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Trade Secrets

[whitespace] barter Counter Offers: In service jobs, some workers use low pay and a lack of respect from employers as justification for an unofficial barter system.

Photo illustration by Christopher Gardner



To some of the overworked and underpaid minions of local coffee shops and nightclubs, it's flat-out stealing; to others it's community-building: the surreptitious world of under-the-table trading

By Traci Hukill

THE CASHIER FROM THE BURGER place walks into a cafe with a bag of french fries and leaves with a double espresso. The cocktail waitress from the bar down the street takes a free mocha before her shift with a wink and sets a few beers on the table later on when the folks from the cafe come in after work. In another part of town, the pizza-delivery guy has just pulled into a bakery parking lot with an extra-large combination pie for his friends there. He leaves with a sackful of free bagels and a big smile.

A few years ago, long before I went to work there, a core group of workers at a cafe got fed up with the low pay, erratic scheduling and indifferent management that characterize an unfortunate number of cafes and restaurants. In a complex psychological alchemy that starts with resentment and ends in defiance, the employees started pilfering.

The policy on employee meals was already generous--they could eat as much as they wanted for free--but people started taking food home, too. One enthusiastic guy used to load up on stale (and sometimes not-so-stale) pastries each night and walk out with a sackful under each arm. And employees started surreptitiously giving coffee drinks away to friends and acquaintances now and then. It didn't seem like any big deal, and the managers, if they knew about it, didn't let on.

Most of the employees in this Santa Cruz hangout had friends in similar low-end service jobs who returned the favor. People wound up with free beer, pizza, ice cream, hats, bongs, massages, rolls of film and admission to shows--all in exchange for espressos, shakes and lattes. The cafe workers' subsidized generosity increased with time, overflowing into the remaining ranks of the staff and expanding to include a wider sweep of beneficiaries. No longer just close friends but agreeable acquaintances and the more interesting street people, whether they had anything to trade or not, could walk in and get a free almond mocha or a double-strength light roast drip.

By the time I showed up a year later, the trade ethic, as well as the giveaway ethic, was firmly in place and had morphed into something several generations of new employees at this cafe, where supervision was minimal and turnover high, had come to accept as part of the place's culture. It was fun (and unbelievably easy) to slide a friend a drink and wave off her feeble attempts to pay for it. Everyone was happy, even management, whose benign ignorance enabled the operation to continue. Business jumped just like it always had, and morale in the place was high.

There isn't any question that we were stealing. It just didn't feel like it because we weren't opening up the cash drawer and yanking money out, but we were definitely violating the sixth commandment, and I think everyone understood that. When the overzealous pastry eater left one night with two whole cheesecakes, people stared and some squirmed. It didn't feel right.

On the other hand, justification and rationalization came easily. We weren't paid enough to live on, we knew we were expendable, management was by all appearances incompetent and it was a dead-end job. We just didn't have a reason to care about the place. For some it was a matter of personal conflict with the boss. Others were ticked off at the system, the way twentysomethings often are, and responding to the prospect of a lifetime of meaningless work by taking it out on the closest target. In any case, the rip-off, we figured, went both ways.

American businesses lose as much as $40 billion a year--or $400 billion, depending on who's talking--to dishonest employees. An entire "loss-prevention service" industry, which manufactures security cameras and pre-employment honesty assessments, has sprung up to warn business owners about the perils of employees who think they're underpaid, overworked or somehow allowed to steal just a little bit. One such company's Web site claims that two out of three employees will steal if given the opportunity. Literature from another screams, "Employees Steal 10 Times More Than Shoplifters!"

But the truth is that no one really knows how much employees steal, not even store owners. What they do know is that employee theft happens all the time and that, short of constant surveillance, almost nothing can be done about it.

THE MANAGER AT CAMPBELL Coffee Roasting Company recalls that a couple years ago, a bad-apple employee was fired for ordering extra merchandise, then writing it off and taking it home. Because of that, and because of several thousand dollars' worth of product that "walked out the door" as a result of employee theft, she says the cafe keeps a tight rein on its employees and its inventory. The only losses today, she says, are due to spoilage.

She's either lucky or naive; most of the owners and managers we interviewed consider employee theft a problem. Dennis Fong owns Cafe Matisse on S. First Street in downtown San Jose. He acknowledges that in his business, illicit trade, giveaways or outright theft come with the territory.

"Anytime you deal with a cash business, it's bound to happen," he says. "There's no operation I know of in the cash business that has it 100 percent under control."

Paul Gerhardt, co-owner of The Usual nightclub, echoes Fong's observation. "I think it definitely goes on all over, especially within a system like the tight-knit bar and nightclub community in San Jose. There's just not that many employees, and a lot of them know each other. As an owner you don't like it, because you obviously don't want your product going over the bar for free, so you just try to keep an eye on your product as best you can."

Tim Bransen (a pseudonym) has been in business in Santa Cruz for 16 years. Although he agreed to be interviewed for this story, he asked that his name not be used because he's trying to sell his restaurant and doesn't want to scare potential buyers away with horror stories. Employee theft has plagued his business for years.

"It's absolutely a problem, from toilet paper to stealing other products," he says. "I interpret it lots of ways, including giving food away or trading. I fire people for that.

"I had a ring of people last summer who stole from me blind," he continues. "They had the paperwork all figured out. But you can get screwed, blued and tattooed as an employer if you accuse someone of theft and can't prove it."

Defamation suits get expensive, so the common wisdom suggests that owners take preventive measures, which translates roughly as "security cameras" or "background checks." The former presents a one-time cost of a couple thousand dollars, the latter a repeating cost of about a hundred. A little quick math shows that hundred-dollar background checks on employees who may only stay for a few weeks or a couple of months might not be so cost-effective.

There is another option, and Jacquie Kofol of San Jose's National Business Consultants stands ready to supply it. Armed with frightening statistics ("average per-employee theft is over $547 a year") and a rapid-fire sales pitch, Kofol sells pre-employment screening tests designed to identify potential thieves. She also presents seminars on preventing employee theft to the San Jose Chamber of Commerce and other professional groups. Her job basically exists because of defamation lawsuits.

"Very, very seldom do you prosecute an employee for theft," she says. "When people call for references, employers are scared to say, 'That person was fired for theft' because they're afraid the employee will come back and sue. So I work with employers doing employee theft screenings and personality fits so they know they're getting the best employees to begin with."

Although Kofol has no quantitative proof that her evaluations work, she says the proof is in glowing letters of testimony from business owners. But Kofol's services are expensive--her favorite tool, the Prevue Assessment, costs $165 per employee--and doing it on the cheap, which means buying the software from Kofol, requires an initial investment of several hundred dollars. Besides, these tests take time to administer and evaluate, and time is something most small-business owners lack. Much easier for them to consider security cameras--even if, like erstwhile hippie Bransen, they find the idea repugnant.

"I hate the idea of an eye in the sky," he says, "but if I were starting from scratch I would be into a camera because you gotta let 'em know you mean business.

"Boy, I started out a whole lot different," he says wearily. "But when you've been victimized as much as we have, things start becoming very simple."

Downtown San Jose's Fong, however, harbors no such ideological hang-ups. "As a matter of fact, I'm installing cameras next week," he laughs. "Let's say you lose $10 a day. That's $300 a month. So a camera costs $2,000, OK? Well, you make it up in a year. You couldn't get that good a return on the stock market!"

Unfortunately, Fong's camera won't distinguish between employees who give the house away on a regular basis and those who occasionally treat regular customers to a discount--a customer-relations tactic bars have been using probably since the first tavern opened.

MARK SAYS IT ALL started with ice. A bartender in Campbell, he says trading now happens all the time at his workplace (for obvious reasons, the employees we interviewed didn't want their real names used). He trades soft drinks for lunches with a nearby cafe on occasion. He also provides ice to a movie theater whose ice machine is on the fritz--and in exchange he and his co-workers get free admission to movies and free popcorn and candy.

The interesting thing about the situation Mark describes is that, although his manager is unaware of the arrangement, it actually benefits the bar. "I usually set out peanuts, but sometimes they give us huge bags of popcorn that I give to my customers. They really like it--you know, it's a nice change of pace."

As for the ice, well, as a bartender he knows better than anyone how important ice is. "It's a tough commodity," he says, then laughs. "The way it started is I went to a movie and ordered a Coke and got one piece of ice in it. One piece of ice! So I asked why, and they told me the machine was broken, and I ran next door and brought 'em some ice. It's just helping people out."

James has worked at a downtown cafe for 2 1/2 years. Asked if he ever gives away food or drinks, James looks uncomfortable.

"You get tipped well if you give someone a discount every once and again," he explains. "When someone comes in four or five times a week I'll give them a discount or free coffee, say, once a week. Then they always tip you one or two bucks.

"But if I think it's going too far, I'll put some of my tip jar into the register," he quickly adds, "because, you know, management can tell. I just don't want to take too much."

He estimates he only gives away about seven dollars' worth of coffee a week, or roughly one coffee a day--his allotted cup, he jokes, since he doesn't drink the stuff himself. That kind of restraint lands James squarely at the pearly gates of the cafe cosmos, where many employees feel comfortable giving away much more than that. As he says, "I've never worked at a cafe where I haven't seen people do it."

ERIN USED TO MANAGE the cafe James is talking about. She tried to keep her employees from giving too much away but knows some slipped past her and says that's OK. It's good for business to treat customers, she says. It builds a sense of community.

"I know some of my people gave stuff away, but I couldn't watch them all the time. A cup of coffee cost us seven cents, so if James came in and refilled his cup a few times ..." she shrugs. "Most of the time I'd tell people that if they wanted to buy someone a drink, they could pay it back out of their tips later. I know sometimes the tab never got paid, but if someone's giving you a lot of business, then you give them a deal now and then.

"It encourages people to come in and spend more money. If you walk in and the bartender or the waitress or the person behind the counter calls you by name and buys you a drink once in a while, that helps you feel like part of something, and that's a good thing. Because in this world, sometimes it feels like you're walking around and no one cares. That's hard."

Erin works in a bar now. She's found that the nightclub people take care of each other just as the cafe people do.

"I get into clubs for free," she says. "There's a thing called club courtesy, which you don't really talk about. If you went up to the door and mentioned [expecting to get in for free], they'd just look at you. But we all know how much everyone makes, and we don't make shit for money except for the bartenders.

"How much you comp someone is not a predetermined thing. It's just the way things in the bar community are. People who work downtown have more of a community than anywhere I've ever been. When you see the bartender from one place driving home someone who works at another bar because they had too much to drink, it just makes you feel good knowing someone's looking out for you."

Chris Esparza, one of four owners of the recently opened club and coffeehouse Fuel 44, came up through the ranks of the restaurant industry, starting as a busboy at 16 and working his way up to bartender, manager and finally proprietor of his own club. He knows firsthand how tight the downtown bar scene is, and since Fuel 44 attracts a big service-industry crowd, he knows he has to allow his employees some latitude.

"We've caught a couple of people giving drinks away," says Esparza, "and it was more just about them feeling the peer pressure of having to buy someone a drink because last time they were in his place, he bought them a drink," he says. "The pressure on the bartenders is huge. Some of them are very social animals. They go out all the time. So they get the flowed-by-the-bro deal, and when those people are facing them on the other side of the bar there's a lot of pressure.

"The way we deal with it? One, we give them kind of a liberal policy in what they can comp. And two, we give them a discount so they can pull from their tips without getting seriously hurt and not really cost us, either."

Like Erin, Laurie, who used to manage a tattoo parlor downtown, thinks trading and giving discounts to local area employees is good business and sound management.

"I don't think it's bad business at all for employees to give employees of other businesses discounts. In SoFA [the South First Area district] you always get a discount. It's helping out the neighborhood, you know? If you give people in the neighborhood discounts, like bartenders and the cafe people, then they're going to be the ones sending us the most business, and hell, yeah, I'm going to give them a discount."

Trading isn't just a downtown San Jose institution. On Palo Alto's upscale University Avenue, where trendy trattorias and cafes line the main drag and side streets, trading is alive and well, if a bit more subdued than in the SoFA district. One Palo Alto cafe worker smiles secretively and shakes his head when asked if he and his co-workers flow their friends coffee drinks and desserts.

"Not really," he says. "I wish it happened more. I think they used to do it at Taxi's, though."

"He says he wishes it happened more?" queries Brian Cohen, Taxi's manager, with a wry look. "That to me says they're doing it. I know it happens around here, especially in some places. Definitely not here, though," he says confidently. "We used to have someone who traded with people in the neighborhood, but he's been gone awhile."

As he talks, though, Cohen seems to rethink his optimistic position. "Sometimes when I go across the street, this one guy sticks his head up and asks, 'Are you gonna hook us up today?' That makes me think something's going on. I guess it could be. It's not too hard to walk out of here with a bag of french fries. But I haven't caught anyone."

Cohen's hunch is correct. Trent works at the cafe in question and regretfully reports that he's only hooked up with one place--Taxi's. "I wish it happened more around here," he says in an uncanny echo of the first cafe worker. "That way I wouldn't have to pay for lunch. I used to do it all the time at this other place I worked. We'd trade with the pizza place around the corner. But not anymore."

Even though he acknowledges that his managers would be displeased if they knew about his side business, Trent shakes his head slowly when asked if he considers it stealing. "I guess you could look at it that way. But I don't."

Coffee Liquid Asset: Coffee drinks are common currency in the underground economy.



BY AND LARGE, the employees who agreed to be interviewed enjoy decent relationships with their employers, so their activity is pretty moderate. When relations between bosses and employees go sour, though, trouble starts brewing, and trading can escalate to bull-market proportions.

Pete was working at the Santa Cruz cafe described earlier when the trade ring began in earnest. Likable and responsible, he considers himself a hard worker and a good employee. Management thought so, too, and within three months of being hired he was supervising his co-workers. Nevertheless, he caught the trade bug.

"I got jerked around so much early on that I didn't mind giving stuff away," he shrugs. He was also getting hats, beer, free entrance to shows and all kinds of food in return. "It was like free money," he admits. But just like Rambo, Pete thinks they drew first blood, and he doesn't mind listing his injuries.

First was the scatterbrained scheduling that changed every week, followed by the raise that didn't come after he accepted more responsibility by becoming a supervisor. But worse than the paltry $5-an-hour pay was management's disregard for his suggestions.

"I was trying to care, and they wouldn't let me," he says, exasperated. "They wouldn't listen to me. I used to care about the company and try to make a difference. I'd say, 'You know, people want this' or 'They're asking for that,' and nothing would ever change."

While no one interviewed quoted Karl Marx, many described Marx's notion of "alienation." It's the idea that the people who do the grunt work aren't allowed to have an investment in the product. That distance between workers and what they do or make is what turns labor into drudgery--and what makes it easy for workers not to care about what they do. It describes a classic sense of helplessness and fatalism that transcends job descriptions and can just as easily infect middle managers in Silicon Valley firms who are mired in bureaucracy as it can espresso jerks who are frustrated in their quests for work that matters.

Valerie Houghton, a licensed therapist practicing in San Jose, cites workers' senses of alienation and entitlement as primary reasons for employee theft. She says those feelings only increase when employers fail to respond to employees.

"Especially in big companies, it has to do with the employer's attitude," she says. "If the employer and management have the attitude 'We are divine and you are schlepps,' theft is worse. The hierarchical, us-vs.-them, noncollaborative model promotes that behavior in the lower echelons. They think, 'Well, I got you.' "

Houghton adds that workers who enjoy job satisfaction--"which includes things like feeling like you're working for the common good, feeling valued and feeling like your contribution is important"--are less likely to steal.

The difference between unhappy Silicon Valley managers and disgruntled cafe employees is that one group makes good money and the other does not. And good money, according to some people in the business, paves the way for good employer-employee relations.

PAUL GERHARDT figures that on a busy night, his bartenders at The Usual nightclub in downtown San Jose make anywhere from $120 to $180, and he thinks that's key to keeping surreptitious free drinks, which are usually rewarded with a big tip, to a minimum. "Most bartenders, if they have a good job, a regular income from a solid place to work, and if they respect management and ownership, aren't going to risk their jobs by giving too much away," he says. "I came up from bartending myself, and it's not really worth it to scam 20 or 30 bucks [in tips] when you have a good job."

Fong, a father of two teenagers, gives an armchair analysis of the situation. "The pay itself is not the real issue," he says. "More than anything else, there's been a change in the social mores. I've had to work since I was a kid, so I make my kid come in every weekend and wash the toilets. But most parents don't make their kids work. They give them money. So money becomes easy for them, and they figure they can have it whenever they want it.

"There's also less opportunity," he concedes. "As a kid, I had three paper routes. In today's time, a young person in junior high or high school can't even get a paper route anymore. They've all been taken over by adults with contracts.

"I blame more of it on the degradation of society than on the youth themselves," he concludes. "They're good kids. God, they're bright kids."

Houghton agrees in part with Fong's assessment of social mores. "A lot of kids haven't had to earn things," she says. "They're given things, and then their parents give them no guidance. People think discipline is a bad word, but 'discipline' comes from 'disciple,' which means 'to teach.' If we take a healthy, authoritative, collaborative approach to disciplining kids, then they develop self-discipline. If people don't get that, then they wander around like a hungry person who doesn't know what he wants to eat."

Fong blames employee theft on a shoddy work ethic and in turn blames that on American lust for immediate gratification, a fairly common diagnosis of what has become of the great Protestant work ethic. But Fuel 44's Chris Esparza holds management responsible for cultivating loyalty in employees and says it shows up on the bottom line.

"A lot of bars have a policy of being kind of distant and crappy with employees, and that's basically just asking them to steal," he says, "so we try to head that off at the pass. If you treat your employees well, it shows. Our pour costs are showing that we're having a much lower level of stealing than a typical bar. In a sense, building loyalty among staff saves a tremendous amount of revenue in theft. There are bars I know that have very unhappy staff, and I know for a fact that any- time that staff has a party or anything going on, the liquor looks like the liquor right from the bar."

Houghton supports Esparza's claim that good management can deter disgruntlement and theft, and in fact says it motivates people to work harder. "There are basically three kinds of leadership," she says. "Authoritarian, authoritative and laissez faire. The most effective style is authoritative, where the manager is in charge, respectful and inclusive. When people feel honored and respected for their contribution, then they feel more invested in what they're doing."

Esparza sums up the situation like this: "Personally, whenever I've been happy working, stealing has never crossed my mind," he says. "But when an employer both gives you a low-paying job and treats you like a leftover meal, justifications start flowing into your mind."

Santa Cruz's Bransen, however, dismisses the link between low pay and a bad attitude. "The people who really want to work, they'll work no matter what you pay them. The others--you can throw money at them and they still won't work.

"People are motivated by two things: greed and fear. I've got people working for seven, eight, nine dollars an hour, and they still steal from me. And they justify it. They say, 'He owes me a living.' I've heard it all."

BARRY STENGER DIRECTS the ethics program at Santa Clara University's Markkula Center for Applied Ethics. He delivers an evenhanded analysis of the relationship between fair pay and employee loyalty.

"A lot of employers feel their responsibility stops when they sign the paycheck," he says. "They don't have to worry about whether the employee has time with his family or is growing his skills.

"On the other hand, some people say you get what you pay for. You get people who are resentful, who are not developing skills. You'll get the cheapest worker, but you don't get the best worker."

Stenger is no champion of employee theft, but he mentions an intriguing development in the history of it. "There's an old tradition in Catholic moral theology called 'occult compensation,' " he says, "which was developed for priests hearing the confessions of working people. If someone was working and not getting a fair wage--in a bakery, for example--and stole a couple of loaves of bread and justified it because he wasn't paid enough and the family needed bread, then the priests counseled that it wasn't sinful because he was being unfairly treated.

"But when it's used too loosely because you just don't have enough money in your pocket, that's another thing. I have a hard time justifying that because it's a passive-aggressive way of dealing with the problem."

ACROSS THE NATION, a movement to secure for working people a living wage over and above the minimum wage is gathering strength. Its main proponent, the Wisconsin-based New Party, has won living-wage ordinances in Baltimore, New York, Los Angeles and soon, perhaps, in San Jose for workers whose employers get government contracts. According to the New Party, "hard-working people should be able to afford the necessities of life for themselves and their families."

Last year Congress raised the minimum wage, after five years at $4.25, to $5.15 an hour. California, rightly recognizing that $5.15 an hour is not a realistic wage, raised the state minimum wage to $5.75 effective March 1 and called it the "Living Wage Initiative."

But living wage proponents point out that while $5.75 an hour may be a living wage in West Texas or even in eastern California, it clearly doesn't cut it in San Francisco or Hollywood. And it doesn't cut it in San Jose, either, where over the last four years, apartment rents have jumped 28 percent, and almost one-fifth of the jobs in Silicon Valley pay less than the $8.08 an hour needed to survive.

Says John Leopold, who with Working Partnerships U.S.A. is struggling to promote the idea of a living wage for San Jose contract employees, "The city of San Jose as a leader in this region can play an important role in terms of highlighting the need for a living wage so people can afford to live and work in the same place. What's happened in other cities is that local living-wage ordinances have created pressure statewide and nationally for people to realize the value of paying living wages. But it's a long-term strategy. The most change that can happen quickly and effectively can happen at the local level."

San Jose will almost certainly not lead the Bay Area in implementing a living wage. In mid-March, the Community and Economic Development Committee of Oakland's City Council passed a proposal guaranteeing a minimum wage of $8 an hour to employees whose bosses contract with the city, in spite of vociferous opposition from the Chamber of Commerce. The proposal now awaits approval by the full council.

In the meantime, the hostility that has always burned between the perceived haves and the have-nots continues to smolder. Employee theft is a telltale wisp of smoke, a sign of friction between the two camps. Employers blame workers for their poor work ethic, but no one considers that the Protestant work ethic is a code of behavior that supports an unwritten contract between employee and employer: "I will work for you and protect your interests if you protect mine," not "I will work for you and protect your interests regardless of whether or not I can secure for myself the basic necessities of life."

Until employees know they'll be taken care of in exchange for their time, or until every cafe and bar in Santa Clara Valley is equipped with surveillance cameras, the mutual rip-off will probably continue.

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From the March 26-April 1, 1998 issue of Metro.

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