Volume 29, Number 1

Wage Theft: An Invisible Crisis

Fred Schepartz

Wage theft is, quite simply, a failure of an employer to pay a worker what the worker is owed for work completed. It may seem amazing that this occurs. In fact, many have a hard time even believing that such a thing can happen. A worker shows up for work, exhibits good faith by diligently completing assigned tasks. The normal expectation is that the worker will get paid the wage owed for the work that was completed. A worker does not expect to not get paid. A worker does not expect to have their wages stolen.
This goes to a basic moral and ethical value that we as a culture hold dear: one does not steal from another. Go back Hammurabi, back to days when our laws were carved on stone or clay, and one will find that this basic concept still holds true.

And yet, wage theft happens all the time. Each year, billions of dollars of wages are stolen from millions of workers. According to a 2014 study from the Economic Policy Institute, $280 billion is stolen from American workers every year.

What makes wage theft especially egregious is that the victims tend to be lower income workers. Thus, women and minority workers tend to be disproportionately affected. The average wage earned by victims of wage theft is $12.19 per hour. The median wage earned by victims of wage theft is $9.50 per hour. Women see their wages stolen at a rate slightly higher than men. Latino workers by a very wide margin are largest ethnic group victimized by wage theft.

Again, this notion seems counter-intuitive, yet it happens. And it’s not just due to this occasional unscrupulous employer who probably reaches into the tip jar to steal a few bills while ordering their latte. The crisis is widespread and systematic with large employers maximizing profits by stealing from their workers.

And to make matters worse, all too often, policy makers willingly ignore this crisis. They will deny that wage theft exists, even when presented with incontrovertible evidence because they are in the hip pocket of the business interests that benefit from wage theft.

For instance, this winter the Wisconsin legislature was poised to pass a bill that would prohibit local governments from enforcing anti wage theft ordinances. This of course begs the question of why they would pass such a pre-emption if wage theft did not exist.

Wage theft manifests itself in many different ways. Here are the most common examples. Workers simply are not paid. This is especially common with immigrant workers who get threatened with deportation if they complain. Workers are paid with a check that bounces. Workers are paid below minimum wage. Workers are paid below the rate of pay the employer promised. Workers are not paid for overtime or are cheated out of overtime because overtime hours were averaged over a two-week period despite the fact that overtime should be paid for any hours in excess of 40 hours per week. Or they’re not paid overtime through misclassification as overtime exempt.

Employers may nickel and dime workers through time clock rounding by rounding down instead of rounding up. Or they take illegal deductions. Or they don’t pay for promised vacation time. If a worker is required to show up at headquarters before driving to a remote work site, they must be paid for the time driving to the worksite. Similar is when workers are not paid for their “donning and doffing” time, which is the time they have to dress and prepare for work.

Restaurants are notorious offenders. The most common form of wage theft in the restaurant industry involves tips. Employers may illegally order a server to share tips with other workers. Or the employer may flat out steal the server’s tips. Another common abuse involves servers who are required to perform set up duties while getting paid the server minimum wage of $2.13 per hour.

A few other examples of wage theft include: workers paid less than what a “prevailing wage” for that specific type of work, assuming that particular state or municipality pays a prevailing wage; workers who get paid with debit cards, which may result in fees to use the debit card; workers paid in something other than actual money; a Workers’ Compensation claim where the employer falsely reports the number of hours worked, which adversely affects the worker’s claim; and overtime that does not include a calculation for all types of pay.

Lastly, perhaps the most common and pernicious form of wage theft is the gender pay gap.

The restaurant industry is the worst offender, followed by janitorial, manufacturing and warehouse, retail and service, agricultural labor, construction, healthcare, clerical and while collar, food production, childcare and education, hotels and transportation.

A victim of wage theft has a variety of legalistic means of redress. If wage theft occurs in a unionized workplace, the worker may file a grievance through the union. However, we have seen a severe erosion of unionized workplaces in Wisconsin and around the country. Sadly, such redress is less and less common. Most wage theft occurs in non-unionized workplaces. Fortunately, alternatives do exist.

Depending on the type of wage theft, a worker may file a complaint with either the Wage & Hour Division of the United States Department of Labor or the corresponding state agency. State law may cover areas not covered by federal law, or federal law may cover areas not covered by state law. The statute of limitations is two years, unless it can be proven that the wage theft was willful. One cannot file a state or federal complaint if one has already initiated litigation though litigation can follow this process.

The process is administrative and involves an investigator who will study the evidence, take necessary statements and then issue a determination, which can be appealed within the administrative process. The federal Wage & Hour Division may award back pay, along with additional compensation up to 100 percent of the awarded back pay. WHD may also order the employer to pay a fine to the Federal government and may mete out criminal penalties in the event of willful wage theft or even file a lawsuit in federal court on behalf of the worker, if the employer refuses to comply with the investigator’s determination. The authority of state agencies to award damages and assess fines varies from state to state.

A victim of wage theft may otp to file a lawsuit. However, it should be noted that a worker is not likely to prevail in a lawsuit without hiring an attorney. The attorney will probably insist on some form of cash retainer unless there is the possibility of a large class-action suit that could result in an award of millions of dollars.

One nice aspect of wage theft lawsuits is that the recovery of attorney fees and court costs may be awarded to the worker. Often in the American legal system, such a recovery is not permitted. Also, there is not necessarily a limit on the awarding of back pay and damages. Such awards are determined by a jury or through negotiation. The worker does have to share any awards with the attorney.

The major advantage of filing an agency complaint is that it costs the worker nothing. These agencies are supported with our tax dollars to work on our behalf. However, such agencies tend to be under-staffed and historically have not taken wage theft very seriously. And being government agencies, they are highly vulnerable to prevailing political winds and thus may make determinations that are frankly obscenely arbitrary and capricious.

The primary advantage of litigation is that the worker is represented by an attorney who is acting as an advocate for that worker. The attorney will fight for their client’s rights, as opposed to a civil servant who has no vested interest in the outcome of the case. However, attorneys generally do not work for free, so if a worker wants to pursue litigation, they will have to pay an attorney to represent them, unless they are part of a significant class action lawsuit involving numerous wage theft victims.

Another disadvantage of litigation is that judges often are reluctant to overturn decisions made through the administrative process. So, if a complaint filed with a state or federal agency does not result in a favorable decision, it tends to be unlikely that litigation will reverse the outcome.

Lastly, it needs to be noted that be it litigation or filing a complaint with a governmental agency, the process takes a long time. Complaints may drag on for months or even years, which does little to alleviate current hardship.

Direct action offers an alternative to legalistic or bureaucratic approaches that is more flexible and often more effective. Certainly, direct action can provide far more rapid relief for a worker.

Worker centers offer front line defense against wage theft and possess a wealth of experience in direct action tactics and strategy. They provide tremendous resources including experienced advocates, access to attorneys, and information about wage laws and policies. Worker centers can analyze evidence to help determine if wage theft has occurred. Once such a determination is made, worker center advocates can help a worker file a complaint or set a course of direct action.

Worker centers have learned through extensive experience that perhaps the fastest way to recover a worker’s wages is to confront the employer directly. This may result in immediate relief or it may not. If the employer refuses to pay the worker what the worker is owed, the worker center may initiate a direct action campaign to pressure the employer into compliance. Such tactics may include contacting the employer’s customers to let them know that wage theft is occurring. It may include various means to apply public pressure to force the employer to return stolen wages.

Such a campaign may involve pickets or even occupations. It generally involves getting the word out to the public to call or write letters to the employer. The idea is to hit the employer in the pocketbook. A loss of revenue tends to be a great motivator to compel employers to return stolen wages.

What is especially important about direct action is that it is collective in nature. Think of the symbolism of the Solidarity Fist. When a hand forms into a fist, the fingers are protected from injury and the hand becomes greater than the sum of the parts of four fingers and a thumb.

A direct action campaign will involve not only the worker and the worker center advocates, but also members of the general public along with the worker’s fellow workers. In terms of wage theft, where there’s smoke, there’s fire. Therefore, in a particular workplace, if one worker is not being paid properly, probably many or all the workers are not being paid what they are owed. In larger workplaces, the process may be systematic, so nobody is getting paid properly.

Such collective action involving many if not all the workers in a particular workplace becomes extremely important given the shortage of unionized workplaces and the fact that wage theft is common in non-union workplaces.

On the downside, direct action does not involve a legally binding process involving an order from a judge or government official. An employer may give in to demands and then turn around and break promises to pay back what is owed and stop engaging in wage theft.

On the other hand, direct action may bring about a satisfactory result considerably more quickly than legalistic approaches. Such relief might not include penalties or additional damages but getting paid and getting paid quickly tends to be what is most important to victims of wage theft. Again, wage theft tends to occur more frequently in lower paying jobs where workers often live from paycheck to paycheck. Therefore, a quick resolution is extremely important to workers in order to avoid or minimize hardship.

This year I started volunteering at Worker Justice Wisconsin, a Madison-based worker center that specializes in wage theft. The experience has been an eye-opening reminder of the importance radical tactics and strategy. As I’ve documented in this space, for the past two years, I have been working toward a career change into the legal field. I still want to do that. I still believe in the importance of the law as a means to protect our rights.

At the same time, I feel that I’ve forgotten that sometimes a radical approach will work better than patiently going through channels.

Hell, I’ve been an activist most of my adult life. I should know better. Certainly, we want federal and state agencies to protect our rights and live up to their responsibilities to us. Certainly, we want a fair judiciary that will protect the innocent and punish the guilty.

But that just doesn’t always happen.

Wage theft is a crisis that should not happen. The notion that thou shalt not steal is one that we have held dear for thousands of years. Or longer. Yet, they are stealing from us. Think about it. They are stealing from us. They are not just making us wage slaves, but in a way, they are turning us into chattel slaves. This is utterly unacceptable.

If direct action is the best way to fight this, then so be it. Let us remember that we have freedom of speech and freedom of assembly. We have the right to take direct action when there is just cause.

Let us remember that we don’t have to wait for an inept or unfair process to play itself out.