Could You Be Accused of "Wage Theft"?

There seems to be a lot of agitation lately about a concept called "wage theft."  Failing to pay required overtime, misclassification of contractors, improper exemption determinations, lack of documentation and more can create terribly onerous disasters.  There is no downside cost to those who may accuse you, while there can be great profit to those who win any judgment; and simply proving yourself totally innocent can be very difficult.

New laws and “minor bookkeeping regulation changes” are being introduced that expose companies to expensive challenges to their pay practices.  The U.S. Department of Labor and 40% of the individual States have developed fixed positions that threaten employers with attacks.  Companies can face class action suits, awards for actual and liquidated damages, back pay for two or three years, penalties, fines and negative publicity.  Under political pressure to "help middle class families remain in the middle class," to raise more money and to generate more new jobs, aggressively antagonistic postures are being adopted by both Federal and State labor departments.  The PAQ Services homepage has links to the various Federal and State programs addressing this issue.

A noteworthy aspect of these new initiatives is the decision of DOL Wage-Hour Division to do the case set-up work for private attorneys. WHD will hand investigative files over to the litigation bar for class action suits rather than dispose of the cases through negotiations with the employers.  Meanwhile, regardless of the Federal DOL actions, the individual States seem to be steaming full speed ahead on their own, as witness the WageTheft.org site. 

It has been said (usually by attorneys) that job descriptions rarely do much good but frequently hang you.  Perhaps the worm has turned.  There have never been so many new good reasons to document job content (frequently carefully avoided in the past) and to establish written proof that wage classification analysis has been conducted for each position.  Without documentation, you can be in a world of hurt.  Whether a worker is a contractor, jointly employed, a regular employee or an employee exempt from overtime is a big deal.  Frequently, there is a lot of money at stake.  The regulators seem to be sharpening their knives to begin new attacks that can earn them substantial political capital.  Without proof of proper employee position classification analysis, complaints of “wage theft” might be upheld.  The best defense is rigorous and detailed documentation of full and total compliance.  If you can’t prove you have done it right all the time in all cases, you can end up in deep doo-doo. 

The potential challenge is too important to ignore.  Charges of “Wage Theft” are easy to make and (if substantiated) could become the basis for the next new bureaucracy of regulators like EEOC or OSHA.  This would be even worse, because the wage theft wars would involve individual States with unique regulations, in addition to the uniform U.S. Federal laws.  It just seems too logical and sensible not to happen.  It would be a no-brainer for all States and DOL to jump on “Wage Theft” as a campaign issue for glamor and glory, to make money, to “serve the public” and to justify their expanded regulatory influence.

Has anyone else experienced any action in this area, or am I just seeing things that add up to nothing?

E. James (Jim) Brennan is Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. Semi-retired after over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.) and will express his opinion on almost anything.

Image: Creative Commons Photo "Pickpocket Macro" by stevendepolo

Comments

[Stephanie Thomas]

Good post! Wage Theft has been on the radar for a while now, but in the past year or two the DOL has intensified its focus on wage and hour compliance. They have launched a series of public outreach campaigns, informing workers of their rights ( see the We Can Help Website at http://www.dol.gov/wecanhelp/) and linking potential plaintiffs to the litigation bar is the newest - but I don't think the last - campaign. I definitely don't think you're seeing things that add up to nothing - even the tiniest of violations can lead to serious problems and huge financial exposure.

[Jack Loring]

The wage theft issue seems to be gaining momentum here in Florida. There's a group here called the Florida Wage Theft Task Force, (FWTTF) that is committed to raising public awareness about wage theft. In addition, there's a research team called the Research Institue on Social & Economic Policy that published a report
http://www.risep-fiu.org/2010/11/wage-theft-in-florida-a-real-problem-with-real-solutions-2/ (first in a series) "describing and exposing the extent of wage theft violations in Florida".

[E. James (Jim) Brennan]

Thanks for the front-line input, Jack. Is it true that attorneys in FL put billboard ads along the highways and on public transit buses, trolling for class-actions suits on overtime and wage theft issues?

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The man who has made up his mind to win will never say "impossible ".

[Kim Bobo]

Workers getting cheated of their wages is a widespread problem in industries like construction, restaurants, janitorial services and farmwork. Contrary to the comments above, these are not problems invented by attorneys or department of labor investigators. Increasingly, ethical employers are beginning to speak up about the issues as well, because those who steal wages and commit payroll fraud undercut those who treat and pay workers fairly. Kim Bobo

[E James (Jim) Brennan]

Perhaps you misunderstood the intent of my alert, Kim. "Wage theft" is wrong, illegal, improper and offensive. It's also unfair to the honest employers who pay the true full cost of labor while those who cheat short-change everyone and get an unwarranted competitive advantage. Guilty parties should be punished and made to correct their practices.

It is the scale and sweep of the penalties and the new procedures being implemented in the U.S. that is noteworthy. Like getting a life sentence for a rolling stop at a deserted intersection that used to only involve a warning or a small fine.

Wrong remains wrong, but draconian measures are being levied against both the innocent and the guilty. Under federal law, a judgment of one dollar in awards forces full payment of all court costs and plaintiff attorney fees. Anyone with a big payroll is likely to have at least one instance somewhere sometime where some line supervisor erred in an overtime decision. Hence, it is becoming extremely important to be able to prove that you are in full exact compliance with both FLSA and your unique State overtime law.

[JL]

As a Comp Analyst, way too often I get into bitter, emotional discussions with employees and managers about why they think they should be exempt. When I try to classify a job as non-exempt the biggest push back that I get is not from management but from the employees. They feel that being a non exempt employee somehow devalues their contribution and puts them in a lower status. We have had candidates turn down job offers because the position is non exempt, even though they would make the same or more money. For those who think big bad corporations just want to save money and abuse workers I think they are for the most part wrong. It has been my experience that firms get into trouble because they are simply not willing to push back on the employees desire to be in the "exempt" class.

[E. James (Jim) Brennan]

Well said, JL. Although I have seen more violations of FLSA caused by supervisory ignorance than by intent, the "salaried status" of working "off the clock" and being considered a professional and part of management is a major issue. I spent many decades as the comp consultant to NSA, PSI and now IAAP; executive secretaries identify with their bosses and administrative assistants are insulted if "forced" to take overtime. Nevertheless, needless to say, disaster can follow when a disgruntled AA makes an anonymous call to the WHD after decades of recorded "voluntary" unpaid overtime. Such violations created by legitimate and frequently well-meaning attempts to please status-conscious nonexempts will surface eventually. Better sooner than later, because the risks and penalties will only increase. The net being cast to capture serious offenders is a very fine mesh that will engulf everyone guilty of the smallest infraction. Those hunting armed robbers are sweeping up jaywalkers too, more or less.