[Hpn] Homeless workers make Labor Ready big profits FWD
Mon, 28 Aug 2000 11:50:03 -0700 (PDT)
FWD Associated Press - AP Wire Service - Aug 19, 2000
TACOMA COMPANY TURNS DAY LABOR INTO BIG BUSINESS
By PEGGY ANDERSEN
Associated Press Writer
TACOMA, Wash. (AP) _ Labor Ready made more than $850 million
last year linking unskilled workers _ often homeless men in
desperate straits _ with small businesses desperate for no-hassle
But what exactly are they profiting from?
``Labor Ready is making all that cash off the homeless,'' says
Larry Geo, 40, interviewed at a Seattle tent city of homeless
The Tacoma-based company, which operates 839 ``stores'' in 50
states, Canada and the United Kingdom, takes heat from unions and
homeless advocates for exploiting those with no skills, no
prospects, and nowhere else to turn.
``They take too big a cut,'' added James Fradenburg, 43, like
Geo a potential member of Labor Ready's workforce of low-income
The company takes at least 30 percent of incoming wages to cover
workers-comp insurance costs, payroll taxes and other deductions,
and overhead, says its general counsel, Ron Junck.
But defenders say Labor Ready brings order and accountability to
``Welcome to the real world,'' says Christopher Jenks of Harvard
University, author of ``The Homeless.'' ``This is called
Founded in 1991, Labor Ready went public in 1996, becoming the
day-labor equivalent of a fast-food chain. Business boomed, and its
stock hit a high of $23 last summer.
There've been some missteps since then _ founder Glenn Welstad
has resigned and shares these days fetch $4 to $5. But the company
has opened more than 150 new stores since January.
For client companies, Labor Ready takes the risk _ and the
paperwork _ out of hiring from a high-risk labor pool.
Many customers ``are probably not making enough money to hire a
full-time person,'' says analyst Jeanne Ernst with First Security
Van Kasper in San Francisco. ``It's probably a godsend to have
somebody come in for two hours'' or a couple days a week.
Advocates for the homeless worry Labor Ready is part of a
contingency-worker trend that could create a permanent underclass
with no job security, no health insurance and few rights.
``People who are homeless need jobs that pay living wages,''
said Barbara Duffield at the National Coalition for the Homeless.
Labor Ready ``is an interim kind of measure that grows and
becomes the answer, and then people don't look at the longterm
answer,'' she said.
But Junck counters that workers typically work for Labor Ready
just 100 hours before they move on _ often to ``full-time
employment they've landed through working with us.''
The company has organized what used to be streetcorner
operations with no worker protections, said analyst Karan Sodhi
with Stephens Inc. in Boston. ``I think they're performing a
But Labor Ready is being sued over the cash-dispensing machines
at the heart of its ``work today, paid today'' slogan.
Workers pay a $1-and-change fee to use the machines _ a worker
who earns $38.57 takes away $37. They can also be paid by check,
but that's problematic for those without addresses or bank
The company's 10-K filing with the Securities and Exchange
Commission characterized the fees as insignificant, but they
brought in $7.7 million last year.
``The machines are ... a convenience for our workers,'' Junck
The Atlanta lawsuit over the machines is one of several salvos
fired by the AFL-CIO's Building and Construction Trades Department.
The union agency, which holds 515 Labor Ready shares, also
accuses the company of ``seriously misleading statements'' to the
The typical Labor Ready customer wants two temporary workers.
The typical daily payout is less than $50.
But it adds up. The company had 254,000 customers in 1999 and
filled 6.5 million work orders.
``I think last year we employed 700,000 workers,'' Junck said _
virtually all earning more than the $5.15 minimum wage.
As the employer of record, Labor Ready handles government
paperwork and even safety training _ through videotapes _ when
warranted. The company tracks offices and workers by computer.
No-shows and substance abusers are blackballed systemwide.
Labor Ready represents ``in some sense the privatization of
employment offices'' without the accountability required of public
agencies, says Cathy Ruckelshaus at the National Employment Law
Project in New York.
There've been growing pains.
A 1999 purge of middle managers _ about 300 account
representatives who hustled prospective clients _ undermined morale
and growth, Ernst said, though ``for several quarters they were
performing above expectations'' as a result of the cuts.
Then there was Welstad's unauthorized $3.5 million loan from the
company to meet a margin call and prevent further decline of its
stock. The move prompted his June resignation as president and
chief executive officer.
``They were very lucky they had Dick King in place when that
happened,'' Ernst said, referring to Welstad successor Richard
King, former president of the Albertson's grocery chain, hired in
Ernst rates the company a hold.
``While the economics of their business are compelling, I'm not
totally convinced they can get back where they were,'' she said.
With a 4 percent unemployment rate, ``even people with very low
skills can get fulltime jobs.''
Sodhi gives Labor Ready a neutral rating, concerned that ``they
grew a little faster than they could manage.''
Received Id AP100232328069A5 on Aug 19 2000 13:01
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