations of labor laws such as discrimination, wage theft, dangerous workplaces and sexual harassment.”

This month, a few days after Bloomberg asked about Lopez’s case, Target said it would cancel its contract with Diversified in Tennessee and order heightened scrutiny of all the firm’s work. Allegations of Diversified’s use of undocumented immigrants in Target stores previously came to light in a workers’ lawsuit in 2011 and again more than a year ago.

In a sense, Target’s decision to now take a closer look traces to a morning in October when Lopez walked into Target’s Brentwood store.

She had grown desperate to recover her back wages, which she said amounted to almost $4,000 for more than a month’s work. She needed the money for her three children still living in Mexico. She’d been sending them cash for almost 20 years, ever since she followed a coyote across the desert into California.

‘A big loophole’

American businesses’ dependence on immigrant labor took root decades ago. When workers shipped overseas to fight in World War I, the U.S. government admitted large numbers of Mexicans to work untended farm fields. They were repatriated to Mexico when the Great Depression hit, then were called upon again during World War II. After the U.S. troops came home looking for work, Congress made it a crime to “harbor, transport, or conceal” undocumented immigrants. But farmers in Texas, worried they’d lose a cheap labor source, won an exemption: Employers who hired undocumented workers couldn’t be held criminally liable. The loophole became known as the Texas Proviso.

In 1986, as the number of undocumented immigrants apprehended by the U.S. Border Patrol reached a record 1.7 million, President Reagan signed the Immigration Reform and Control Act. It gave amnesty to nearly 3 million undocumented immigrants and created the first potential sanctions for employers.

But the business lobby won what was essentially a modernized version of the Texas Proviso: The government would have to show that companies had “knowingly” hired undocumented workers. Moreover, the act stipulated that if an employer views a worker’s document that “reasonably appears on its face to be genuine,” he or she has satisfied the law and could even be penalized for discrimination by rejecting it or asking for additional proof.

That led to a cottage industry of fake-document makers, said Muzaffar Chishti, an attorney at the Washington-based Migration Policy Institute. “It became a big loophole,” Chishti said. “Employers who had become used to hiring unauthorized workers told them, ‘Go and get me documents.’”

The law tasked government agents with enforcing its employment provisions — activity that the Trump administration has vowed to increase. In the fiscal year that ended Sept. 30, federal officials reported opening 6,848 work site investigations, quadruple the prior year’s total. In fiscal 2017, 1,730 employers were subjected to “enforcement-related actions” for hiring illegal workers, according to the latest figures from the Department of Homeland Security. According to an analysis by the Migration Policy Institute, that’s about 0.03% of employers.

‘Unwritten official policy’

With 1,800 stores and 350,000 employees, Target promotes itself as a national leader in corporate social responsibility and workers’ rights. But its cleaning contractor, Diversified, has drawn controversy.

When Diversified janitors who cleaned Target stores and other big-box retailers in Minnesota filed a lawsuit in 2011, they alleged violations of labor law, such as being required to work without breaks or overtime pay. They also detailed how they were instructed to clock in using the identifying information of former workers whose names remained in Diversified’s computer system.

The assumed identities were known by workers and managers as “ghost employees.” The workers described getting electronic pay cards in other people’s names, which they dubbed “ghost cards.”

In a sworn statement filed in the lawsuit, Marco Alvarez, a former Diversified area manager in Minnesota, said hiring undocumented workers to clean Target stores was an “unwritten official policy” for the contractor in multiple states. Diversified was hiring people, “intentionally and knowingly, who did not have proper status so they could avoid paying overtime,” he said.

Diversified denied any wrongdoing and settled the suit in 2013 for $675,000, according to court documents.

When Target then sought bids on a new contract for its Twin Cities stores, Diversified didn’t submit one. But Target kept the company on elsewhere. A Target spokesperson said the retailer had retained Diversified in the other locations because, at the time, it was unaware of any additional labor or immigration complaints about the firm. As of Dec. 1, Diversified’s janitors were cleaning 400 Target stores in 23 states. Its website also lists more than a dozen other major U.S. companies as customers.

An attorney for Diversified, Meredith Gaunce, said the firm doesn’t hire undocumented workers. “This has never been company practice,” Gaunce said, adding that its managers confirm applicants’ eligibility with the E-Verify system. “If an undocumented person did perform work, then clearly there was an intent to evade company rules and procedures.”

Martha Lopez said she began working for Diversified days after arriving in Nashville from Los Angeles in December 2012. A friend told her about a job notice tacked to the bulletin board at their neighborhood Latino market. She called about it, and the woman who answered put her to work before dawn the next day, cleaning a Target store. The woman promised to pay her in cash, no questions asked, and handed her the pay card assigned to “M Hernandez Cleme,” Lopez said.

“They always told me that person had papers and had been in their system for many years,” said Lopez, 42. “So that’s how they could pay me.”

Gaunce confirmed that the name on the pay card belongs to a former employee but said she had seen no evidence that any Diversified manager distributed ex-workers’ pay cards to current employees. She also said the company was unaware that Lopez is undocumented, and the firm has been unable to corroborate her claims of unpaid wages. Gaunce said the firm does have a record of employing Lopez, though it dates to 2013, ending Dec. 24 that year.

Lopez said she worked cleaning five Target stores in the Nashville area for Diversified over about 5½ years. She had four managers over that time, she said, and they all had her use the same pay card — until it stopped working early this year.

Lopez said that by the time her manager replaced the card weeks later — with one that said “DMS Employee” — she’d racked up $3,708.75 in unpaid wages. In August, she’d had enough. She was tired of the schedule — seven days a week with no overtime and no time for breaks, she said — so she quit.

Eventually, Lopez met some people from an immigrant labor advocacy group called Dignidad Obrera. Staff members told her about two janitors who last year also said they’d been shorted by Diversified — and collected from the company. Like Lopez, the men said they were given pay cards with other people’s names. One was issued to a woman named Alma Hernandez; the other to Angel Amaro, the workers said. Gaunce said both are names of former Diversified employees.

On Aug. 17, 2017, Gaunce sent an email agreeing to pay double what the men were seeking, without disputing or admitting to any of their allegations. The lawyer asked that in return, the men stop their protests, the email shows. Gaunce told Bloomberg that the company’s internal investigations found no merit to the men’s complaints, but “we wanted to ensure nothing had been miscommunicated or had evaded our processes.”

Lopez was inspired by their success. She and another Mexican immigrant who had worked with her cleaning the Brentwood store reached out to Dignidad Obrera. The group, which doesn’t inquire about workers’ immigration status, helped her write a letter to Diversified demanding double their back pay. On Sept. 19, Lopez received a letter from Gaunce asking for more documentation of her work for Diversified because the firm’s records indicated she hadn’t been active in the payroll system for more than four years. “I hope you can understand our confusion,” the letter said.

Lopez took her grievance to Target’s front door. That October morning, she and three fellow members of Dignidad Obrera gathered beside the customer service desk in the Brentwood store to give their complaint letter to a manager and ask for help.

When the store manager refused to accept the letter, Lopez was taken aback. “You guys work through Diversified,” the manager said, according to a video of the encounter. “We, unfortunately, don’t have any ability to do anything directly for you.”

After Bloomberg asked about Lopez’s allegations, Target met this month with Diversified’s chief executive, Derek Gordon. According to a Target executive familiar with the meeting, Gordon pledged to investigate and address the issues raised.

Target spokeswoman Jenna Reck said the retailer is “firmly committed to responsible business conduct and we hold our team, business partners and vendors to the highest standards. We require our vendors to follow all applicable laws and regulations for their business.”

A few days after the meeting with Gordon, Target said it would cancel Diversified’s contract in Tennessee. It also said that because of the allegations, it would order a more extensive look into all the contractor’s work for Target, as part of a scheduled annual audit. The auditor’s findings “will inform the next steps for our national contract with Diversified” in 22 other states, Reck said.

Diversified said it has always performed well in Target’s annual audits and will cooperate with this one. “We appreciate their concern for their brand in light of these unwarranted claims,” it said in a statement. As for Lopez’s allegations, Diversified said she and the workers group hadn’t provided sufficient proof of her claims, but it paid her anyway.

A check in the amount Lopez had demanded arrived last week — bearing her real name.

Smith and Etter write for Bloomberg.