Effective Wage Theft Enforcement

This year, 20 states will raise their minimum wage, due to new state laws, voter-approved ballot measures, or automatic adjusted requirements. Though millions of workers are expected to benefit from the increased wages, there are concerns that many of them will not receive the extra money to which they are now entitled. The struggle to increase wages has been no less serious than the struggle to ensure that workers actually receive them.

That’s why groups representing low-wage workers across the country have invested considerable time, energy and strategic thinking to make wage theft enforcement meaningful and effective.

Shortchanging workers has become a growing crisis in recent years, with losses estimated as high as $40 billion to $50 billion annually. It is hard to know for sure, but a recent study conducted for the U.S. Department of Labor (and based on 2011 data) found that more than 300,000 workers both in New York and in California suffered minimum wage violations each month. And a report on the study by The New York Times estimated that more than two million workers across the nation were paid less than the federal or state minimum wage.

In December, 2014 The Wall Street Journal interviewed David Weil, administrator of the federal Department of Labor’s Wage and Hour Division, the unit that is responsible for enforcing the 76-year-old Fair Labor Standards Act, which sets standards for minimum wage and overtime pay and that affects most workers.

Weil was asked what has surprised him since taking the job a year ago, and he replied, “There still are violations of our standard labor laws that are almost jaw-dropping. Sometimes companies violate the law because they don’t understand it. But there are companies out there that aren’t complying because they don’t want to or don’t feel they need to.”

Perhaps some of the lapses in understanding can be attributed to dramatic changes in the relationship between employers and employees in recent years. Weil has documented many of the changes in his 2014 book, “The Fissured Workplace,” which examines some of the increasingly attenuated connections between bosses and workers – and the consequences. What recourse do workers have when the entity that issues a less-than-complete paycheck is not necessarily the boss? When companies say they will be responsible for “core competencies,” but don’t adhere to basic standards, such as appropriate wage-and-hour regulations, are they trying to have it both ways?

Christine Owens, executive director of the National Employment Law Project, a Public Welfare Foundation grantee, suggests that “more and more workers are in working arrangements that feel or are like contingent work.” She echoes Weil in her concern that these arrangements lead to “a race to the bottom regarding wages” and a “lack of ownership of responsibility” among employers, especially when they are contractors.

That’s why Weil and his troops are fighting back harder. The wage-and-hour division has 300 more investigators than it did at the beginning of the Obama Administration, for a current total of nearly 1,100. And the investigators are striking first more often. Traditionally, about 75 percent of the division’s investigations have been driven by complaints. But by the end of 2014, nearly half of the investigations were initiated by the division, since many of the low-wage labor operations that are non-compliant are in industries that employ a lot of immigrants, who are least likely to complain.

In addition, the Labor Department is going after liquidated damages, where appropriate, in addition to actual lost wages, in settlements for wage theft claims. The liquidated damages cover the additional costs incurred by workers and their families when they are not paid properly, such as late payments on bills.

While these federal-level developments are important and welcome, it has also been critical for the federal government to work together with states. A recently announced $800,000 judgment against a Papa John’s pizza franchise in New York that underpaid its employees and failed to pay overtime was the result of an action that was initiated by state Attorney General Eric Schneiderman, reportedly with help from the federal Labor Department.

And, just as federal officials have shifted tactics to be more responsive to what is happening in workplaces, state enforcers are also coming up with more aggressive and effective strategies at the urging of local advocates, many of whom are Public Welfare Foundation grantees.

Illinois has been a model state in this regard, with advocates pushing for better enforcement by public agencies while also allowing workers to pursue their own claims.

In 2010, after a year-long education campaign by the Just Pay for All coalition, the State Legislature passed five significant amendments to the Illinois Wage Payment and Collections Act. The coalition, which consisted of Working Hands Legal Clinic and three worker centers – Chicago Workers Collaborative, Centro de Trabajadores Unidos, and Latino Union of Chicago – received support during the campaign from the Public Welfare Foundation.

The amendments, which constituted the most thorough improvements to wage theft law in the state in 60 years, increased fines and penalties for employers who engage in wage theft. Even more significantly, the law made it easier for low-wage workers to get assistance from the Illinois Department of Labor (IDOL) or the courts when they sought help with collecting unpaid wages, vacation, bonus pay, commissions, and illegal deductions.

For many contested wage theft claims under $3,000, there is now an administrative procedure within IDOL that provides resolution within about six months. Representatives of community organizations are allowed to accompany workers to these administrative hearings, making it more likely that workers will show up.

Since the amendments went into effect in 2011, the coalition has worked diligently with IDOL to ensure vigorous implementation and enforcement. It has worked equally hard to educate low-wage workers across the Chicago area to learn how to access the administrative process at IDOL. As a result, IDOL’s Fair Labor Standards Division successfully recovered more than $5.3 million in lost wages in 2014.

Through this work, the coalition has developed a new cadre of leaders. It has now expanded to eight worker centers and re-named itself the Raise the Floor Alliance. In addition to wage theft, Raise the Floor will deal with health and safety, unfair firings, discrimination, and other issues.

When it comes to empowering workers to pursue their own claims, grantee Public Justice Center helped push Maryland to pass a cutting edge law in 2013, which allows wage theft victims to seek a lien on employer property before a final judgment, preventing fly-by-night employers from hiding their assets. Among other things, the wage lien policy has shortened a potentially two-year litigation process to about 75 days.

These are among some of the new, sharper tools of enforcement that Public Welfare Foundation grantees and others are helping to put in place for workers to ensure that, as the minimum wage is raised, they receive all the pay to which they are entitled.

Innovations in Wage Theft Enforcement

Public Welfare Foundation grantees are leaders in protecting workers against wage theft, and they have initiated many cutting-edge innovations to improve enforcement by both public institutions (such as courts and labor departments) and private actors (workers enforcing their own rights through the courts). The following are some examples of recent pathbreaking innovations.

Public enforcement

By agencies and courts

Private enforcement

By workers

Better practices

Working Hands Legal Clinic secured better results for workers in Chicago’s small claims courts by educating judges in the complexities of employment law through legal briefs and other measures.

Grantees across the country are meeting with their state labor departments to monitor enforcement practices, advise them about patterns of abuse, and suggest directions for targeted investigations.
Restaurant Opportunities Centers United has pioneered the use of settlement agreements in wage theft cases to secure back wages as well as changes in employment practices designed to prevent future instances of wage theft.

Coalition of Immokalee Workers is leveraging the market power of corporate purchasers of tomatoes to win worker-centered enforcement of wage and other workplace rights.

Better policies

Grantees in Illinois and Washington, DC advocated for changes in policies that empower their labor departments to adjudicate small wage claims, for a quicker – and less expensive – path to justice. Public Justice Center successfully pushed for a new policy in Maryland to create a pre-judgment wage lien that improves the chances of actually collecting back wages from fly-by-night employers.

Grantees in California, DC, Illinois, New York, and Oregon have pressed successfully for various policies that hold employers accountable, despite use of temp firms, subcontractors, and attempts to close down and reopen successor firms.

The Public Welfare Foundation supports efforts to advance justice and opportunity for people in need. These efforts honor the Foundation’s core values of racial equity, economic well-being, and fundamental fairness for all. The Foundation looks for strategic points where its funds can make a significant difference and improve lives through policy and system reform that results in transformative change. For more information, visit Follow the Foundation on Twitter or on Facebook.

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