Late last year I sat in the office of an Ohio County Prosecutor and provided her and the County Sherriff thick notebooks documenting a systematic theft of workers’ wages by a local construction contractor by means of misclassification under Ohio Prevailing Wage Law and systematic underpayment. The theft was compounded by the fact that company officials signed false verifications of compliance with state prevailing wage laws under penalty of perjury. To add insult to injury, the job on which the wage theft took place was being paid for with tax dollars from that same county.
I asked the Prosecutor what would happen if a local construction contractor had brought evidence that one of their workers, perhaps a bookkeeper, had fraudulently written herself tens of thousands of dollars in checks from funds belonging to the company and then lied about the theft on government mandated reports signed under penalty of perjury. The Prosecutor, Sherriff, and their assistants and deputies all assured me that the culprit would be prosecuted to the fullest extent of the law.
I smiled, certain that these law enforcement officials, ethical office holders, and civil servants would be as anxious to arrest and prosecute the owners of the construction company for stealing wages from their employees and lying about it under penalty of perjury as they would be to prosecute that bookkeeper.
I couldn’t have been more wrong.
They flatly refused to treat the wage theft as a criminal offense. Instead, the company’s conduct was treated as a “mistake,” blamed on failure to understand the law.
Enforcement was left to the Ohio Department of Commerce, which could only require the company to pay back wages. While more than $40,000 was ordered to be paid to the 9 employees and a 100 percent civil penalty assessed, the company owners were spared the life changing consequences of a criminal prosecution.
My experience was put into disturbing context by Kim Bobo’s new book, Wage Theft in America: Why Millions of Working Americans Are Not Getting Paid—and What We Can Do about It (New York: The New Press, 2009) . Bobo documents a wage theft crime wave across the United States. The victims range from illegal immigrants who fear deportation if they report violations to skilled construction workers who are forced to kick back parts of their paycheck on government projects, and includes childcare and home healthcare workers, sales clerks, and many others. Bobo makes a compelling case that wage theft is far more pervasive than most of us understand or would like to admit.
Bobo draws her analysis primarily from her experience in running Interfaith Worker Justice Center in Chicago and cases handled by other worker centers throughout the country, and a recent study of over 4000 low wage workers dramatically verified Bobo’s conclusions. The study, “Broken Laws: Unprotected Workers,” makes stunning discoveries of the rampant nature of wage theft in America. Here are a few of the conclusions:
- 26 % of respondents had been paid less than the minimum wage in the previous workweek.
- 25% of the respondents had worked more than 40 hours in the previous week but a whopping 76% of them were not paid overtime.
- 70% of workers who arrived early or stayed late at their employer’s request were not paid for the extra time.
- 69 % of workers entitled to meal breaks didn’t get them.
Wages are stolen from tens if not hundreds of thousands of American workers every day. If employers were stealing from customers in such a systematic way, law enforcement at all levels would be forming task forces and putting thousands in jail.
Why should theft of wages from American workers be different? Bobo suggests that most instances of wage theft can be traced to old-fashioned greed. Greed is sometimes dressed up with rational sounding names like “pressure from competitors in low wage countries” or “innovative” compensation schemes. But at the end of the day employers steal from those who work for them in order to make more money.
Bobo correctly points out that wage theft is also driven by the greed of consumers who demand low prices. That demand leads some companies to indirectly encourage wage theft. Bobo quotes the Congressional Testimony of MIT Professor Thomas Kochan, regarding the poster child for wage theft in America: “Wal-Mart executives have established corporate policies that are ethical and appear to conform to legal requirements. However Wal-Mart has also established financial and business objectives that managers find difficult to achieve without circumventing those rules.” This is a scenario not unique to Wal-Mart. Despite ethical, legal policies, many companies repeatedly steal from their employees in order to reduce labor costs.
But perhaps the biggest factor is the lack of consequences. Wage thieves are only rarely caught, and those who are face almost no legal, financial, or societal consequences. Often the worst penalty for a wage theft is being forced to pay workers what they should have been paid to begin with and then only for the period of time allowed under the statute of limitations (often as little as two years). Weak enforcement of relatively weak laws is as much to blame for the widespread practice of wage theft as employer or consumer greed.
Wage Theft in America proposes a variety of potential solutions to the problem. Bobo’s proposals range from creating more worker centers to dramatically beefing up the enforcement capacity of Federal and State Wage and Hour Enforcement Agencies to policies that increase the number of workers represented by labor unions. While her proposals would work, much of what she suggests would require legislation and appropriations that are politically unattainable even with Democratic control of all three branches of the federal government. (See the recent collapse of card check provision of the Employee Free Choice Act, if you have any doubt about this).
However, some less controversial and inexpensive strategies can help. Congress needs to simplify economic protection laws and make it easier for employees to report wage theft offenses. In particular, workers need reliable protection against retaliation for reporting violations. Workers currently risk of termination or other workplace punishment if they report wage theft.
But ending wage theft may not require new laws. Instead, government agencies should simply enforce existing regulations. It won’t take many well-publicized arrests to persuade employers to stop cheating workers.
Making that happen will require political pressure. Activists, religious organizations, and labor unions need to reignite the kind of moral outrage that brought about our current labor laws almost a century ago. Rooting discussions of wage theft in religion can help. Bobo argues that religious teachings from the Old Testament to the Quran demand that workers receive their fair day’s pay. Because of this, religious organizations can be fertile ground for generating moral outrage against those who exploit the least among us.
Labor Unions and political activists should educate elected prosecutors and sheriffs about wage theft and how it undermines local citizens and the community. And they should pressure law enforcement officials to do their jobs. Local business communities should also support such efforts, since cheating competitors have an unfair advantage over ethical businesses that follow the law. And since Bobo’s book demonstrates that companies with labor unions are less likely to commit wage fraud than their competitors, union leaders should engage their counterparts across the bargaining table to join in efforts to encourage more serious enforcement.
Unions and their lawyers can devote resources to investigating and documenting wage theft, providing overburdened state and federal officials the evidence they need to bring cases. Efforts by construction unions to promote “fair contracting” have forced non-union competitors to comply with prevailing wage laws. Organized labor should embrace these efforts as tools to strengthen unionized competitors in every industry and for organizing more companies in the future. Such efforts also show management and potential members the added value that having a union can bring to a company and its workers.
Wage Theft in America frames the debate as about not just the value of labor unions in the workplace, but also the value of workers themselves. Reframing wage and hour violations as crime, reclaiming the moral high ground, and refusing to tolerate wage theft not only discourages cheating of workers but also reminds companies that operate ethically, as most do, that wage theft cuts into their bottom lines. Such changes in the public debate would certainly have changed the outcome of my efforts to prosecute the cheating contractor in Ohio.
Marc Dann is a lawyer in Cleveland who represents labor unions and workers seeking fair wages and contracting practices and has been a community affiliate of the Center for Working-Class Studies for four years .