The perfect heist: Is your boss stealing your salary?
22 nov 2022
Employers are stealing from their staff every day in the United States – and very little is being done about it. Millions of workers are being paid less than the minimum wage and their employers are pocketing the difference, which adds up to about $15 billion, according to a survey by the Economic Policy Institute, a non-profit think tank. That figure exceeds the total value of property crimes committed in the country each year, such as robberies, burglaries, larceny, and motor vehicle theft, according to the FBI. The number of people affected is staggering. A study of low-wage workers in New York, Chicago and Los Angeles shows more than three-quarters of those full-time staffers who did overtime weren’t paid for it and one quarter weren’t even paid the minimum wage. The problem of wage theft is big and intractable, and it often appears that the system encourages employers to take from their workers’ paychecks.
What exactly is wage theft?
Wage theft is a catch-all term used to describe any instance where an employer fails to pay what is owed to a worker under the law. It includes paying less than the minimum wage, stealing tips, failing to pay for overtime, failing to pay for all hours worked or meal breaks, unauthorized deductions or misclassifying an employee as an independent contractor.
The problem is found across industries, though it is concentrated in low-paid roles. Official data shows that most complaints involve the construction, food and retail sectors. There have been some major cases in recent years. Amazon has been sued repeatedly for failing to pay minimum wage, overtime and rest time to its delivery drivers. It was also sued by warehouse workers who had not been paid while undergoing lengthy security screening after their shifts.
In August 2022, fast-food chain Chipotle agreed to a $20 million settlement over labor violations, including non-payment of benefits to 13,000 workers, in a case New York mayor Eric Adams said was the “largest fair workweek settlement nationwide and the largest worker protection settlement in New York City history.”
Larger employers have become more savvy on the issue and more compliant, but the problem persists, according to employment lawyers Brent Pelton and Taylor Graham. “Anywhere there is a large imbalance of power between the workers and employers, whether it’s because the workers are immigrants or minorities or for any reason where an employer thinks they can take advantage, they do,” says Graham.
Is this a uniquely American problem?
Wage theft doesn’t just affect the US, but there are specific factors that make it easier for employers to engage in it here. The minimum wage and labor laws differ across states. So, for example, jobs in one part of the country require workers to be paid for rest and meal breaks but others do not. Some employers try to classify workers – such as truck drivers, graphic artists or journalists – as independent contractors to avoid paying payroll taxes, compensation to workers and insurance protections. Campaigners are hoping that new rules announced by the Biden administration on independent contractors will help to tackle this problem.
Another big problem in the US is the lack of protection against being fired in a system known as Employment at Will, says Tsedeye Gebreselassie, work quality director at the National Employment Law Project, which campaigns for workers’ rights. “You can get fired for pretty much any reason or no reason at all,” says Gebreselassie. “There are some laws, like anti-discrimination laws [to protect workers] and, technically, you can’t be fired in retaliation for exercising your rights but those laws are really poorly enforced. That makes it difficult for workers to speak up or even to ask questions that they might have in the workplace because there is this constant fear of being fired for doing so,” she adds.
Not only are the penalties against employers weak, there are incentives to break the law, according to lawyer Brent Pelton. “There are ‘incentives’ because there is a big difference between the prevailing wage rate or the union rates and what oftentimes immigrant workers are willing or forced to work for,” he says. Financial penalties do exist, and in some cases employers can face jail time, but the rare instances this actually happens means it is a weak deterrent. “Even with this limited enforcement, we see it as being way too easy to cheat and so many other contractors are never brought to justice by the state or federal authorities,” Pelton adds.
Broader problems of wage theft
The key point about wage theft is that it doesn’t just affect the workers who are missing out in their paychecks. Many victims are vulnerable workers from migrant or racial minority backgrounds and not being given what they have earned can push families into poverty. A lack of paid sick leave can mean that the employee needs to continue working, thus spreading their illness. At the same time, workplace injuries go untreated. Studies show that when truck drivers are underpaid, they are forced to make ends meet by working longer hours while fatigued thus increasing the risk of crashes happening.
Wage theft affects everyone: the wider economy suffers and studies show that millions are not collected in payroll taxes, and federal and state income taxes. The problem leaves a bitter taste for companies that do pay their workers fairly, says Gebreselassie. “There are many employers that do not engage in wage theft and those employers are forced to compete with businesses that drag down labor standards,” she says.
What can be done?
When it comes to fighting wage theft, the first step is to increase the resources of the federal and state agencies tasked with fighting the problem, says Gebreselassie. One study shows a serious lack in this regard, with just one federal wage-and-hour investigator for every 175,000 workers, a huge jump from the 69,000 workers per investigator in 1978. There should be stronger penalties and mechanisms to ensure employers pay up when courts find they have stolen from workers, such as by holding assets or setting up funds, says Gebreselassie. Workers who speak out and stand up to wage theft also need stronger protections against retaliation from employers, including unfair sackings.
Another way to tackle the issue is for more workers to be members of unions. “Higher unionization rates definitely impact wage theft in a positive way because you have a structure where there are ways for you to raise complaints through a union process and it protects you from retaliation,” says Gebreselassie. The problem is that joining a union can be difficult in the US and, while unionizing drives at Amazon, Starbucks and other workplaces are grabbing headlines, official figures tell a different story. There was a jump in union membership during the height of the pandemic in 2020 to 10.8% but figures dropped back to 10.3% in 2021. Only one Amazon warehouse has been unionized while two Starbucks coffee shops were closed down after workers voted to join a union. A federal proposal aimed at boosting workers’ rights to organize and to collectively bargain – the Protecting the Right to Organize Act – will struggle to become law given Republican opposition in the Senate.
What to do if you’re being underpaid
If you think you are a victim of wage theft, you should contact the Federal Department of Labor or your state’s equivalent, where you can access an online complaints system. Keeping records on how many hours you worked and what you got paid is important for the process, says Gebreselassie. “Keeping a record is very helpful because the law presumes that workers are the ones telling the truth, unless the employer has evidence that shows that they’re not,” she adds.
Workers should be diligent at work after a complaint is made, says Brent Pelton. “Make sure that you continue to do excellent work – but know your rights and don’t be afraid to pursue and to enforce your rights without losing focus on continuing to do a good job,” he says.
The reality for many workers is that making a complaint about wage theft can mean losing their employment. “Unfortunately, whether it’s because the employer retaliates against the employee or maybe there’s not clear retaliation but it just becomes uncomfortable to be working for the employer that you’re suing or challenging, oftentimes people end up moving on to another job,” says Graham.
The chances of recovering unpaid wages are also slim. A report in October from an advocacy group in Iowa state shows that for every $1,000 stolen by employers, just $2 were recovered by public agencies. The stark reality in the US is that without major structural reform and significantly increased resources for investigation and enforcement, wage theft will continue to be a reality for far too many workers.
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