Wage theft
Wage theft is the failing to pay wages or provide employee benefits owed to an employee by contract or law. It can be conducted by employers in various ways, among them are failing to pay overtime; violating minimum-wage laws; the misclassification of employees as independent contractors; illegal deductions in pay; forcing employees to work "off the clock"; not paying annual leave or holiday entitlements; or simply not paying an employee at all.
Wage theft in the United States
According to some studies, wage theft is common in the United States, particularly against low wage workers, including citizens and undocumented immigrants. The Economic Policy Institute reported in 2014 that survey evidence suggests wage theft costs US workers billions of dollars a year. Some rights violated by wage theft have been guaranteed to workers in the United States in the 1938 Fair Labor Standards Act.In 2019, the U.S. Department of Labor cited about 8,500 employers for taking about $287 million from workers, but they rarely punish repeat offenders, which "perpetuates income inequality, hitting lowest-paid workers hardest." A 2023 study showed that a significant amount of wage theft goes unreported because employees may not fully understand what constitutes wage theft, or they fear reprisals.
Forms
Overtime
According to the FLSA, unless exempt, employees are entitled to receive overtime pay of at least "time-and-a-half", or one and one-half times normal pay, for all time worked past forty hours a week. Some exemptions to this rule apply to public service agencies or to employees who meet certain requirements in accordance to their job duties along with a salary of no less than $684 a week. A 2009 study of workers in the United States found that in 12 occupations more than half of surveyed workers reported being denied overtime pay: child care, stock and office clerks, home health care, beauty/dry cleaning and general repair workers, car wash workers and parking attendants, waiters, cafeteria workers and bartenders, retail salespersons, janitors and grounds workers, garment workers, cooks and dishwashers, construction workers, and cashiers.Minimum wage
In 2009, reform placed the new United States federal minimum wage at $7.25. Some states have legislation that sets a state minimum wage. In the case an employee is subject to both federal and state minimum wage acts, the employee is entitled to the higher standard of compensation. For tipped employees, the employer is only required to compensate the employee $2.13 an hour as long as the fixed wage and the tips add up to be at or above the federal minimum wage. Minimum wage is enforced by the Wage and Hour Division. WHD is generally contacted by 25,000 people a year in regards to concerns and violations of minimum wage pay. A common form of wage theft for tipped employees is to receive no standard pay along with tips.A 2017 study found that U.S. employers underpay 2.4 million sub-minimum wage workers over $15 billion yearly, amounting to an average of $64 per week, or nearly a quarter of earnings. Year-round workers are underpaid $3,300 per year and receiving $10,500 in annual wages on average.
Misclassification
is a violation that leaves employees very vulnerable to other forms of wage theft. Under the FLSA, independent contractors do not receive the same protection as an employee for certain benefits. The difference between the two classifications depends on the permanency of the employment, opportunity for profit and loss, the worker's level of self-employment along with their degree of control. An independent contractor is not entitled to minimum wage, overtime, insurance, protection, or other employee rights. Attempts are sometimes made to define ordinary employees as independent contractors.Misclassification in the United States is extensive. In New York state, for example, it was found in a 2007 study that 704,785 workers, or 10.3% of the state's private sector workforce, were misclassified each year. For the industries covered in the study, average unemployment insurance taxable wages underreported due to misclassification was on average $4.3 billion for the year and unemployment insurance tax underreported in these industries was $176 million.
Illegal deductions
Employees are subject to forms of wage theft through illegal deductions. Trivial or fabricated violations in the workplace are used to validate deductions. Any deduction that brings an employee to a level of compensation lower than minimum wage is also illegal. In many states, employers are required to issue employees documentation of deductions along with earnings. Failure to issue this documentation is generally prevalent in work places subject to wage theft.Full wage theft
The most blatant form of wage theft is for an employee to not be paid for work done. An employee being asked to work overtime, working through breaks, or being asked to report early and/or leave late without pay is being subjected to wage theft. This is sometimes justified as displacing a paid meal break without guaranteeing meal break time. In the most extreme cases, employees report receiving nothing. In some cases, the legal status of the workers can enable employers to withhold pay without fear of facing any consequences.Other forms
Putting pressure on injured workers to not file for workers' compensation is frequently successful. Employees are often confronted with threats of firing, or calls to immigration services if they complain or seek redress. Workers are often denied time off or annual vacation time that they have acquired, or denied pay for sick leave or earned vacation time.Incidence
A 2009 study based on interviews of over 4,000 low wage workers in Chicago, Los Angeles, and New York City found that wage theft from low wage workers in large American cities was severe and widespread. Incidents varied with the type of job and employee. Sixty-eight percent of the surveyed workers experienced at least one pay-related violation in the week prior to the survey. On average, the workers in the three cities lost a total of $2,634 annually due to workplace violations, out of an average income of $17,616, which translates into wage theft of fifteen percent of income. Extrapolating from these figures, low wage workers in Chicago, Los Angeles, and New York City lost more than $2.9 billion due to employment and labor law violations.In 2017, the Economic Policy Institute estimated that wage theft amounts to up to $50 billion annually, more than all robberies, car thefts, and burglaries combined, and that around 17 percent of low wage workers are victims of this crime.
Workers at risk
Studies have found inflated rates of wage theft violations in markets employing women and foreign-born populations, and there are indications that wage exploitation and wage theft are among key motivations of employers for hiring migrant workers. Within the foreign-born population, women were at a much greater risk for wage violations than their male counterparts. Undocumented workers or unauthorized immigrants stood at the highest risk levels. Education, longer tenured employment, and English proficiency proved to be influential factors in employee populations. All three variables reduced the probability of wage theft for the aforementioned demographics. Workplaces where the compensation was paid in one weekly flat rate or in cash saw a higher instance rate of wage theft. Smaller businesses with less than 100 employees also saw a higher instance rate of violations than larger business. In one study, the manufacturing industry, repair services, and private home employment were at the highest risk for violations at the workplace. Home health care, education, and construction saw the lowest levels of wage theft. Restaurants, grocery stores, retail, and warehousing fell around the median.Contemporary examples
In November 2011, Warehouse Workers for Justice helped Wal-Mart warehouse employees file their fourth class-action lawsuit against the warehouse companies. Without Wal-Mart being a direct defendant, the argument was made that Wal-Mart had created this culture amongst the companies it worked with. The first lawsuit filed was in 2009. The workers argued that poor record keeping and broken promises led to workers receiving less than minimum wage. Walmart also denied workers paid vacations that they were promised upon contracting. In a report released on November 26, 2011, a Palm Beach County organization, People Engaged in Active Community Efforts, sent postcards to Macy's and Bealls executives as a form of protest. The Florida Retail Federation had recently proposed a bill to block a wage theft ordinance in their county, which was intended to create a system that would speed the investigation and processing of wage theft reports.A 2012 study by the Iowa Policy Project calculated that dishonest employers defraud Iowa workers out of about $600 million annually in wages. State Senator Tony Bisignano, Democrat from Des Moines and Senator William Dotzler, a Democrat from Waterloo, Iowa, proposed a bill to strengthen wage law enforcement on January 28, 2015, "since Iowa's wage theft laws are so weak they are impossible to enforce". The Iowa Association of Business and Industry opposed the bill, saying that resources for enforcement should be the focus instead.
In 2021, Tyler Technologies paid $3 million to settle claims that it had required some employees to work overtime and had not paid them for that time.
In 2022, Haro v. Kaiser Foundation Hospitals settled. After the Haro case was consolidated into a Kaiser staff class action with other wage theft claims, settlement payments by Kaiser totaled over $22 million. Kaiser had unsuccessfully invoked PREP Act immunity. Employee Haro sued her employer under a California minimum wage statute for failing to compensate her for time spent taking mandated COVID tests, which required her to arrive at work 15 minutes before the start of her shift. The court reasoned her claim was not "causally connected to any of covered countermeasures" because the defendant "could just as easily have implemented the screenings without the requirement that employees show up early. In that case, the screening procedures would simply have occurred while employees were on the clock and would not have a minimum-wage claim."