Why Wage Theft Is a Growing Problem in America

Sienna Beard
March 31, 2015

The Wage and Hour Division (WHD) of the Department of Labor protects wages and enforces laws that cover more than 7.3 million establishments and 135 million workers. The WHD has determined that certain industries are more likely to have workers who are cheated out of their wages, as well as workers who are less likely to speak up against those who are cheating them.

In order to have far-reaching results, the WHD uses civil money penalties, liquidated damages, and debarments; it is also looking at supply chains and attempting to discourage the use of subcontractors or suppliers who don’t follow the laws. In addition, staffers publicize violations so that employers can be educated about their responsibilities. This makes it possible for employers and employees to learn from the issues that other companies face. The WHD’s job is to protect the wages of citizens, but you can also take steps to protect your own wages.

In 2014, the WHD discovered that $240 million was owed to more than 270,000 workers. Since fiscal year 2009, the WHD has recovered over $1.3 billion in back wages for more than 1.5 million workers. According to the U.S. Department of Labor Blog, an average of over $659,000 in back wages were collected each day last year; more than $890 for each employee due back wages. That equates to 2.9 paychecks for a maid or housekeeper, and 3 paychecks for a cashier. Also last year, the WHD recovered $79 million owed to 109,000 workers in low-wage industries. The WHD targets its investigations based on data, and evidence leads them to industries where there are often problems and violations. From 2009 to 2014 there was a 20% increase in establishments found to be in violation. Of agency-initiated investigations during 2014, 78% were found to be in violation.

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DOL Signs Agreement with RI Department of Labor and Training

The agreement is a new effort by the agencies to work together to protect the rights of employees and level the playing field for responsible employers by reducing the practice of misclassification. 

May 08, 2015

 

The U.S. Department of Labor and the Rhode Island Department of Labor and Training signed a three-year memorandum of understanding intended to protect the rights of employees by preventing their misclassification as independent contractors or other non-employee status. Under the agreement, both agencies will share information and coordinate law enforcement, according to DOL’s release.

The agreement is a new effort by the agencies to work together to protect the rights of employees and level the playing field for responsible employers by reducing the practice of misclassification. Before the Rhode Island Department of Labor and Training agreed to partner with DOL, Alabama, California, Colorado, Connecticut, Florida, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New Hampshire, New York, Utah, Washington, Wisconsin, and Wyoming agencies also signed similar agreements.

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For more information on misclassification, visit (DOL/Misclassification)

 

DFW Television Report Puts Spotlight on Worker Misclassification

by Scott Braddock on Wed, 04/29/2015 – 7:36am

In an explosive investigation that drew the attention of many average Texans over the weekend, WFAA Television in Dallas/Fort Worth put a bright spotlight on the problem of worker misclassification. It’s a problem the Construction Citizen team has exposed for years and we greatly appreciate any time other media outlets take up the cause as well.

This most recent outrage came to light after three men working as independent subcontractors underneath Thanksgiving Tower in Dallas died in a horrific accident. But, the companies involved have denied damages to their families. How can that be?

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Employers Of District Of Columbia Employees Have One Month Left To Provide Wage Notices To Current Employees

Monday, April 27, 2015

The District of Columbia’s Wage Theft Prevention Amendment Act of 2014, which became effective on February 26, 2015, requires in part that employers provide written wage notices to their D.C.-based employees.  Employers have until May 27, 2015 to satisfy this requirement with respect to their employees who were employed as of the Act’s effective date of February 26, 2015.

Specifically, the law requires written wage notices as follows:

  1. New Employees:  Employers are required to provide a written wage notice, both in English and in the employee’s primary language, to all new employees at the time of hiring (with receipt of the notice to be acknowledged in writing by the employee and a copy retained by the employer);
  2. Current Employees:  Employers are required to provide a written wage notice, both in English and in the employee’s primary language, to all current employees (who were employed as of February 26, 2015) by May 27, 2015 (with receipt of the notice to be acknowledged in writing by the employee and a copy retained by the employer);
  3. Upon Change:  Employers are required to provide a written wage notice, both in English and in the employee’s primary language, whenever there is a change to any information on the wage notice (with the notice to be acknowledged by the employee and a copy retained by the employer).

 

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Calif. Bill Would Ramp Up Enforcement Against Wage Theft

By Erin Coe April 22, 2015

Law360, San Diego (April 24, 2015, 10:43 PM ET)

 

Looking to crack down on wage theft, California’s Senate leader said Thursday he has introduced a bill that would allow state regulators to require businesses that have failed to pay court orders for worker wages to post a bond of $150,000.

State Senate President Pro Tem Kevin de Leon said S.B. 588 would help boost the state labor commissioner’s efforts to go after employers that illegally withhold wages from workers. If companies that already have outstanding judgments also fail to post the bond, the bill gives the labor commissioner the option to file a lien for unpaid wages on the employer’s property.
“Wage theft has reached epidemic proportions in California,” de Leon said in a statement. “California must target the bad actors to level the playing field for honest businesses and help workers collect the pay they’ve earned.”
A U.S. Department of Labor report in December found that between 334,000 and 372,000 workers in California were paid less than the minimum wage each week, at a cost of between $1.2 and $1.5 billion annually.

Seattle’s New Wage Theft Ordinance Imposes Notice Requirements and Civil Penalties

4/16/2015 by Breanna M. Sheetz, Daniel L. Thieme and James Zissler

 

Effective April 1, 2015, a new Wage Theft Ordinance imposes specific wage and tip notice requirements on employers in the City of Seattle.1  The Seattle Office for Civil Rights (SOCR) is granted power to investigate complaints, and employers who violate the Ordinance are subject to orders to pay wages and tips, as well as civil penalties.

What Employers Should Do Immediately to Comply with this Ordinance

Following are the immediate steps that employers should take if they have non-exempt employees2 working in Seattle:

1. Provide immediate notice of the wage theft law to Seattle employees.

Employers must provide notice of employees’ rights under this law in writing (or electronically, as noted below). The SOCR has issued a poster that includes the required information about the new wage theft law, as well as information about Seattle’s new minimum wage law.  The poster is available in English (http://www.seattle.gov/Documents/Departments/CivilRights/mwo-poster-english.pdf) and Spanish (http://www.seattle.gov/Documents/Departments/CivilRights/mwo-poster-spanish.pdf).  In lieu of displaying the poster, employers can comply with this requirement by reprinting the information in a handbook, or duplicating the poster in another format such as a letter or online system that is accessible by employees.

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To Combat Wage Theft, San Jose Weighs Local Ordinance

By Jennifer Wadsworth / April 15, 2015

 

Taking a cue from Santa Clara County, San Jose is considering adopting a wage theft ordinance. The city rule would deny permits, licenses and government contracts to businesses with pending wage theft violations.

In a proposal submitted to the Rules and Open Government Committee, City Council members Don Rocha, Margie Matthews, Ash Kalra and Magdalena Carrasco say local enforcement would will regulatory gaps that leave thousands of low-wage workers under-paid with little recourse.

They share the story of a live-in caregiver, Priscilla Soriano, who worked 12-hour days six days a week, but never got paid overtime. In 2011, she filed a complaint with the state Labor Commission, which ruled that the employer owed her $64,904 in unpaid wages.

Between 2011 and 2014, nearly 1,100 San Jose-based businesses were slapped with wage theft judgments, according to Santa Clara County Superior Court records cited in the Rules memo. Women, immigrants and anyone working a low-wage job are the most at-risk.

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Cheating by Unethical Employers Reaches Crisis Levels While Texas Lawmakers Sit on Their Hands

by Scott Braddock on Wed, 04/08/2015 – 5:46am

 

Over the years, the Construction Citizen team has put a bright spotlight on the myriad problems caused by worker misclassification. Those difficulties continue to mount while Texas lawmakers do very little about it, much to the frustration of ethical companies that cannot compete with cheaters, many single mothers who are denied child support payments, conservative activists upset about illegal immigration, and workers’ rights advocates who believe in a better standard of living for those who toil in the hot Texas sun.

Worker misclassification is one of the major underlying problems when it comes to fixing all those challenges.

If you’re unfamiliar, worker misclassification is a fancy term for cheating on payroll. That’s why labor activists call it “payroll fraud.” It happens when a boss pretends their worker is an “independent subcontractor” instead of an employee even when, by law, the person should be on the books as an employee. Many employers do this with the goal of avoiding payroll taxes, workers’ compensation coverage, and other benefits and protections in place when there is a true employer-employee relationship. Keep in mind that there are many legitimate uses of contract labor, but the IRS has legal definitions for who is an employee and who is a contractor.

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Misclassification of workers called a ‘serious’ problem

Laurie Merrill, The Republic
8:13 p.m. MST April 1, 2015

 

The federal government is using enforcement and education in its ongoing battle to stop construction businesses from hiring off-the-books laborers to cut costs, a Labor Department official said.

“There are, sadly, businesses out there that use misclassification as a business model,” David Weil, U.S. Department of Labor’s Wage and Hour Division administrator, said at a construction industry seminar in Phoenix Wednesday.

The practice of paying lower wages to untrained workers by misclassifying them as independent contractors is growing, Weil said. By doing so, companies avoid paying taxes, employment insurance, liability coverage and legal wages. Underpaid employees often are afraid to come forward.

“The misclassification of employees as independent contractor presents one of the most serious problems facing affected employees, employers and the entire economy,” Weil said.

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Study shows wage theft rampant in construction industry

By Katie Johnston GLOBE STAFF MAY 12, 2015
 

For more than three years, workers doing asbestos removal and demolition jobs for several Woburn companies were paid in cash, resulting in more than $700,000 in unreported wages, federal prosecutors charged in an indictment last week.

Meanwhile, construction workers around the state – particularly immigrants hired by subcontractors – say they sometimes go for weeks without pay. When they do get paid, it can be less than promised, and overtime pay is virtually nonexistent.

Many of them are hired as independent contractors, without the job protections or tax deductions of a traditional employment relationship.

The practice, known as wage theft, “has reached epidemic levels” in Massachusetts, namely in the booming residential construction industry, according to research from the University of Massachusetts Amherst.

In the past 18 months, the state attorney general’s office has issued more wage violation citations against employers in the construction industry than in any other sector – 253 citations in all, resulting in more than $1.6 million being recovered in penalties and unpaid wages. The attorney general’s office said cracking down on wage theft continues to be a priority.