Lehi • The U.S. Department of Labor has filed suit to stop a 107-year-old flour mill from making shipments because of unresolved back-pay issues with employees, a move that could mark its end.
The civil lawsuit, filed in U.S. District Court for Utah, contends the owner of Lehi Roller Mills refused to comply with a Labor Department order to stop shipping bakery products to longtime customers, including Kentucky Fried Chicken, which has done business with the mill since the 1950s.
The Labor Department also has notified customers to "voluntarily" reject shipments from the Mills. Owner Sherman Robinson said he was late in paying workers but notified the Labor Department last week that all employees had been paid in full.
"I don't get the connection between shutting off our cash flow stream and paying people," he said. "How does that protect the jobs of the people who work here? At this point, I am at a loss on what I can do."
The pay issue came to light earlier this month when several of the mill's 60 workers took to the streets to press the cash-strapped company into paying them. Uriel Martinez said he lost his apartment because he had not been paid.
On July 10, the mill sent letters to 13 workers who had walked out, saying they had effectively resigned by not showing up for their shifts. Ten days later, the Utah Labor Commission closed the case involving wage claims, saying all 13 workers had been paid. Robinson said that is the date on which he had paid all back wages.
"If the legal action is only for nonpayment of wages and it does appear that's been satisfied for at least some of the workers and if the Labor Department knows employees have been paid, then [stopping all shipments] would seem Draconian. But those are two big ifs," said Joe Hatch, a labor attorney and former Salt Lake County councilman who is not involved in the case.
The complaint alleges that Robinson had violated the Fair Labor Standards Act by failing to pay 38 employees for two pay periods, from June 3 to June 30, totaling $67,000. In addition, employees were to be paid on July 20 for work performed from July 1 to July 14.
Under the act, it's illegal to ship so-called "hot goods" produced when workers go unpaid because it perpetuates "an unfair method of competition" and interferes "with the orderly and fair marketing of goods in interstate commerce," according to the complaint.
Labor Department investigator Tonya Labish said in an affidavit that on July 17 Robinson "refused to comply" with an order to stop shipping products to his customers, including Kentucky Fried Chicken, Archer Farms, Mrs. Fields, Costco, Sara Lee and Starbucks "to name a few."
But Robinson said he told investigators that he had signed confidentiality agreements "so I wanted a mechanism in which my attorney could work with the federal investigators to protect my customers."
His contract with Kentucky Fried Chicken dates to 1952 when Robinson's father was among the first to extend credit to Pete Harman, who teamed up with Colonel Harland Sanders to open the nation's first KFC outlet in Salt Lake City. Lehi Mills still makes the chicken coating with its "secret combination of spices" and corn bread mix for Harman's franchises in the Western United States.
Labor Department spokeswoman Elizabeth Todd said she cannot comment "given the open status of the investigation." The department's website says the agency has the power to suspend shipments of goods when an employer does not "voluntarily" correct violations.
Robinson traces his financial difficulties to the failure of America West Bank, based in Layton. In 2009, regulators closed the bank and appointed the Federal Deposit Insurance Corp. as receiver. Robinson says the action not only cut off the Roller Mills' line of credit but also froze liens the bank held against the property leaving him with no collateral to obtain a loan elsewhere, he said.
Lehi Roller Mills
Founded • 1905 at 833 E. Main St., Lehi
Owners • George Robinson purchased mill in 1910; grandson Sherman Robinson is current owner
Products • Wholesale flour and mixes for pancakes, brownies, cookies and muffins sold in grocery stores
Hours • 9 a.m. to 6 p.m., Monday through Saturday at mills' retail store