Represents only a fraction of total stolen wages
A new report by the Economic Policy Institute (EPI) finds that employers stole about $2 billion from workers across the United States in 2015 and 2016.
The findings come from an EPI survey of state labor departments and attorneys general, and data from the U.S. Department of Labor (DOL), along with a report on private, civil litigation class action settlements. Wage theft can take many forms, including: minimum wage violations, overtime violations, tipped minimum violations, and employee misclassification.
According to the report, one of the most prevalent forms of wage theft — minimum wage violations — impacts 17 percent of low-wage workers in the 10 most populous states. On average, the report finds, workers suffering minimum wage violations are cheated out of $64 a week, or $3,300 annually.
The report’s authors say the authors estimate low-wage workers in the United States lost more than $50 billion to all forms of wage theft in 2016 alone. It's impossible to determine the exact amount of wages stolen from workers during this time period, the authors said, because the DOL and state recovery figures underrepresent the problem.
TOO FEW INVESTIGATORS
Although wage theft is illegal, laws protecting workers are rarely enforced. In 2016, the DOL Wage and Hour Division had around 1,000 investigators responsible for 7.3 million workplaces. The probability of any specific workplace being investigated for wage theft in a given year is around 0.01 percent.
Further, a recent study found that 14 states, most of which use the federal minimum wage, either lack the capacity to investigate wage theft claims or lack the ability to file lawsuits on behalf of victims.
TRUMP ADMINISTRATION MAKING IT WORSE
Meanwhile, as reported in the Labor Tribune's Dec. 14 issue, the Trump administration’s DOL has taken the first major step toward allowing employers to legally take tips earned by the workers they employ.
Under the DOL’s proposed rule, as long as the tipped workers earn minimum wage, the employer can legally pocket tips pooled from their servers. As workers in restaurants and bars are much more likely to suffer minimum wage violations than workers in other industries, this could exacerbate their problem.
“It is the DOL's job to enforce our nation’s worker protection laws and ensure that working people are paid fairly for their labor, not create mechanisms for robbing them,” EPI Labor Counsel Celine McNicholas said.
“When policymakers wonder why working Americans are frustrated, they should consider the toll that wage theft takes on workers. It is fundamentally unfair to work hard and play by the rules while corporations rig the system against working people — literally taking money out of their pockets.”
WHAT IS WAGE THEFT?
Wage theft is the failure to pay workers the full wages to which they are legally entitled. Wage theft can take many forms, including but not limited to:
- Minimum wage violations: Paying workers less than the legal minimum wage.
- Overtime violations: Failing to pay nonexempt employees time-and-a-half for hours worked in excess of 40 hours per week.
- Off-the-clock violations: Asking employees to work off the clock before or after their shifts.
- Meal break violations: Denying workers their legal meal breaks.
- Illegal deductions: Taking illegal deductions from wages.
- Tipped minimum wage violations: Confiscating tips from workers or failing to pay tipped workers the difference between their tips and the legal minimum wage.
- Employee misclassification violations: Misclassifying employees as independent contractors to pay a wage lower than the legal minimum or avoid paying overtime.
What can be done to stop wage theft?
The data is clear: wage theft is a widespread epidemic and not merely the practice of a few unscrupulous employers.
This systemic violation of our nation’s most basic principle of labor and employment policy — that working people should be paid what they are owed for their labor — requires lawmakers to immediately institute commonsense measures that combat wage theft.
These policies include:
- Raising the cost to employers for violating the law. Meaningful penalties can deter wage theft. Lawmakers should require an employer who has violated the law to pay a worker three times the amount of wages owed.
- Improving transparency. Workers often do not receive information about the basic terms, conditions of their employment. This makes it difficult to establish that they are not being paid fairly. Lawmakers should ensure that every worker gets a statement of pay that shows rate of pay, hours worked, and deductions from pay.
- Supporting strong government enforcement. The U.S. Department of Labor and state agencies tasked with enforcing wage and hour protections must be given adequate resources to enforce the law.
- Protecting workers from retaliation. In a national survey 43 percent of workers experienced retaliation after complaining about their wagers/working conditions. This has a chilling effect on the entire workplace, leaving all workers more vulnerable. Meaningful penalties for retaliation would deter employer retaliation. Allowing enforcement agencies to receive anonymous complains or permitting third parties (such as unions or worker centers) to file complaints on their behalf would also limit employer retaliation.
- Protecting workers’ right to class action. Employment class action lawsuits are fundamental to the enforcement and combating race and sex discrimination. Without the ability to aggregate claims, it's difficult if not impossible for workers, particularly low-wage workers, to find legal representation. It is critical that workers not be forced to sign away their right to class action as a condition of employment.
Wage theft is devastating to the workers whose wages are stolen and to their families.
Victims of wage theft largely represent low-income households — families who need every dollar they earn to pay for basics like rent, utilities, and groceries. To protect the wages workers work hard for, lawmakers must act to ensure employers are held responsible for cheating their workers.