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The Prevalence of Wage Theft in Our National Economy

Posted by Ellen McKewen

CMTC_wage_theftTens of millions of U.S. workers survive on low wages – in many cases without medical insurance, paid time off, a retirement plan, or any other benefits. Exacerbating their financial plight is the widespread issue of wage theft, which is far more common than many people believe. Wage theft may consist of a boss’ outright denial of payment, inadequate compensation for all working hours, or refusal to cover overtime hours.

To put it another way, wage theft is the illegal withholding of wages or denial of benefits that are rightfully owed to any employee. Wage theft particularly affects low wage or illegal immigrant workers in the United States.

The Economic Policy Institute (EPI) came out with a highly detailed and insightful report on wage theft in September 2014. According to their analysis, wage theft has considerably negative consequences. Neglect of payment for minor things, such as preparation for service before regular business hours, customer assistance done off the clock, and clean-up after the establishment closes, accumulates over time.  Employees who earn a weekly minimum wage paycheck ($290 for 40 hours) may lose up to 10% ($1,400) of their annual income if they fail to get reimbursed for even a ½ hour of their work day.  This amount may not seem like much, but it makes the difference between having a home and living on the streets.

The Center for Urban Economic Development, National Employment Law Project, and the UCLA Institute for Research on Labor and Employment conducted an important 2008 research study on wage theft in three cities, New York, Los Angeles, and Chicago. According to their findings, approximately 66% of the workers surveyed dealt with at least one weekly wage violation. On average, the annual illegal loss of wages per employee was $2,634 out of a total income of $17,616. Overall, workers lost close to $3 billion in low wage industries across the three cities mentioned above. The EPI report states:

“If these findings in New York, Chicago, and Los Angeles are generalizable to the rest of the U.S. low-wage workforce of 30 million, wage theft is costing workers more than $50 billion a year.”

Wage theft is an insidious national crime. A comparison of wage theft to crimes that are more well-known reveals wage theft’s true magnitude and impact. FBI’s Uniform Crime Reports indicate about $14 billion lost in burglaries, larcenies, stolen cars, and robberies in 2012. That is $14 billion in controversial, stigmatized theft versus an estimated $50 billion in wage thefts.

Below are a few more recent statistics that illustrate the epidemic proportions of wage theft in the United States: 

  • The U.S. Department of Labor has recovered $280 million from wage and hour violators;
  • State departments of labor in 44 states recovered $172 million;
  • State attorneys general in 45 states recovered $14 million;
  • Private attorneys recovered $467 million in wage and hour class action lawsuits.

And while most companies don’t believe they create an environment condoning wage theft, some actually do so without knowing it.  Some questions to consider are:   

  • Do your employees work through their meal & rest breaks?
  • Do you have contract employees who are directed by you, report to you, and who’ve worked for you for a lengthy period of time?
  • Have you innocently condoned someone working off the clock?  (The employee clocked out but waited on a customer, did additional work off the clock, etc.)
  • Do you pay current CA minimum wage?
  • Are your contractor resources deprived of any benefits you provide to full-time employees?

Here are some tips for you to ensure you and your employees are protected against Wage Theft issues:

  • Follow all wage and hour laws.
  • Confirm that all employment posters are current.
  • Understand and apply overtime laws.
  • Eliminate tip stealing.
  • Ensure all meal and break periods are firmly entrenched.
  • Protect workers’ health and safety.
  • Do not retaliate against an employee for reporting an issue.

Protecting your company from wage theft not only fosters your employees’ financial security, but also minimizes the risk of legal liability if employees sue for insufficient compensation. Establish firm payment systems to care for your employees and avoid major penalties from our legal system.








Topics: Hiring and Retention, Hiring, Human Resources

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