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Labor & Economy

Wage Theft Confidential: How Your Earnings Are Stolen




Wage theft is a serious yet seldom-reported crime that victimizes millions of Americans – particularly low-income and immigrant workers. Today, as part of an ongoing examination of workplace issues,  Capital & Main debuts a new series focusing on wage theft, beginning with a primer on the problem by Bobbi Murray, followed by Joe Rihn’s profile of a port truck driver who works in an industry where wage theft is a daily fact of life.

The expression “wage theft” is a deceptively gentle term. Perhaps “paycheck mugging” more accurately describes the violence done to the earnings of millions of Americans each year.

If you are a target of wage theft no one pistol-whips you to acquire your valuables–but you definitely get robbed. Every week Los Angeles workers get held up for $26.2 million through unpaid overtime, being pressured to work through unpaid breaks or off the clock; some employees are simply shortchanged on their hours or pay.

Based on data from New York, Chicago and Los Angeles, the Economic Policy Institute calculates that workers in the United States lose $50 billion a year in unpaid wages. By comparison, high-profile crimes such as bank, convenience store and residential robberies, auto theft and other larcenies cost victims less than $14 billion in 2012, according to FBI statistics quoted by the EPI.

In Los Angeles 655,000 low-wage workers get dinged each week by at least one pay violation— employees already scraping by at $16,536 a year get mugged for $2,070 annually, according to Human Impact Partners in a study created with the UCLA Labor Center and the Restaurant Opportunities Centers United.

Here’s one typical way that wage theft works: You show up for an eight-hour shift at a fast-food restaurant. California law requires you to get a 30-minute unpaid break no later than five hours after you begin. Actually using that half hour is another matter, however.

Citing a 2012 California Supreme Court decision, the California Chamber of Commerce advises business owners that “employers do not have to ensure employees take their meal breaks. Once the meal period is provided, there is no duty to police meal breaks to ensure no work is being done.”

You need this job—so you work through your unpaid break.

This means that if you’re a $9-an-hour employee, you’ve just forfeited $4.50. Later you might give up another $4.50 to comply with the manager’s request to help clean up for a half hour after you’ve clocked out.

So you’ve given up a free hour today—and probably yesterday and maybe tomorrow.

“It’s a zero-sum game,” says Tia Koonse, Legal and Policy Research manager at the UCLA Labor Center and one of the authors of the National Employment Law Project’s (NELP) report, “Hollow Victories: The Crisis in Collecting Unpaid Wages for California Workers.”

“In a high-pressure workplace you’re not going to take a break,” Koonse tells Capital & Main, adding that off-the-clock violations were common throughout the 26 industries the “Hollow Victories” study surveyed.

In retail businesses, management often requires employees to clean up work areas after they’ve clocked out. In the restaurant industry, workers roll up the silverware before their shifts—and then clock in.

“At every possible moment management is under pressure to squeeze everything out of you,” Koonse says.

Also in This Series:
A Truck Driver’s Story
Do Laws Work?
The Worst Scofflaw Industries
Finding Solutions

Legal action is unlikely to collect what a worker is owed in stolen wages— the “Hollow Victories” survey showed that only 17 percent of California workers who won wage claim-cases between 2008 and 2011 were able to recover any payment.

Employers skip out, change names and disappear rather than pay up. Sometimes workers don’t even know who is stiffing them—a NELP study called Who’s The Boss shows an increasing tendency for big-name employers to subcontract their work. You may fill orders at an Amazon warehouse but really work for Integrity Staffing Solutions.

Amazon and Integrity Staffing Solutions are currently involved in a case before the U.S. Supreme Court that looks at whether workers can be required to wait for as much as 25 unpaid minutes as they wait to be screened at the end of a work day for stolen items. Interestingly, the contractor argues that the searches are extraneous.

Stephanie Luce, a longtime wage and work-standards scholar, and a professor at the City University of New York’s Murphy Institute, is the co-author of a 2012 report, “Discounted Jobs: How Retailers Sell Workers Short.” She says such unpaid wait-time is common in retail.

“You clock out and you get your bags searched to make sure you haven’t stolen anything—you are searched off the clock,” says Luce. “People get assigned three-hour shifts and then have to wait 20 minutes to be searched.”

Wage theft is a part of a business model designed to keep employer pay costs as low as possible, Luce says. “It’s very clear from reading management literature from back in the ’90s that the new frontier in maximizing profits is not paying a minute more in wages.”

At a multimillion operation like Victoria’s Secret, Luce points out, “local stores get the marching orders and the budget from headquarters—there’s a centralized plan for what your costs are, [for] sales projections and keeping payroll on track.” That means timing workers down to the minute.

In the meantime, wage enforcement efforts by government agencies have been eviscerated through staff reductions. “The Department of Labor has been under-funded and de-funded,” Luce says. “There are fewer inspectors—there are not enough resources for monitoring and enforcement.”

Enforcement is the first thing that gets cut during a recession when workers are most vulnerable, Koonse agrees.

The national honor roll of employers busted for robbing their employees of millions includes quite a few famous names:

  • Staples Inc. agreed in 2010  to pay $42 million as part of a global settlement resolving several wage-and-hour collective actions that claimed the office supply vendor misclassified its assistant store managers as exempt from federal overtime pay requirements.
  • Walmart settled in Washington State for $35 million in an unpaid wages case; in 2008 the retail giant settled 63 cases in 42 states for $352 million related to charges that Walmart forced employees to work off the clock and skip meal breaks.
  • Levi Strauss (once considered a paragon of corporate responsibility) was required to pay more than $1 million in wages for misclassifying employees as assistant store managers and then obliging them to work off the clock. Job websites list Levi Strauss sales associates’ salaries at around $9 hourly, and supervisors’ at $11 plus change.
  • FedEx  was ordered by a court-appointed official in 2008 to pay out $14.4 million to some 200 drivers who had been classified by the company as independent contractors and who therefore had to pay for gas, maintenance and other operating expenses. Defining workers as independent contractors has become a wage-theft battleground—as in the case of L.A.’s port truck drivers, who bear the cost of operating and maintaining the vehicles they lease to haul goods and often end up owing money instead of collecting a check at the end of a pay period. (See “A Truck Driver’s Story” in this series.)
  • Forever 21 has been sued more than once for stiffing workers on overtime compensation and meal breaks.

The fines these and other companies received were a pittance compared to the Fortune 500 bottom lines involved.

“These are big companies that can afford to pay,” says employment attorney Victor Narro of the UCLA Labor Center and co-author, with Ruth Milkman and Ana Luz Gonzalez, of the 2014 study “Wage Theft and Workplace Violations in Los Angeles.”

“They do have the ability to pay their workers–they continue to choose to violate the law,” Narro adds. “They calculate–What are the chances of being investigated again?”

But it’s still easier (and therefore more profitable) for corporations to retaliate against employees who file wage claims rather than to pay up. They can afford to out-wait the employee living paycheck-to-paycheck who must prove that she was denied her rights.

Given these realities, is there any hope at all for curtailing wage theft? Despite the odds facing American workers, and the fact that federal oversight has been diminished, local efforts to put teeth into anti-theft measures have been advancing.

Chicago is the nation’s largest city to pass a measure that would revoke the business license of any operation convicted of wage theft. Seattle has also enacted a wage theft ordinance.

The Los Angeles Coalition Against Wage Theft—an alliance of 60 local organizations—has promoted similar measures in L.A. Last June City Council members Gilbert Cedillo and Paul Koretz announced plans to revive a five-year-old proposal to criminalize wage theft and potentially put scofflaws behind bars. In response to a media query, Koretz’s office sent an email explaining that the proposal is now on the desk of City Attorney Mike Feuer, whose office is charged with drafting an ordinance based on the council resolution.

At the state level, California will follow the lead of 15 other states to investigate unscrupulous contracting and subcontracting arrangements. A new law goes into effect on January 1, 2015 that establishes joint liability for contractors and their clients—if a worker gets stiffed by a name-brand employer that is hiding behind a contractor then both the contractor and the name-brand company are potentially liable for criminal penalties.

“It incentivizes companies to come to the table” rather than ignore worker claims, says Koonse.

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