#2 Wage Theft: US Businesses Suffer Few Consequences for Stealing Millions from Workers Every Year

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Thousands of US companies illegally underpay workers yet are seldom punished for doing so, Alexia Fernández Campbell and Joe Yerardi reported for the Center for Public Integrity in May 2021. Since its initial report, the Center has documented extensively that employers who “illegally underpay workers face few repercussions, even when they do so repeatedly. This widespread practice perpetuates income inequality, hitting lowest-paid workers hardest.”

Wage theft includes a range of illegal practices, such as paying less than minimum wage, withholding tips, not paying overtime, or requiring workers to work through breaks or off the clock. It impacts service workers, low-income workers, immigrant and guest workers, and communities of color the most, according to the Center for Public Integrity’s “Cheated at Work” series, published from May 2021 to March 2022. An Economic Policy Institute study from 2017 found that just one form of wage theft—minimum wage violations—costs US workers an estimated $15 billion annually and impacts an estimated 17 percent of low-wage workers.

Based on their independent analysis of fifteen years of reports from the US Department of Labor’s Wage and Hour Division, Campbell and Yerardi concluded that companies engaging in wage theft “have little incentive to follow the law.” In 2019 alone, the Department of Labor cited more than 8,500 employers for stealing approximately $287 million from workers. Major US corporations—including Halliburton, G4S Wackenhut and Circle K Stores—are among “the worst offenders,” Campbell and Yerardi reported.

The labor department’s Wage and Hour Division, which is charged with investigating federal wage-theft complaints, “rarely penalizes repeat offenders,” Campbell and Yerardi explained. Between October 2005 and September 2020, the agency fined “only about one in four repeat offenders.” In just 14 percent of the documented cases, companies were ordered to pay workers cash damages, and since 2005, the agency has allowed more than 16,000 employers to avoid paying more than $20 million owed in back wages.

Lack of resources at the federal level is blamed for lax enforcement. As of February 2021, the Wage and Hour Division employed only 787 investigators, a proportion of just one investigator per 182,000 workers covered by the Fair Labor Standards Act, Campbell and Yerardi noted. For comparison, in 1948 the division employed one investigator per 22,600 workers, or eight times the current proportion. Insufficient federal enforcement is “especially problematic” for workers in states that lack their own enforcement agencies: some fourteen states “lack the capacity to investigate wage theft claims or lack the ability to file lawsuits on behalf of victims,” according to the 2017 Economic Policy Institute report.

Strong state and local laws can help to protect workers and could offset weak federal enforcement. Campbell and Yerardi’s report mentioned local successes in Chicago (2013), Philadelphia (2016), and Minneapolis (2019), for example. But, as the reporters also noted, workers’ rights advocates continue to seek federal reforms, appealing to Congress to allocate funding to double the number of federal investigators. Terri Gerstein observed in May 2021, writing for the Economic Policy Institute, that in lieu of federal enforcement, and in response to “widespread, entrenched, and often egregious violations of workplace laws, an increasing number of district attorneys and state attorneys general have been bringing criminal prosecutions against law-breaking employers.”

Nonetheless, wage theft appears to be on the rise. A September 2021 study by One Fair Wage and the University of California, Berkeley, Food Labor Research Center found that 34 percent of workers in the service sector reported experiencing more violations of their rights—including wage theft—in 2021, compared to 2020. Some 35 percent of surveyed service workers reported that tips plus additional wages did not bring them up to their state’s minimum wage, and 46 percent reported that employers did not compensate “time and a half” for working overtime.

Since May 2021, a handful of corporate news outlets, including CBS News, covered or republished the Center for Public Integrity’s report on wage theft. Corporate coverage tends to focus on specific instances involving individual employers, but otherwise pays little attention to wage theft as a systemic social problem or to anemic federal enforcement. For example, a September 2021 NBC News report framed wage theft cases as “disputes” involving “dueling claims that are difficult to verify.” Verifying systemic wage theft has become easier, however, thanks to the Center for Public Integrity’s March 2022 decision to make the data and code used in their yearlong “Cheated at Work” investigation available to the public.

The story may gain more traction now that Congress is starting to pay attention. In May 2022, US House lawmakers introduced H.R. 3712, known as the “Wage Theft Prevention and Wage Recovery Act of 2022,” which would amend the Fair Labor Standards Act to protect workers from wage theft, according to Ariana Figueroa of the Virginia Mercury. Minnesota congressperson Ilhan Omar said, “It is clear more DOL [Department of Labor] funding and additional federal reforms are needed in our localities in order to protect our most vulnerable workers.”

Alexia Fernández Campbell and Joe Yerardi, “Ripping off Workers without Consequences,” Center for Public Integrity, May 4, 2021.

Student Researcher: Annie Koruga (Ohlone College)

Faculty Advisor: Robin Takahashi (Ohlone College)