Wage theft

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Service Employees International Union anti-wage theft protest (Seattle, 2013) SEIU Wage Theft 03 (9371880444).jpg
Service Employees International Union anti-wage theft protest (Seattle, 2013)

Wage theft is the failing to pay wages or provide employee benefits owed to an employee by contract or law. It can be conducted by employers in various ways, among them failing to pay overtime; violating minimum-wage laws; the misclassification of employees as independent contractors; illegal deductions in pay; forcing employees to work "off the clock", not paying annual leave or holiday entitlements, or simply not paying an employee at all.

Contents

Wage theft in the United States

Annual value of different forms of theft in the U.S., expressed in billions of US dollars. Figures are from the FBI's Uniform Crime Reports for 2012. Wage theft versus other property crimes.png
Annual value of different forms of theft in the U.S., expressed in billions of US dollars. Figures are from the FBI's Uniform Crime Reports for 2012.

According to some studies, wage theft is common in the United States, particularly against low wage workers, including legal citizens to undocumented immigrants. [1] [2] The Economic Policy Institute reported in 2014 that survey evidence suggests wage theft costs US workers billions of dollars a year. [3] Some rights violated by wage theft have been guaranteed to workers in the United States in the 1938 Fair Labor Standards Act (FLSA). [4]

In 2019, the U.S. Department of Labor cited about 8,500 employers for taking about $287 million from workers, but they rarely punish repeat offenders, which "perpetuates income inequality, hitting lowest-paid workers hardest." [5] A 2023 study showed that a significant amount of wage theft goes unreported because employees may not fully understand what constitutes wage theft, or they fear reprisals. [6]

Forms

Overtime

According to the FLSA, unless exempt, employees are entitled to receive overtime pay of at least "time-and-a-half", or one and one-half times normal pay, for all time worked past forty hours a week. Some exemptions to this rule apply to public service agencies or to employees who meet certain requirements in accordance to their job duties along with a salary of no less than $684 a week. Despite regulations, there are many employees today who are not paid the overtime due them. A 2009 study of workers in the United States found that in 12 occupations more than half of surveyed workers reported being denied overtime pay: child care (90.2 percent denial), stock and office clerks (86 percent), home health care (82.7 percent), beauty/dry cleaning and general repair workers (81.9 percent), car wash workers and parking attendants (77.9 percent), waiters, cafeteria workers and bartenders (77.9 percent), retail salespersons (76.2 percent), janitors and grounds workers (71.2 percent), garment workers (69.9 percent), cooks and dishwashers (67.8 percent), construction workers (66.1 percent) and cashiers (58.8 percent). [7] [8]

Minimum wage

In 2009, reform placed the new United States federal minimum wage at $7.25. Some states have legislation that sets a state minimum wage. In the case an employee is subject to both federal and state minimum wage acts, the employee is entitled to the higher standard of compensation. For tipped employees, the employer is only required to compensate the employee $2.13 an hour as long as the fixed wage and the tips add up to be at or above the federal minimum wage. Minimum wage is enforced by the Wage and Hour Division (WHD). WHD is generally contacted by 25,000 people a year in regards to concerns and violations of minimum wage pay. [7] [9] A common form of wage theft for tipped employees is to receive no standard pay ($2.13 an hour) along with tips. [8]

A 2017 study found that U.S. employers underpay 2.4 million sub-minimum wage workers over $15 billion yearly, amounting to an average of $64 per week, or nearly a quarter of earnings. Year-round workers are underpaid $3,300 per year and receiving $10,500 in annual wages on average. [10]

Misclassification

Misclassification of employees is a violation that leaves employees very vulnerable to other forms of wage theft. Under the FLSA, independent contractors do not receive the same protection as an employee for certain benefits. The difference between the two classifications depends on the permanency of the employment, opportunity for profit and loss, the worker's level of self-employment along with their degree of control. An independent contractor is not entitled to minimum wage, overtime, insurance, protection, or other employee rights. Attempts are sometimes made to define ordinary employees as independent contractors. [7] [8]

Misclassification in the United States is extensive. In New York state, for example, it was found in a 2007 study that 704,785 workers, or 10.3% of the state's private sector workforce, were misclassified each year. For the industries covered in the study, average unemployment insurance taxable wages underreported due to misclassification was on average $4.3 billion for the year and unemployment insurance tax underreported in these industries was $176 million. [11] [12]

Illegal deductions

Employees are subject to forms of wage theft through illegal deductions. Trivial or fabricated violations in the workplace are used to validate deductions. Any deduction that brings an employee to a level of compensation lower than minimum wage is also illegal. In many states, employers are required to issue employees documentation of deductions along with earnings. Failure to issue this documentation is generally prevalent in working places subject to wage theft. [7] [8]

Full wage theft

The most blatant form of wage theft is for an employee to not be paid for work done. An employee being asked to work overtime, working through breaks, or being asked to report early and/or leave late without pay is being subjected to wage theft. This is sometimes justified as displacing a paid meal break without guaranteeing meal break time. In the most extreme cases, employees report receiving nothing. [7] [8] In some cases, the legal status of the workers can enable employers to withhold pay without fear of facing any consequences. [13]

Other forms

Putting the pressure on injured workers to not file for workers' compensation is frequently successful. [1] Employees are often confronted with threats of firing or calls to immigration services if they complain or seek redress. Workers are often denied time off or vacation time that they have acquired or denied pay for sick leave or vacation time.

Incidence

Workplace Violation Rates
in the United States (2008) [7]
ViolationPercent of
All Workers
Surveyed
Percent of
Workers at Risk
of Violation
Minimum wage violation25.9%25.9%
Overtime violation19.1%76.3%
Off-the-clock violation16.9%70.1%
Meal break violation58.3%69.5%
Worker was subjected to
an illegal pay deduction
4.7%40.5%
Tips were stolen by
employer or supervisor
1.6%12.2%
Violation occurred in week prior to worker being surveyed
Results based on survey of 4,387 low wage workers

A 2009 study based on interviews of over 4,000 low wage workers in Chicago, Los Angeles, and New York City found that wage theft from low wage workers in large cities in the United States was severe and widespread. Incidents varied with the type of job and employee. Sixty-eight percent of the surveyed workers experienced at least one pay-related violation in the week prior to the survey. On average the workers in the three cities lost a total of $2,634 annually due to workplace violations, out of an average income of $17,616, which translates into wage theft of fifteen percent of income. Extrapolating from these figures, low wage workers in Chicago, Los Angeles, and New York City lost more than $2.9 billion due to employment and labor law violations. [7]

In 2017, the Economic Policy Institute estimated that wage theft amounts to up to $50 billion annually, more than all robberies, car thefts, and burglaries combined, and that around 17 percent of low wage workers are victims of this crime. [14]

Workers at risk

Studies have found inflated rates of wage theft violations in markets employing women and foreign-born populations, and there are indications that wage exploitation and wage theft are among key motivations of employers for hiring migrant workers. [15] Within the foreign-born population, women were at a much greater risk for wage violations than their male counterparts. Undocumented workers or unauthorized immigrants stood at the highest risk levels. Education, longer tenured employment, and English proficiency proved to be influential factors in employee populations. All three variables reduced the probability of wage theft for the aforementioned demographics. Workplaces where the compensation was paid in one weekly flat rate or in cash saw a higher instance rate of wage theft. Smaller businesses with less than 100 employees also saw a higher instance rate of violations than larger business. In one study, the manufacturing industry, repair services, and private home employment were at the highest risk for violations at the workplace. Home health care, education, and construction saw the lowest levels of wage theft. Restaurants, grocery stores, retail, and warehousing fell around the median. [7] [16]

Contemporary examples

In November 2011, Warehouse Workers helped Wal-Mart warehouse employees file their fourth class-action lawsuit against the warehouse companies. Without Wal-Mart being a direct defendant, the argument was made that Wal-Mart has created this culture amongst the companies it works with. The first lawsuit filed was in 2009. The workers argued that poor record keeping and broken promises have led to workers receiving less than minimum wage. Walmart also denied workers paid vacations that they were promised upon contracting. [17] In a report released on November 26, 2011, a Palm Beach County organization, People Engaged in Active Community Efforts (PEACE), sent postcards to Macy's and Bealls executives as a form of protest. The Florida Retail Federation had recently proposed a bill to block a wage theft ordinance in their county, which was intended to create a system that would speed the investigation and processing of wage theft reports. [18]

A 2012 study by the Iowa Policy Project calculated that dishonest employers defraud Iowa workers out of about $600 million annually in wages. State Senator Tony Bisignano, Democrat from Des Moines and Senator William Dotzler, a Democrat from Waterloo, Iowa, proposed a bill to strengthen wage law enforcement on January 28, 2015, "since Iowa's wage theft laws are so weak they are impossible to enforce". The Iowa Association of Business and Industry opposed the bill, saying that resources for enforcement should be the focus instead. [19]

In 2021, Tyler Technologies paid $3 million to settle claims that it had required some employees to work overtime and had not paid them for that time. [20]

Enforcement

Documentation

In the United States, the Fair Labor Standards Act (FLSA) requires employers to keep detailed records regarding the identity of workers and hours worked for all workers who are protected under federal minimum wage laws. [21] [22] Most states require that employers also provide each worker with documentation every pay period detailing that worker's hours, wages and deductions. [23] [ better source needed ] As of September 2011 Arkansas, Florida, Louisiana, Mississippi, Nebraska, South Dakota, Tennessee and Virginia did not require this documentation. [24] [ better source needed ] A 2008 survey of wage theft from workers in Illinois, New York, and California found that 57% of low wage workers did not receive this required documentation and that workers who were paid in cash or on a weekly rate were more likely to experience wage theft. [7] Anecdotal evidence suggests that tip theft, which is a legally complex issue distinct from wage theft and not necessarily under the control of the same laws governing the payment of wages, [25] [ better source needed ] may also be common in instances where employer record keeping does not comply with the law. [26]

Penalties and sanctions

When the Wage and Hour Division (WHD) receives reports of violations, it works to ensure that employers change their work practices and pay back missed wages to the employees. Willful violators can face fines up to $10,000 upon their first conviction with imprisonment resulting from future convictions. In regards to child labor laws, an employer can face a fine of up to $11,000 per minor. In 2012 the Wage and Hour Division collected $280 million in back wages for 308,000 workers. [27] As of 2014, there are 1,100 federal investigators for 135 million workers in more than 7 million businesses. [28] The ratio of labor enforcement agents to U.S. workers has decreased over tenfold since the inception of the FLSA, from one for every 11,000 workers in 1941 [29] to one for every 123,000 workers in 2014. [28]

In February 2010, Miami-Dade County, Florida became the first jurisdiction in America to ban wage theft with an ordinance passed unanimously by the county commission. Prior to the ordinance, wage theft was called "the crime wave that almost no one talks about". [30]

Wage theft in other countries

Australia

A 2020 report by Unions NSW founded that more than 3000 foreign-language job ads offered illegally lower wages, [31] A 2022 report by the same Union founded that over 7,000 job advertisements in foreign languages offered lower wages. [32] [33]

In Australia, another form of wage theft is the failure of employers to pay the mandatory minimum contribution to employee's superannuation fund. Between 2009 and 2013 the Australian Tax Office recovered A$1.3 billion in unpaid superannuation which is estimated to be only a small portion of total unpaid superannuation. [34]  

In 2019, Australian celebrity chef George Calombaris admitted to underpaying $7.83 million in wages to 515 employees, which was only discovered after a Fair Work Ombudsman audit revealed the scale of the error following one complaint from an underpaid staff member. [35]

Canada

In 2012 in Windsor, Ontario nearly 200 people gathered at a grassroots meeting to discuss daily workplace challenges that workers face, including wage theft, which a labor union president described as "a sad state of affairs when you have a corporation that can dictate items". [36]

United Arab Emirates

In the UAE, many employers have taken money out of their workers' wages. In some cases, workers have not been paid or workers are duped. [37] [38] [39]

United Kingdom

A 2017 report by Middlesex University and Trust for London revealed that at least 2 million workers in Britain are losing an estimated £3 billion in unpaid holiday pay and wages per year. It suggested that withholding holiday pay, not paying wages and workers losing a couple of hours money per week are some of the deliberate strategies used by employers to improve their profits. [40]

Related Research Articles

A minimum wage is the lowest remuneration that employers can legally pay their employees—the price floor below which employees may not sell their labor. Most countries had introduced minimum wage legislation by the end of the 20th century. Because minimum wages increase the cost of labor, companies often try to avoid minimum wage laws by using gig workers, by moving labor to locations with lower or nonexistent minimum wages, or by automating job functions. Minimum wage policies can vary significantly between countries or even within a country, with different regions, sectors, or age groups having their own minimum wage rates. These variations are often influenced by factors such as the cost of living, regional economic conditions, and industry-specific factors.

Overtime is the amount of time someone works beyond normal working hours. The term is also used for the pay received for this time. Normal hours may be determined in several ways:

<span class="mw-page-title-main">Salary</span> Form of periodic payment from an employer to an employee

A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis. From the point of view of running a business, salary can also be viewed as the cost of acquiring and retaining human resources for running operations, and is then termed personnel expense or salary expense. In accounting, salaries are recorded in payroll accounts.

<span class="mw-page-title-main">Equal Pay Act of 1963</span> United States labor law of the New Frontier program

The Equal Pay Act of 1963 is a United States labor law amending the Fair Labor Standards Act, aimed at abolishing wage disparity based on sex. It was signed into law on June 10, 1963, by John F. Kennedy as part of his New Frontier Program. In passing the bill, Congress stated that sex discrimination:

Labor rights or workers' rights are both legal rights and human rights relating to labor relations between workers and employers. These rights are codified in national and international labor and employment law. In general, these rights influence working conditions in the relations of employment. One of the most prominent is the right to freedom of association, otherwise known as the right to organize. Workers organized in trade unions exercise the right to collective bargaining to improve working conditions.

A full-time job is employment in which workers work a minimum number of hours defined as such by their employer.

<span class="mw-page-title-main">Interfaith Worker Justice</span>

Interfaith Worker Justice (IWJ) was a nonprofit and nonpartisan interfaith advocacy network comprising more than 60 worker centers and faith and labor organizations that advanced the rights of working people through grassroots, worker-led campaigns and engagement with diverse faith communities and labor allies. IWJ affiliates took action to shape policy at the local, state and national levels.

The Labor Code of the Philippines is the legal code governing employment practices and labor relations in the Philippines. It was enacted on Labor day, May 1, 1974 by Late President of the Philippines Ferdinand Marcos in the exercise of his then extant legislative powers.

<span class="mw-page-title-main">Minimum wage in the United States</span>

In the United States, the minimum wage is set by U.S. labor law and a range of state and local laws. The first federal minimum wage was instituted in the National Industrial Recovery Act of 1933, signed into law by President Franklin D. Roosevelt, but later found to be unconstitutional. In 1938, the Fair Labor Standards Act established it at $0.25 an hour. Its purchasing power peaked in 1968, at $1.60 In 2009, it was increased to $7.25 per hour, and has not been increased since.

In United States government contracting, a prevailing wage is defined as the hourly wage, usual benefits and overtime, paid to the majority of workers, laborers, and mechanics within a particular area. This is usually the union wage.

The New York State Department of Labor is the department of the New York state government that enforces labor law and administers unemployment benefits.

<span class="mw-page-title-main">Fair Labor Standards Act of 1938</span> United States wage law

The Fair Labor Standards Act of 1938 29 U.S.C. § 203 (FLSA) is a United States labor law that creates the right to a minimum wage, and "time-and-a-half" overtime pay when people work over forty hours a week. It also prohibits employment of minors in "oppressive child labor". It applies to employees engaged in interstate commerce or employed by an enterprise engaged in commerce or in the production of goods for commerce, unless the employer can claim an exemption from coverage. The Act was enacted by the 75th Congress and signed into law by President Franklin D. Roosevelt in 1938.

<span class="mw-page-title-main">California Labor Code</span> Collection of Californian civil law statutes

The California Labor Code, more formally known as "the Labor Code", is a collection of civil law statutes for the State of California. The code is made up of statutes which govern the general obligations and rights of persons within the jurisdiction of the State of California. The stated goal of the Department of Industrial Relations is to promote and develop the welfare of the wage earners of California, to improve their working conditions and to advance their opportunities for profitable employment."

<span class="mw-page-title-main">Wage and Hour Division</span> Federal office in the United States

The Wage and Hour Division (WHD) of the United States Department of Labor is the federal office responsible for enforcing federal labor laws. The Division was formed with the enactment of the Fair Labor Standards Act of 1938. The Wage and Hour mission is to promote and achieve compliance with labor standards to protect and enhance the welfare of the Nation's workforce. WHD protects over 144 million workers in more than 9.8 million establishments throughout the United States and its territories. The Wage and Hour Division enforces over 13 laws, most notably the Fair Labor Standards Act and the Family Medical Leave Act. In FY18, WHD recovered $304,000,000 in back wages for over 240,000 workers and followed up FY19, with a record-breaking $322,000,000 for over 300,000 workers.

<span class="mw-page-title-main">Employee compensation in the United States</span>

Employer compensation in the United States refers to the cash compensation and benefits that an employee receives in exchange for the service they perform for their employer. Approximately 93% of the working population in the United States are employees earning a salary or wage.

The tipped wage is base wage paid to an employee in the United States who receives a substantial portion of their compensation from tips. According to a common labor law provision referred to as a "tip credit", the employee must earn at least the state's minimum wage when tips and wages are combined or the employer is required to increase the wage to fulfill that threshold. This ensures that all tipped employees earn at least the minimum wage: significantly more than the tipped minimum wage.

<span class="mw-page-title-main">Fight for $15</span> Political movement in the United States

The Fight for $15 is an American political movement advocating for the minimum wage to be raised to USD$15 per hour. The federal minimum wage was last set at $7.25 per hour in 2009. The movement has involved strikes by child care, home healthcare, airport, gas station, convenience store, and fast food workers for increased wages and the right to form a labor union. The "Fight for $15" movement started in 2012, in response to workers' inability to cover their costs on such a low salary, as well as the stressful work conditions of many of the service jobs which pay the minimum wage.

<span class="mw-page-title-main">Minimum Wage Fairness Act</span> Bill of the 113th U.S. Congress

The Minimum Wage Fairness Act is a bill that would amend the Fair Labor Standards Act of 1938 (FLSA) to increase the federal minimum wage for employees to $10.10 per hour over the course of a two-year period. The bill was strongly supported by President Barack Obama and many of the Democratic Senators, but strongly opposed by Republicans in the Senate and House.

<span class="mw-page-title-main">Minimum wage in South Korea</span>

The South Korean government enacted the Minimum Wage Act on December 31, 1986. The Minimum Wage System began on January 1, 1988. At this time the economy was booming, and the minimum wage set by the government was less than 30 percent of that of real workers. The Minister of Employment and Labor in Korea asks the Minimum Wage Commission to review the minimum wage by March 31 every year. The Minimum Wage Commission must submit the minimum wage bill within 90 days after the request has been received by the 27 committee members. If there is no objection, the new minimum wage will then take effect from January 1. The minimum wage committee decided to raise the minimum wage in 2018 by 16.4% from the previous year to 7,530 won (US$7.03) per hour. This is the largest increase since 2001 when it was increased by 16.8%.

<span class="mw-page-title-main">Keith Sonderling</span> American lawyer (born 1982)

Keith E. Sonderling is an American lawyer and government official. He currently serves as a Commissioner on the Equal Employment Opportunity Commission, previously serving as Vice Chair. He was confirmed by the Senate on September 22, 2020. Prior to the EEOC, he served as the Acting and Deputy Administrator of the Wage and Hour Division of the United States Department of Labor. Before joining the government in 2017, he practiced Labor and Employment Law at the Florida-based Gunster Law Firm in West Palm Beach, Florida.

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