State saddles N.Y. trainers with additional penalties for labor violations

Trainers based in New York who negotiated settlements with the federal Department of Labor over unpaid wages and other labor violations have been hit with separate penalties by the state’s labor department, according to officials and trainers in New York.

Most prominently, trainers Chad Brown, Kiaran McLaughlin, and Linda Rice have been ordered to pay separate penalties and back wages, according to a release from Gov. Andrew Cuomo, which called the cases “wage theft.” Brown and Rice had already reached earlier settlements with federal regulators over labor violations.

In addition, racing stables headed by the trainers James Jerkens, Doodnauth Shivmangal, and Leo O’Brien were targeted by state regulators and have reached separate settlements, the state said.

The total amount cited by New York officials in the six cases is nearly $1 million, affecting 350 workers at New York racetracks, the state said.

Rice, who reached a settlement with federal regulators for $110,000 in back wages and penalties last year, was hit with another $133,000 in settlement costs under the state investigation. She said that following the settlement with federal regulators, state regulators conducted an additional audit of time periods not covered by the federal audit.

Rice said that the state audit centered on the same issues that were brought up by the federal investigators, namely, the proper accounting of the numbers of hours worked by grooms and hotwalkers. Both the federal and state investigators have rejected a longstanding industry practice of paying backstretch workers a weekly salary, Rice said.

“Basically they are saying this can no longer be a salaried job,” Rice said. “They are telling us these have to be hourly wages, with all that means for overtime.”

Chad Brown was hit with an additional $526,000 in “unpaid wages, liquidated damages, and penalties,” according to the state of New York, on top of the $1.6 million settlement he reached earlier this year with federal labor regulators. While the state judgment affected 119 grooms and hotwalkers, the state said, the federal settlement had affected 182 employees.

Brown’s attorney, Allan Bloom, did not return a phone message on Friday afternoon, when the state penalties were announced.

A spokesman for Gov. Cuomo’s office, Tim Ruffinen, said that state regulators audited Rice’s operation for the period of June 2017 to July 2018. The Brown audit covered a period from Sept. 2017 to Sept. 2018. The federal audits for both Rice and Brown covered three years prior to those state-audited periods. Rice has said that the federal settlement was reached in early 2019, while Brown’s federal settlement was not announced until May of this year.

The state said that wages have already been recovered in the cases involving Brown, McLaughlin, Rice, and Jerkens. In McLaughlin’s case, the total amount of recovered wages, liquidated damages, and penalties totaled $304,000. In Jerkens’s case, the total was $14,000.

In addition, the state said that Shivmangal has been ordered to pay $180,000, while O’Brien has been ordered to pay $89,000.

Racing officials with knowledge of the investigations have said that, following the initial federal investigations, state regulators fanned out across New York’s backstretches to initiate labor probes into dozens of stables. Coupled with mandatory increases in minimum wages that differ in the three counties where New York’s three racetracks are located, racing officials have said that the investigations and resulting changes in payroll procedures and costs have created unease among trainers about the ability to remain on the circuit.

“The Department of Labor issues have made life very difficult here over the past several years,” said Rice, who is a vice president on the board of the New York Thoroughbred Horsemen’s Association.

Trainers, horsemen’s officials, and labor lawyers representing horsemen have insisted that trainers were not intentionally underpaying their workers or violating labor laws, but were rather far too slow to adapt to modern labor practices that require the precise recording of hours worked and the adherence to regulations that define split shifts and overtime. In practice, grooms and hotwalkers often work highly erratic hours in which a day’s work can stretch well beyond a traditional, unbroken eight-hour shift.

For decades, trainers across the U.S. have used a weekly salary to compensate grooms and hotwalkers, with small bonuses based on the performance of horses under their care. Many rely on guest workers under the H2-B visa program to fill out those positions, and those workers are subject to additional regulations.

Joseph Appelbaum, president of the New York THA, said in a press release Saturday that trainers in New York have “worked extremely hard to modernize their payment practices” but said that the current rules and regulations being applied to backstretch workers “fail to recognize the unique nature of our industry.”

“All racetrack workers should be paid fairly and appropriately under the law,” the statement by Appelbaum said. “No small business is perfectly run, and these compliance issues mainly stem from a combination of long-term industry practices, the confusing nature of wage and hour rules, and a challenging timekeeping environment.”