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Wage Theft Epidemic: Bosses Pocket 15 Percent of Workers' Pay

There has been a 400-percent increase in wage-and-hour violation claims over the last 11 years -- and that just scratches the surface of unreported wage thefts.
 
 
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Marco Jacal and Isidro Suarez were fed up with their employer, the owner of Veranda, an upscale nightclub and restaurant in Manhattan’s West Village. The two men worked as bar backs and busboys, but weren’t paid an hourly wage--instead they were forced to survive on tips handed off by waitresses after their shifts ended.

“We were very angry and upset, because one, two months turned into five months only paid in tips,” Suarez says. But the two men are also immigrants and were unsure of their rights.

When a new manager declared he would act as middleman for their tips, Jacal and Suarez’s “pay” began to shrivel. The waitresses told them how much they had been left, but the numbers didn’t add up. The manager was stealing part of their tips while the owner stole all of their wages. That was too much.

Jacal and Suarez approached Make the Road New York, an advocacy group for immigrant (and usually low-wage) workers, to help them win back their unpaid wages, unaware that a law had recently been passed to address this very problem. Legal procedures were soon opened against the company.

When the owner of Veranda learned of the suit he demanded all his employees’ working papers, a thinly veiled threat. He targeted Jacal and Suarez specifically, as known whistleblowers, reducing their hours, scheduling them during the Monday-Tuesday deadzone, and finally, firing them.

The workers, with the aid of advocates, were able to turn to Attorney General Eric Schneiderman’s office to prosecute their case under New York state's new Wage Theft Prevention Act. Veranda ended up paying $150,000 in restitution and back pay to 23 workers. Under a provision of the new law, Jacal and Suarez were each paid $25,000 in lost wages, damages, and to punish their employer for firing them. Both men used their victory to help train members of Make the Road and to educate friends, families and acquaintances about the new law. Veranda now pays workers with checks, instead of cash under the table, and the state attorney general’s office will continue to monitor the restaurant’s employment practices through 2014.

Jacal's and Suarez’s story is both commonplace and exceptional. Wage theft is a pervasive and often unacknowledged crime in our radically unequal society. Recently CNN reported a 400-percent increase in wage-and-hour violation claims over the last 11 years, a statistic that likely only scratches the surface of unreported wage thefts. While property theft is punishable with jail time, the National Employment Law Center (NELP) estimated (in 2008) that the average low-wage worker loses 15 percent of her annual income to wage theft, through underpayment and denied overtime, among other schemes. Many do not have the support of groups like Make the Road, or in other parts of the country, laws that prioritize such crimes.

NELP's analysis of the nation’s three largest cities—New York, Los Angeles and Chicago—found that over one-fourth of low-wage workers weren’t being paid the minimum wage, while 76 percent weren’t compensated for overtime work. There is no reason to think conditions are better elsewhere. Across the nation, millions are forced to work off-the-clock, misclassified as “independent contractors” to avoid taxes (which the workers then have to pay themselves), their paychecks tampered with, their time sheets altered. Walmart is an example of a national company that has indulged in almost all of these practices.

Enabled by staggering power differentials between employers and workers, these practices have become the norm in many low-wage industries (in 2000 the Department of Labor found 100 percent of poultry companies were in violation of wage and hour laws). In the absence of a strong labor movement and robust federal and state departments of labor, low-wage workers are left to fend for themselves in a weak job market. Immigrants who lack proper documentation are particularly susceptible to thieving bosses, who often threaten to turn their employees over to the police if they complain.

This epidemic of wage theft goes largely unnoticed in the mainstream media and simply does not register on the policy agenda of most political elites. Some states and municipalities have taken on the issue, usually with prompting from labor and immigrant rights movements, resulting in anti-wage theft laws like the one in New York.

“By our estimation New York has the strongest law in the country,” says Tim Judson, workers' rights policy specialist with the Progressive States Network, and co-author (with Cristina Francisco-McGuire) of a new study, Cracking Down on Wage Theft: State Strategies for Protecting Workers and Recovering Revenues. “But wage theft laws are almost universally poor. In recent years a few states took strong steps, but even those laws have a ways to go before they are a model standard that could really be effective in cracking down on a problem this huge.”

New York's Wage Theft Prevention Act operates on three levels: punitive, protective and administrative. It increases penalties from 25 percent of stolen wages to 100 percent (if an employer steals $1,000, the worker could win back $2,000, instead of $1,250). If the employer doesn’t pay up in 90 days, the amount increases by 15 percent. The law expands whistleblower protections by providing protection to those who speak up for their colleagues and outlaws anyone (say, a manager’s son or a fellow worker) from threatening retaliation, like firing or cutting hours, where previously only the technically defined employer faced sanction. Fines of up to $10,000 can be levied upon those who, like Veranda's owners, try to punish workers for speaking out. The law also mandates clear and accessible record-keeping related to wage rates and pay days.

In Judson’s opinion, New York’s anti-wage theft law is so strong because it was drafted “hand-in-glove” between worker groups, chiefly Make the Road, and Eric Schneiderman’s unusually progressive attorney general’s office. But just because a wage-theft law is enacted doesn’t mean worker advocates can leave the fight, especially in states where the attorney general’s office isn’t so reliable. State labor law enforcement apparatuses are notoriously underfunded and understaffed. Non-governmental organizations often have to educate workers, ensure the law is carried out and put pressure on employers.

“The flip side of neo-liberal policies, where government functions are farmed out [to private entities], is that workers’ centers are doing the job of the Department of Labor,” says Adam Kader, director and co-founder of Arise Chicago, a workers’ center with Spanish-, English- and Polish-speaking members. “The state level Department of Labor [under the previous administration] was zero percent effective in our experience.”

In 2010, Illinois' wage-theft law was bulked up, due to the organizing acumen of Just Pay for All, a coalition formed to pass the law. It features a new administrative process routed through the Department of Labor to streamline the settlement of under-$3,000 cases. Another provision enables employees to file suit against individuals, instead of their companies, making it harder for employers to escape their obligations by declaring bankruptcy. If found guilty, employers will also have to pay a $250 fine, interest and the workers’ legal fees (previously they only had to pay back the exact amount they stole, which basically amounts to a non-consensual interest-free loan).

Although Arise supported passage of the law, they were not directly involved in the campaign. The law gives little additional power or enforcement ability to the state’s anemic Department of Labor. If the agency tells an equivalent of Veranda’s owner to pay up, say, the culprit will often ignore the order. It will then be kicked to the attorney general’s office, but Kader is not convinced wage-theft cases are at the top of AG Lisa Madigan’s priority list.

“Of course the law is good, but it’s limited as an actual anti-wage theft strategy,” Kader says, explaining that Arise relies on blunt confrontations with thieving employers using pickets, leafleting, religious delegations, and phone calls and letters to business clients and associates. “You need different kinds of community pressure to win those complaints, those lawsuits, so why not start with community pressure. Our most heavy emphasis is still on developing and perfecting our direct-action strategies.”

In Florida’s Miami-Dade county, home of a potent local anti-wage theft ordinance, worker advocacy organizations use similar tactics to publicize the cases brought before the county (which enforces the law in the absence of a state Department of Labor, which legislators eliminated in 2002).

Under the Miami-Dade ordinance, workers register a complaint with the county which checks out their claim, and if it is valid, calls the employer to notify them of the charge. If the offender proves recalcitrant, the case goes to an administrative hearing. If the employer is found guilty they must pay the sum they stole, plus an additional two times the original amount (an employer who steals $100, would owe $300), along with administrative costs to the county. The law went into effect in March 2010, and phone calls began promptly, resulting in between $400,000 and $500,000 in recovered wages for 350 workers (as of April 2012). The hearings began 10 months later, in January 2011, and have resulted in a further $500,000 in recovered wages. (Another $2.5 million in claims are pending.)

“I think government taking a stand, at any level, is a deterrent,” says Jeanette Smith, director of South Florida Interfaith Worker Justice. “[But] not every single wage-theft claim will get through whatever program exists. There’s just too many of them. We work with workers on shame campaigns; we do that alongside the process. Any attempt against wage theft should be multi-pronged.” The Miami-Dade ordinance has an annual budget of only $75,000 for enforcement, so the continuing support of the workers’ organizations is essential.

While the ordinance faced little opposition when first passed (it is enthusiastically supported by the city’s fiscally conservative Republican mayor), employer groups have been ramping up their opposition, in court and in the legislature. Opposition intensified after Palm Beach County began working on its own ordinance. Big companies like Macy’s and Walmart are spearheading the pushback, even though no claims have been made against them. Business-side solidarity is strong and the companies seem to want to strangle the law before it becomes commonplace.

This seems to suggest that as anti-wage theft laws grow in number, industry and conservative opposition will only increase. But the moral weight is inarguably on the side of workers, and in the midst of an ongoing state and local fiscal crisis these laws are a cheap way to win back lost revenue, along with wages. In recent years, anti-wage theft laws have cropped up in New Mexico, Massachusetts, Washington State (Seattle instituted additional protections), and San Francisco, while Madison, Wisconsin, Washington, DC, and San Francisco have all mandated tougher enforcement campaigns.

In the near future, Marco Jacal's and Isidro Suarez's victory may not be so unusual. 

 

Jake Blumgart is a freelance reporter-researcher based in Philadelphia. Follow him on Twitter.
 
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