Elder care homes profit as workers earn a pittance
By JENNIFER GOLLAN
She alights from a black Ferrari convertible, her Christian Louboutin stilettos glinting in the sunlight. The lid of her black lacquer grand piano is propped open in the living room of her plush Beverly Hills home.
“I own a chain of elderly care facilities,” she says into the camera on Bravo’s reality television show “The Millionaire Matchmaker.” ”My net worth is $3 to $4 million, probably.”
Stephanie Costa was 30 and enjoying a lifestyle supported in part by six board-and-care homes she owned in California’s Central Valley. But half of that fortune was threatened when she and her company initially were cited for about $1.6 million for labor violations, including wage theft – not paying 11 employees for working much of 24 hours a day, six days a week.
Costa, who declined to be interviewed for this story, is a rare public face of a burgeoning multibillion-dollar elder care industry that is enabling operators to become wealthy by treating workers as indentured servants. Across the country, legions of these caregivers earn a pittance to tend to the elderly in residential houses refurbished as care facilities, according to an investigation by Reveal from The Center for Investigative Reporting.
The profit margins can be huge and, for violators of labor laws, hinge on the widespread exploitation of thousands of caretakers, many of them poor immigrants effectively earning $2 to $3.50 an hour to work around the clock. The federal hourly minimum wage is $7.25.
Reveal interviewed more than 80 workers, care-home operators and government regulators and reviewed hundreds of wage theft cases handled by California and federal labor regulators, workers and local district attorneys. The investigation found rampant wage theft has pushed a vast majority of these caregivers into poverty.
Workers are left feeling desperate and trapped. Many caregivers say they rise before daybreak to cook meals, shower residents and scrub toilets. At night, they are deprived of sufficient sleep because they have to wake to change adult diapers, dispense painkillers, return wandering dementia residents to their beds and shift the bedridden every two hours to thwart bedsores.
Workers describe sleeping in hallways and garages, on couches and the floor. Some care homes deduct $25 a day from caregivers’ paychecks for “lodging.”
Exploited caregivers rarely are allowed a day off; even then, they often must pay their substitutes. Two caregivers recounted having miscarriages after their bosses refused to allow them time off or to stop lifting heavy residents.
Because these workers often live where they work, they are under the watchful eye of their bosses. They are bullied into not cooperating with investigators. In some cases, care-home operators have threatened to report undocumented workers to authorities.
Human trafficking – in which workers, particularly Filipinos, are coerced, manipulated and exploited — also is not uncommon, according to prosecutors and attorneys. For example, several family members were charged last year with human trafficking and labor abuse in a case involving caregivers in San Mateo County, California, south of San Francisco.
“It’s a classic tale of human greed,” said Tia Koonse, legal and policy research manager at the UCLA Labor Center. “Their entire business model is predicated on not making payroll. It relies on people being willing to work for 24 hours a day for less than a dollar an hour. Only trafficked people will put up with that.”
The growth of board-and-care homes in neighborhoods across the United States is tied to medical advances, enabling aging baby boomers to live longer despite debilitating illnesses. This has resulted in an increasing number of gravely ill people or their family members seeking an alternative to costly nursing home care. There were about 29,000 residential care communities nationwide and about 300,000 full-time caregivers in 2016, according to the most recent federal figures available. About two-thirds are smaller facilities with four to 25 residents, many with dementia. California leads the nation with more than 7,300 residential care facilities licensed by the state.
Stephanie Costa provides a case study in exploiting workers, getting caught breaking labor laws and circumventing full punishment.
In 2013, 11 workers brought wage theft claims after providing around-the-clock care in the care homes Costa owned. They changed adults’ diapers, comforted the dying and hoisted infirm residents into bed. They worked six days a week and subsisted on meager wages, according to interviews and court documents.
The workers said they risked being fired if they left the facilities and had no off-duty rest breaks during the day. Costa’s care homes promoted 24/7 care for frail clients.
“We knew we were being underpaid,” said Juliet Delos Reyes, 60, a former caregiver employed by Costa. “But we were helpless. We didn’t know our rights. How could we leave?”
Reyes said she was not allowed to leave the home without permission when clients were present.
In many cases, workers in the industry fall into jobs that become increasingly abusive. A substantial number are working in the U.S. without authorization or applying to remain legally in the country. They are paid less than they’re promised, isolated and restricted to the facilities.
Residents in these care homes typically are more than 60 years old. The annual national median cost for each resident is about $48,000. Dementia residents often pay more. Some owners tack on extra charges for those who are incontinent or desire more than two showers a week.
Over the last decade, care-home operators across the nation broke minimum wage, overtime or record-keeping laws in at least 1,400 cases, federal data shows. About 35 percent of them were in California. Data obtained by Reveal through a California Public Records Act request shows senior care facilities in the state have been ordered to pay back wages and penalties in more than 110 additional cases.
Three months after Costa’s star turn on Bravo in 2013, the state labor commissioner’s office ordered Costa and her company, Bedford Care Group, to pay about $1.6 million for unpaid wages and penalties. That’s when she changed tactics.
Papers were then filed with the state to create two new residential care-home companies called Clear View Retirement Group LLC and Copper River Retirement Group LLC. Costa’s mother, Alice Hayes, is secretary, one of two officers, of these companies, according to licensing records. Hayes declined to comment.
These new companies then received licenses from the state to run the six former Bedford care homes. But the structure and administrative staff in the care homes? Hayes assured residents that they would remain the same. In December 2014, following an appeal, the amount owed for the labor violations was reduced to $665,000. But around the same time, Costa’s Bedford Care Group filed for bankruptcy, a legal maneuver that allowed her to effectively slash the amount she owed workers by settling the case for about $200,000, which she paid.
Three weeks after Costa’s care-home business filed for bankruptcy, her father registered a new company with the state called Property Investment Housing LLC. The company then took over as the new owner of Costa’s six care homes. Her father did not return a call seeking comment. Stephanie Costa is the company’s chief executive, records show.
Stephanie Costa represents a rare case in which an operator paid up, if only a partial amount of the original fine. Residential care facilities for the elderly receive among the largest wage theft judgments of any industry. Yet Reveal found that some facility owners caught cheating their workers are able to evade fines and judgments.
Many companies play shell games by not keeping money or real estate holdings in the name of the company against which judgments or fines are entered. They simply abandon their company names – and the judgments against those named entities – rendering the penalties and wage theft judgments meaningless.
Across the country, states are charged with regulating board-and-care facilities. In California, the state labor commissioner’s office and U.S. Department of Labor, in addition to some local governments, are charged with investigating wage theft. State and federal regulators say privately that they need many more investigators and lawyers to chase down scofflaws and force them to pay.
The Department of Labor’s Wage and Hour Division declined to make top officials available for an interview. But in a written statement, a Labor Department spokesman said: “Last year the division recovered a record-setting $304 million in back wages for workers and conducted a record-setting 3,600 outreach events to provide information to employers, employees, and other stakeholders about the requirements of the law.”
The agency noted that in California, it has conducted investigations and “extensive outreach” to care-home operators “ensuring that they pay their workers the wages they have legally earned.”
At least 20 companies providing care for the elderly, disabled and mentally ill in California continue to operate illegally — many of them under their original names — after ignoring judgments for back wages and penalties totaling more than $1.4 million, Reveal found. A 2016 law barred companies with outstanding wage theft judgments from conducting business in the state. But the state Department of Social Services’ Community Care Licensing Division, which is in charge of licensing facilities for the elderly and disabled, has not followed through.
Pat Leary, acting director of the Department of Social Services, declined through spokesman Michael Weston to be interviewed. But in an email, Weston wrote that while the law allows his agency to deny a new license or not renew an existing one, the agency can take these steps only if it finds residents’ health and safety have been threatened.
For her part, Costa’s former employee Juliet Delos Reyes desperately needed the total back pay she was owed before the bankruptcy of Costa’s company. She now cares for her husband, who is on dialysis. His medical bills are crushing.
“We didn’t save anything. It affected us badly,” Reyes said through tears. “I just hope that someday the government will look at how caregivers are treated.”
In mid-2016, the California Social Services Department banned Costa from the assisted living business for life after finding multiple health and safety violations. Among the violations: caregivers working without required criminal background checks; caregivers lacking the proper skills to test the glucose of a diabetic resident whose hands had been amputated; taking in hospice patients without the state’s permission; and arguing with the friend of a resident who was sent to the hospital, prompting staff there to ask her to leave.
Costa ignored the ban and continued to hire and fire workers at the care homes. So state licensing officials in April 2017 had Costa’s mother sign a declaration promising Costa would not be involved in “any capacity” with the companies – Copper River Retirement Group and Clear View Retirement Group – that operate the care homes she once ran.
But even after that meeting, records show, Costa listed herself as a managing member of Clear View Retirement Group. Costa’s name has since been removed from the most recent business filings received by the state.