Wage Theft: Employers Steal Almost $50 Billion Annually From Workers

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The average annual cost of all robberies, burglaries, larcenies, and motor vehicle thefts in the U.S. amounts to about $14 billion. That may seem like a lot, but it’s nothing compared to wage theft, which costs victims about $50 billion annually.

That’s according to “Wage Theft in 2017,”  a report from the Wage Authority Group, a collection of attorneys specializing in wage and overtime law.

Why Wage Theft Is Rampant

How can it be that so many employers are stealing from their employees?

Rob Ash, an attorney with the Wage Authority Group, thinks one factor is that “wage theft has gone unnoticed by employees for many years.”

Another factor: greedy employers.

“It may be cheaper for an employer to maintain its business practices and policies even when they recognize those policies run afoul of federal and state wage and hour laws,” Ash says. “In order to deter employers from choosing this path, legislatures include provisions for liquidated damages and other penalties in wage and hour laws. Nonetheless, an employer may still choose to just roll the dice and hope they don’t get sued, rather than comply with state and federal labor laws.”

But an increasing number of employers are being sued, thankfully. The number of Fair Labor Standards Act (FLSA) suit filings for wage theft increased by 400 percent between 1996 and 2015. It’s unclear whether this means wage theft is becoming more common. However, it’s likely that the increase in suits is due at least in part to more and more employees becoming aware of their rights under the FLSA, Ash says.

“Every time notice of a wage theft lawsuit goes out, a new set of employees learn about the rights available under the FLSA,” he notes.

Despite the rising number of suits, authorities only recover a fraction of the stolen wages each year. In 2012, federal and state departments of Labor and lawyers recovered $933 million in wages, less than 2 percent of the total amount stolen.

“One reason it is difficult for federal and state authorities to recover stolen wages is due to the lack of sufficient resources and effective wage collection tools,” Ash says. “It can be difficult for public agencies to keep up with the wage law violations, as they are often underfunded and experience a shortage of staff and resources allotted to address wage law violations, which ultimately inhibits the full recovery of stolen wages. Additionally, many employers who engage in wage theft have subsequently abandoned or sold their businesses, which also significantly impacts the ability to recover stolen wages.”

When workers do win their suits, they often walk away empty-handed regardless: 83 percent of workers who win their cases never see any of their stolen pay.

Paper“The expense and difficulty in collecting on judgments is one of the main reasons why so many workers are unable to recover their wages,” Ash says. “Once a worker is awarded a favorable judgment, many find that the subsequent collections process presents an even greater challenge. This is because employers who engage in wage theft in the first place will likely continue to refuse to pay after a judgment is filed against them.”

Recovering wages becomes even more difficult when employers go out of business or declare bankruptcy. Especially shady employers will go to great lengths to to avoid paying wages owed, including hiding assets and dissolving their businesses. As the collections process grows more complex, workers seeking payment often lack access to the guidance they need to navigate the system.

Be on the Lookout: What Wage Theft Looks Like

Most victims of wage theft are low-wage workers, and the majority of wage theft occurs when employers pay employees sub-minimum wage. However, wage theft can take a number of shapes, including:

  1. Working “under the table” or “off the books”
  2. Being forced to work even after clocking out
  3. Stolen tips
  4. Being forced to work through meal or rest breaks
  5. Being forced to work through mandatory screening processes
  6. Illegal deductions from a worker’s paycheck

“Many states have laws that prohibit employer deductions from an employee’s paycheck,” Ash says. “For example, New York law prohibits an employer from deducting any sum from an employee’s wages with the limited exceptions of deductions made ‘for the benefit of the employee’ and deductions required by law.”

Deductions classified as “for the benefit of the employee” include insurance premiums, pensions, health or welfare benefits, U.S. bonds, charitable contributions, and union dues. Under New York law, these deductions must be expressly authorized in writing by the employee. If an employer does not obtain an employee’s written authorization, then even these deductions are illegal.

California has similar laws preventing an employer from making deductions from an employee’s pay check for lost or damaged property, register shortages, business losses, and overhead expenses. Other states will have their own laws governing deductions.

“As a practical matter, if an employee sees a deduction on their paycheck and they are unsure whether the deduction is lawful, they should contact an attorney … for further investigation,” Ash says.

This article is for educational purpose only and does not constitute legal advice.

By Matthew Kosinski