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Wage Theft: Addressing Corporate Crime in the Workplace

Wage theft is a corrosive workplace pandemic. Simply put, the issue of wage theft refers to means by which employers fail to pay their workers the full wages they are legally owed. Wage theft takes many forms, and has become increasingly prevalent and problematic across the U.S. For example; the phenomenon has commonly manifested itself in the refusal of companies to pay their employees for overtime or for all hours worked, the failure of companies to pay their workers full minimum wage in accordance with state requirements, and the deliberate misclassification of workers as independent contractors. Steps can and should be taken to slow the proliferation of wage theft within the modern workplace, and to alleviate the potentially devastating implications this issue bears for American paycheck-to-paycheck laborers. Wage theft is a deeply urgent issue, but one that can be materially mitigated through the implementation of more stringent government mechanisms to regulate and enforce fair working standards, the elimination of extortionate corporate practices, and beyond.

In the 21st century, wage theft has emerged as the most overlooked form of theft. Indeed, in 2012, the total amount of money—over $900 million—recovered for wage theft victims in private lawsuits tripled the amount of money stolen in all robberies nationwide. Given the inability and unwillingness of many victims of wage theft to sue employers for their rightful earnings, the true discrepancy between wage theft and general larceny is much greater. Expert analysis has estimated that wage theft presently costs wage laborers approximately $50 billion per annum.

By cheating workers out of the earnings they are legally entitled to, wage theft clearly violates federal laws like the Fair Labor Standards Act (FLSA), signifying that wage theft is not only unscrupulous but also explicitly illegal. Despite its intrinsic illegality, the practice has persisted, primarily due to unchecked employer aggression alongside weak government enforcement. The inefficacy of attempts to curb wage theft is best exemplified by the understaffed U.S. Department of Labor Wage and Hour Division (WHD), which—in conjunction with state labor departments and class-action lawsuits—is among the leading sources of back pay recovery for wage theft victims. In the fiscal year 2019, the WHD recovered $322 million in back wages for workers. In 2016, between the efforts of the WHD and state government entities as well as class-action suits, a grand total of $1.1 billion was recovered for wage theft victims. While ostensibly impressive, these figures pale in comparison to the $50 billion stolen from workers annually. The recourse that exists to combat wage theft has not done nearly enough to substantially diminish employer rapacity and compensate workers who have suffered from egregious wage violations.

Given the current ineffectiveness of government agencies that are supposed to prevent wage theft, the consolidation of these departments is imperative. In fact, a report published in May found that in five profiled states, each wage and hour investigator covers between roughly 55,000 and 190,000 workers; these wage and hour investigators are the state labor department officials who are principally tasked with investigating wage infractions. Thus, investigators are unable to thoroughly monitor all instances of wage theft committed by employers because of the sheer quantity of workers they oversee. This problem is very pronounced within the aforementioned WHD, too, as each federal wage and hour investigator and officer covers about 175,000 workers. 

Clearly, for wage theft to be seriously addressed, the installation of more federal and state-wide investigators and resources is crucial. Congresswoman Rosa DeLauro, who chairs the Labor, Health and Human Services, Education, and Related Agencies Appropriations Subcommittee, echoed this sentiment by asserting that “we need more enforcement. And, investing in enforcement at Wage and Hour Division is a smart use of federal funds.” Heightened enforcement is a critical stepping stone from which additional strategies can be assessed and executed, such as targeting wage-stealing companies at the forefront of industry hierarchies, partnering with community organizations, and otherwise maximizing deterrence against corporate wage theft.

Moreover, the problem of retaliation is perhaps the most substantive roadblock to employer accountability. Retaliatory actions are often undertaken by employers to suppress and punish employees who dare to complain about or sue over wage infringements. Such retaliation can range from firing or demoting workers to worsening their schedules and working conditions as a means of discouraging these individuals from reporting wage-related violations. 

Lately, the Trump administration’s harsh immigration rhetoric has exacerbated the retaliatory fear associated with wage theft. This type of anti-immigrant rhetoric and policy-making has strengthened employers’ leverage over undocumented laborers, as employers commonly threaten to report undocumented workers to immigration authorities if they speak out. While employer retaliation of any kind is a suable offense and is, in fact, the most frequently named charge in employee discrimination lawsuits, bringing a retaliation case to civil court is simply unviable for the many low-wage workers who cannot pay for burdensome legal fees. Because so many wage theft victims are not able to resort to the expensive process of bringing suit if they have suffered retaliation, employer retaliation against these financially insecure individuals remains relatively undeterred.

A report by the National Employment Law Project (NELP) corroborated that “any law intending to protect workers’ rights must protect workers from retaliation in order to make that law a reality.” Further, this recent analysis pinpointed several necessary components of any feasible retaliation protection law, including compensatory damages for employees who have faced both retaliation and wage theft, and the recovery of all legal fees incurred by workers who are successful in their retaliation cases, so that workers can afford adequate representation in court. Unfortunately, only six U.S. states have retaliation protections that meet each of the essential, identified criteria, emphasizing the deep-seated need for comprehensive anti-retaliation laws across all remaining states.

Finally, in tandem with employer retaliation, mandatory arbitration clauses effectively perpetuate workplace crimes like wage theft. At their core, forced arbitration stipulations prohibit judicial involvement in workers’ rights disputes, including in wage theft-related cases. In other words, employers often bar employees from taking their complaints to court, instead requiring them to go through a private arbiter to adjudicate a given dispute. Because private arbitration is conducted through the employers themselves, these employers almost always prevail in wage theft disputes and similar complaints. Any hope of judicial action to protect workers from mandatory arbitration was extinguished with the Supreme Court’s Epic Systems Corp. v. Lewis ruling in 2018. In light of Epic Systems, research has projected that, by the year 2024, over 80 percent of non-union workers in the private sector will have surrendered their rights to file class-action and collective-action suits in court.

Nevertheless, action can still be taken to improve workers’ rights and limit wage theft in the face of mandatory arbitration. Recent congressional legislation—namely the Restoring Justice for Workers Act introduced in 2018, and the Forced Arbitration Injustice Repeal Act introduced this year—has been proposed with the overarching aim of eradicating forced arbitration and protecting workers’ collective litigation rights. Legislative proposals like these, along with like-minded initiatives for increased worker protections at the state levels, have the potential to curtail wage theft significantly. Through a combination of strengthened government resources, stricter laws against retaliation, and actions to eliminate forced arbitration, workers would be enabled to more readily come forward with disputes, and employers would be held more accountable for proper employee compensation and working standards.

Photo: Image via torbakhopper (Flickr)