Wage Theft Must Not Be Ignored

April 22nd, 2014 at 8:36 am

Here’s an important editorial on something I haven’t written enough about: wage theft, i.e., situations wherein “employees are forced to work off the clock, paid subminimum wages, cheated out of overtime pay or denied their tips.”  Sometimes this meshes with misclassification, another violation of labor law, wherein regular employers are classified as self-employed.  According to one study, misclassification of port truckers resulted in over $800 million in wage theft in CA alone.

The editorial interestingly points out that this doesn’t just hit low-income workers, citing the Silicon Valley case where employers of top tech firms were allegedly colluding to suppress wage competition.

My strong sense is that one way to deal with this is to mete out a spate of significant punishments to violators as a signal that we’re serious about cracking down on wage theft.  As I understand it, too often, the current penalties for being caught stealing workers’ wages are a slap on the wrist (though I think this is improving a bit in the misclassification space).

Also, as the NYT piece points out, wage theft is seriously under-policed, as the number of wage and hour inspectors at the Labor Dept has declined while the workforce has grown.  Ross Eisenbrey provides an excellent analysis of the broader issues for our full employment project.  He notes, for example, that “when Congress enacted the FLSA in 1938, it funded one Wage and Hour Division (WHD) investigator for every 11,000 workers. By 2007, when there were only 731 WHD investigators for the entire nation, the ratio had fallen to 1 inspector for every 164,000 covered employees. Even today, with around 1,000 WHD investigators, the odds of any particular employer being inspected in any given year are trivial.”

This is a rich area of pursuit in the interest of protecting labor standards which are in turn essential to protect the quality of jobs, often jobs held by those with the least bargaining power.

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8 comments in reply to "Wage Theft Must Not Be Ignored"

  1. M says:

    An underreported remedy for wage theft is to allow workers to directly place a lien on employers’ property until they can go to court and prove their case. This is already the law in Maryland, and there’s a bill under consideration for the second year in a row now in CA.


  2. Larry Signor says:

    I am 58 years old and have never worked a job where some of my wages were not systematically stolen (it is being done right now, but me and my fellow workers don’t know what to do about it except accept it). Right or wrong, wage theft has always been with US. You have really taken on Goliath, Jared. G/L.

  3. Brett says:

    More third-party labor inspectors and third-party groups would definitely be welcome, especially with the trend towards trying to force workers to go through mandatory arbitration as a condition of employment – those groups would reserve the right to sue businesses over it.

    Side-note, but this is also why I think Alt Labor and other worker-empowerment groups should risk it a bit in terms of organization, even if it means they sometimes fall on the wrong side of labor law. It’s not like businesses aren’t already doing that type of thing – hell, the whole implicit arrangement with fast food franchising and labor contracting is that you only make a real profit if you manage to con your employees out of agreed-upon pay.

  4. smith says:

    This is a shovel ready project that pays for itself.
    If one increases the level of inspectors by 10,000, sill far below New Deal levels (1/16,400 vs New Deal 1/11,000) the cost is $75,000/inspector x 10,000 inspectors = $750,000,000/year
    The example of $800,000,000 for truckers in California seems to indicate an amount well spent. Fines could defray the expense, but proper levels of enforcement should virtually eliminate violations, so it would be wrong to base the staffing level on violations or fines collected.

  5. save_the_rustbelt says:

    A couple of quick comments:

    There is a significant problem going the other way, wage and overtime theft by employees.

    The most vulnerable workers are illegal aliens, but there seems to be a de facto amnesty for all sorts of offenses here, including wage theft, tax evasion, forged documents and identity theft. The workers benefit from the lack of tax enforcement.

    There are lots of enforcement issues in the labor markets.

  6. Ruthmarie says:

    Wage theft has been around for a very long time. I used to work in bioscience where the practice was blatant as far back as the mid-1990s. I was routinely told that I was “expected” to put down 35 hours a week on my timesheet even though I was also “expected” to work a minimum of 50 hours a week. In reality it was generally over 60 hours. No compensation for that time whatsoever.

    They got away with this because so many foreign nationals happy to get out of China or India did not understand about labor laws. All you need for successful wage theft is a gullible and vulnerable source of cheap labor. The fact that this has now spread to Silicon Valley and beyond is not surprising. But it denotes the urgency of rethinking the H1-B and other work-visa programs because I think you can draw a direct line between wage theft and flat wages to this flood of “legal” cheap labor onto our shores. It needs to stop.

  7. Anlik Moda says:

    The most vulnerable workers are illegal aliens, but there seems to be a de facto amnesty for all sorts of offenses here, including wage theft, tax evasion, forged documents and identity theft. The workers benefit from the lack of tax enforcement.