When Your Boss Steals Your Wages: The Invisible Epidemic

Employers are taking advantage of hard economic times.

It's an invisible epidemic -- and because people are so desperate to have and keep a job, some employers are taking full advantage of the hard economic times. Lynn Stuart Parramore at Alternet:

Americans like to think that a fair day’s work brings a fair day’s pay. Cheating workers of their wages may seem like a problem of 19th-century sweatshops. But it’s back and taking a terrible toll. We’re talking billions of dollars in wages; millions of workers affected each year. A gigantic heist is being perpetrated against working people: they’re getting screwed on overtime, denied their tips, shortchanged on benefits, defrauded on payroll, and handed paychecks that bounce like rubber balls. A conservative estimate of unpaid overtime alone shows that it costs workers at least $19 billion per year.

The laws protecting workers are grossly inadequate, and wage thieves go unpunished. For giant companies like Walmart, Citigroup and UPS, getting fined is just the cost of doing business. You could even say that they're incentivized to cheat because punishment is so unlikely, and when it happens, so light. The protections we used to take for granted, like the right to receive at least the minimum wage, the right to workers’ compensation when hurt on the job, and the right to advocate for better working conditions, are nothing more than a quaint memory for many Americans. Activist Kim Bobo, author of Wage Theft in America,calls it a "national crime wave."

The sheer scope of the problem is jaw-dropping, sweeping across key industries and inflicting massive damage on individuals and society as a whole. In 2009, the National Employment Law Project (NELP) released a ground-breaking study, “Broken Laws, Unprotected Workers,” which found that in America, an honest day’s work is frequently rewarded with theft and abuse. A survey of over 4,000 workers in Chicago, L.A. and New York found that minimum and overtime violations were rife, and any attempt to complain or organize was swiftly met with punishment. Among the revelations:

  • 26 percent of low-wage workers got paid less than the minimum wage.
  • 76 percent of workers toiling over 40 hours were denied overtime.
  • Workers lose an average of $2,634 a year due to these and other workplace violations.

Who gets cheated?Women, minorities, immigrants, and workers at the bottom of the wage scale are hardest hit, but wage theft is thriving across the employment spectrum.

People hired for jobs like yard work and domestic services in which the employer pays cash are denied social insurance like Social Security, and often what’s paid doesn’t add up to minimum wage. Some employees are paid for piece work, like the number of shirts produced in a garment factory, and get cheated when the tally falls below minimum wage (that’s one of the things that’s alleged to have happened to Carrillo). Another common form of theft is the “last paycheck” scam in which a worker is either fired or quits and finds that her final wages are withheld.

Low-wage tip workers are frequently the victims of theft in which the boss illegally keeps tips or makes you pay for your uniform or a ride to the job site. Restaurants are infamous for paying wages below the legal minimum; some charge a fee to convert credit card tips into cash, while others simply steal tips outright. When I was in college, I waited tables at a restaurant where the manager required the waiters to turn over tips at the end of the day, ostensibly so a certain percentage could be distributed among the cooks and other staff. I thought my manager was doing something to create fairness. Actually, he was stealing tips.

Then there’s the payroll fraud scam. Misclassifying workers as independent contractors means the business doesn’t pay overtime, employer contributions to Social Security and Medicare, or unemployment insurance. Sometimes bosses misclassify by mistake, but often they do it knowingly. Temporary and seasonal workers are especially vulnerable. The construction and trucking industries are notorious offenders, but payroll fraud impacts people like engineers, financial advisers, adjunct professors, and IT professionals. It doesn’t matter if you have agreed to call yourself an independent contractor, you may not be under the law.

Two tests are commonly used to determine your status: the Department of Labor “economic reality” test and the IRS “Right to Control Test.” These tests consider questions like: Do you set your own hours? Can you make a profit or loss depending on how you do the job? Is the job contracted for a specific time period? Unfortunately, various federal and state entities have their own criteria, creating widespread confusion. The independent contractor issue is one of the fastest growing areas of litigation, with class actions by independent contractors jumping by 50 percent in 2010. Congress has introduced bills to deal with this problem, but they tend to die in committee.

You might think that joining the managerial ranks would protect you from wage theft. You would be wrong. Some people are given titles as managers so they can be forced to work overtime without extra pay. Managers pressured to “improve their numbers” sometimes resort to falsifying employee records. Others deny breaks or deduct the break from the workers’ wages. Walmart has engaged in so many of these practices that researcher Susan Miloser of Washington & Lee Law School refers to retail wage theft as a result of managerial strain the “Walmart Pinch.”

About Susie Madrak

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