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 (1)
Some of this is sanctioned by Congress (“legal theft”?). For example, the insurance industry treats almost all insurance agents as outside contractors, avoiding paying any salary or benefits.
- The agents work on commission, meaning that a new agent can work for two to three months and earn nothing for the time. However, it counts as employment, so the agent isn’t eligible for unemployment benefits.
- Overtime? Forgetaboutit.
- Further, some companies try to limit the ability of agents to represent other insurers — limiting their ability to earn money as an “independent” agent. That either skirts or violates IRS rules about what constitutes independence.
Other industries are churning salespeople without paying them.
Obviously, the employees most at risk of abuse are undocumented workers. That’s why some private employers love them. The employer can abuse the worker, and the worker has no recourse without risk of arrest and deportation.
In almost all cases, wage theft hits those who can least afford it, and can add to the cost of government assistance programs like Food Stamps. This is another example of employers using taxpayer dollars to subsidize their operations.
How common is Wage Theft?
The EPI estimate is that it might be as much as $50 billion per year. However, due to abuse of undocumented workers, there really are no reliable figures.
- One study suggests that paying less than minimum wage affects 17% of low wage workers in the 10 largest states.
- The US Dept. of Labor (DOL) recovered $247 million in underpaid wages in 2015 and $267 million in 2016 — large amounts, but basically miniscule compared to the total size of the problem.
Some states have been aggressive about recovering wages for workers, and some have done nothing. The states that have done nothing are largely but not exclusively in the South:
- South Carolina
Famously, Disney was fined $3.8 million for making employees in theme parks pay for costumes, pushing their net pay below the minimum wage. That problem was caught by the US DOL, not by the State of Florida.(3)
The City of Los Angeles went after Carl’s Jr. Restaurants for minimum wage violations at stores in the City. Fines and backpay totalled $1.45 million.(4) While it’s likely that what Carl’s did in LA it does elsewhere, no other jurisdiction seems to have taken action.
The top states in recovering money for workers are (no surprise):
- California ($117 million in the past two years)
- New York ($85 million)
- Texas ($12 million)
Is your state government wasting taxpayer money instead of enforcing employers to obey the law? Why are you letting your government do that?