Shortchanged: An in-depth look at wage theft
If labor activists have turned up the volume on the discussion around wage theft, that’s a good thing, said John Aiken, director of the Apprenticeship and Labor Standards Division of the Minnesota Department of Labor and Industry, the state agency that investigates worker complaints.
“What that is doing is raising the profile of this issue and, hopefully as one of the consequences of this, is driving people to this office to seek the assistance that they deserve,” Aiken said.
The department receives more than 20,000 inquiries each year. While some of the phone calls and emails concern child labor laws, the majority of complaints fall into the category of illegal activity commonly known as “wage theft,” including workers who never received a final paycheck from a previous employer, weren’t paid overtime or had illegal deductions taken out of their wages.
The increased attention being paid to wage theft has thrown a spotlight on the laws that are meant to protect workers, employers who seem to flout the rules and the resources that are available to go after lawbreakers. Both state agencies and their federal counterparts at the U.S. Department of Labor are noticing.
“As a person who does law enforcement, I would always like a bigger staff,” David King, district director for the federal Labor Department’s Wage and Hour Division office in Minneapolis, said. “We could always find work for people to do. There’s lots of things that can be done to help protect workers. That’s just a reality.”
Scope of the problem
The authors of Employers Gone Rogue, a 2013 study that drew on surveys of 4,387 low-wage workers in Chicago, New York and Los Angeles, described a “current weak penalty and enforcement regime in the United States” for employers who break the rules. The researchers, from the National Employment Law Project, Cornell University and the University of Illinois at Chicago, wrote in the report that a lack of data makes studies like theirs difficult, but added that “an emerging body of evidence suggests that the systemic violation of employment and labor laws is common in a number of low-wage industries.”
“It’s basically criminal activity, in a sense, and it’s hard to get accurate reporting,” said Aaron Sojourner, a labor economist at the University of Minnesota. Sojourner said the Employers Gone Rogue report is “probably the best evidence out there that this is more or less common.”
The Economic Policy Institute, a Washington, D.C.-based nonprofit think tank, analyzed a U.S. Department of Labor report and found the value of all back pay recovered by the department in fiscal year 2012, about $280 million for 308,000 workers, was more than the estimated $139 million stolen by criminals in all street, bank, gas station and convenience store robberies during that same period. Sojourner said “more cops on the beat” would help to protect both workers and law-abiding employers, who may have a hard time competing in industries where cheating is almost a part of doing business.
“If you’re going to write rules, you have to make sure everyone plays by the same rules,” he said. “You can’t let part of the market compete by cheating, because it’s unsustainable.”
On the beat
There are nine full-time investigators based in Minneapolis who look into violations of federal labor laws, including two trainees. Another investigator works out of a field station in Duluth.
King said six industries drive the majority of complaints and investigations: restaurants, health care, construction, retail stores, hotels and motels and temporary help firms.
During the most recent fiscal year, from October 2014 to September 2015, King’s staff completed 142 investigations and found about $1.8 million in wages not paid correctly. Over that same period, they collected $43,000 in civil penalties from employers who broke the law.
Sara Ellstra, state program administrative director for DLI’s Labor Standards Unit, said the agency employs six labor investigators who respond to claims of labor theft, up from just three investigators when she started at the agency in 2007. The unit also includes one person charged with public outreach and four staffers who focus specifically on enforcement of prevailing wage laws for state-funded construction projects.
In 2015, the agency recovered more than $655,000 in final wages for 1,144 workers who didn’t get their last paychecks after leaving a job. Another 7,317 workers received back wages totaling nearly $387,000 after the agency intervened. The penalties paid by employers who broke the law totaled just less than $184,000.
When there’s evidence of a violation by an employer, the agency first tries to negotiate a voluntary settlement. If no agreement is reached, the agency can issue a compliance order, at which point the employer has to pay double the back wages owed.
If the employer still contests the agency’s findings, the case moves into the court system. Workers, too, have the option of taking private action in district or conciliation court.
Aiken said complaint originate primarily in the service industry, coming from restaurant employees, janitors and health care workers. If federal law offers greater protection to the worker, state investigators will refer them there, and vice-versa, he added.
A shifting approach
DLI Labor Standards Unit investigations are primarily “complaint-driven,” Aiken said, but it is shifting, tentatively, toward a more proactive enforcement approach.
“Last year was my first year here, and one of the things I wanted to do when I came in was to begin a directed-investigation initiative — pilot it, give it a try and see if that would help us meet our mission of promoting broad compliance in industry,” Aiken said, adding that the initiative is still “just in the beginning stages.”
The restaurant industry is getting some of that additional attention from DLI because of a high volume of inquiries regarding tip pooling and minimum-wage violations from restaurant workers, Aiken said.
“We’re putting together a process that will be effective and an initiative that we can grow based on the resources we have,” he said.
A better-informed public, one that knows about the rights of the workers who clean their offices and hotel rooms, prepare their food and show up for work at construction sites, may also be part of the solution, Sojourner suggested.
“We think about law enforcement as being located in government, but actually all kinds of law enforcement really rely on an active citizenry to an active public that’s engaged,” he said.
“… It really requires everybody on the ground to be paying attention, too.”
Other stories in this special report