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Wage Theft: A Crime You Can Get Away With

This week, we authored a report grading states on how well they protect a fundamental workplace right: getting paid what you are legally owed. This right is so basic and common-sense that most people are still unaware of how commonly it is violated.
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Co-authored with Cristina Francisco-McGuire

This week, we authored a report grading states on how well they protect a fundamental workplace right: getting paid what you are legally owed. This right is so basic and common-sense that most people are still unaware of how commonly it is violated.

Wage theft, or the illegal underpayment of workers, has become so widespread, it affects millions of workers across the country and is nearly ubiquitous in certain industries: retail, restaurants, hospitality, day-labor, warehousing, child care, and construction. That's a lot of people -- already not getting paid enough -- whose bosses illegally make their paychecks even lighter.

The last time a detailed, multi-state survey was done, the findings were shocking. Researchers in three of our nation's largest cities interviewed thousands of workers who earned at or near the minimum wage, and found a wide array of workplace violations. Here are just the basic facts:

  • 64% of low-wage workers experience wage theft each week
  • 26% are paid under the legal minimum wage
  • 76% of workers who are owed overtime go unpaid or underpaid for those hours
  • On average, low-wage workers lose 15% of their income each year to wage theft - $51 per week, or $2,634 per year

Added up across the nation, this amounts to billions of dollars in earnings stolen from people who can least afford to lose it. In New York State alone, workers' losses are estimated at $3 billion per year, and wage theft costs the state $427 million per year in uncollected revenues. By depressing the consumer spending needed to fuel economic growth and by defrauding states and taxpayers to the tune of millions of dollars, this is a problem that affects all of us.

State laws and labor departments play a crucial role in prosecuting wage theft, filling in where enforcement of the federal minimum wage law is either lacking or not applicable. Even after the U.S. Department of Labor hired 250 more investigators in 2009, there is still only one investigator for every 141,000 workers -- nearly ten times fewer than there were seventy years ago, after the federal minimum wage was first enacted.

Our new report, Where Theft is Legal, shows that, if "cracking down on wage theft" were a class, 44 out of 50 states would fail one of the major tests: enacting strong laws against the crime. At the same time, several states have begun to move in the right direction. As we highlighted in another recent report, New York passed a law in 2010 that is now the strongest in the country. Illinois, California, and Massachusetts have also developed strong and innovative policies to help workers reclaim their wages and convince employers to abandon wage theft. But far too many states have done little to nothing at all.

So what would strong wage theft laws look like? The state laws and policies being advanced by worker advocates and forward-thinking policymakers are setting the new standard for cracking down on wage theft. In Where Theft is Legal, we pulled together the best of these policies into a comprehensive standard, and measured states' existing laws against it. These policies fall into three major categories that, together, comprise a strong wage theft policy:

Accessing Justice: The most basic provisions of wage theft laws are among the most important: which workers are protected, and whether the law gives them the tools to recover stolen wages. An often overlooked issue is the problem of employer retaliation against workers challenging wage theft. Unless employees have strong legal protections, the risk and impact of losing a job can be greater than the possible benefit of taking on one's employer.

Transparency & Accountability: Good recordkeeping laws help workers and their employers stay on the same page regarding wage rates, paydays, work hours, and payroll deductions. Not only do laws like payday notification and paystubs create a paper trail that makes it easier to process wage claims, they ensure that employers who play by the rules have nothing to fear.

Securing Justice: In order to clamp down on wage theft effectively, the law must incentivize workers to pursue claims, as well as deter employers from violating the law. This third major component of strong wage theft laws policies addressing those two imperatives: the amount in damages workers are able to recover through filing a wage claim, and the civil and/or criminal penalties for employers for violations.

Without any one of these policies, we lack the essential protections and tools to change the way unethical employers do business. Yet, our report shows that New York is the only state that receives a passing grade in all of these categories -- and even it only earns a C+ overall.

This week, we celebrated the 100 anniversary of the first state minimum wage law - a landmark achieved more than a quarter century before the federal government set a national standard. Today, forty-five states have their own minimum wage laws, and eighteen have set them higher than the national $7.25. It is up to states to lead the way on wage theft, just as they did in establishing the minimum wage.

The consequences of inaction are dire. Not just last week's alarming unemployment report, but the whole economic landscape shows signs of a tectonic shift away from our nation's vision of itself as a land of opportunity. Most of the jobs being created since the end of the Great Recession are in lower-wage industries where wage theft is rampant. As a result, millions of the people considered "lucky" enough to find work these days are not only landing in jobs earning less than a livable wage, but in workplaces where their pay is eroded even further by illegal deductions and underpayments.

If we do not crack the wage theft problem, the very notion of economic security will be a relic of our past. The already-weakened economy could weaken even further, meaning that even those of us fortunate enough to have jobs where we don't suffer wage theft could end up having to take one where we do, as millions already have.

Tim Judson is the Workers' Rights Policy Specialist at Progressive States Network, a national non-profit that works with state legislators and advocates to develop and advance progressive legislation in the states. Cristina Francisco-McGuire is Senior Policy and Program Specialist at Progressive States Network.

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