Wage Theft: American Businesses Steal Millions from Workers Every Year

by Vins
Published: Updated:

Thousands of US companies illegally underpay workers and are seldom subject to punishment for doing so, Alexia Fernández Campbell and Joe Yerardi reported for the Center for Public Integrity in May 2021. In 2019 alone, the US Department of Labor cited more than 8,500 employers for wage theft that took approximately $287 million from workers, Campbell and Yerardi reported. Major US corporations—including Halliburton, G4S Wackenhut and Circle K Stores—are among “the worst offenders.” Based on reports from the Department of Labor’s Wage and Hour Division covering 2005-2020, which the Center for Public Integrity obtained through a Freedom of Information Act request, Campbell and Yerardi report that companies engaging in wage theft “have little incentive to follow the law.”

A 2017 study published by the Economic Policy Institute found that one form of wage theft—minimum wage violations (paying workers less than minimum wage)—cost US workers an estimated $15 billion annually and impacted an estimated 17 percent of low-wage workers.

Most victims of wage theft are “on the lower rungs of the workforce,” the Center for Public Integrity reported. The 2017 Economic Policy Institute report found that more than 46 percent of the workers suffering minimum wage violations are service workers.

The Labor Department’s Wage and Hour Division, which is charged with investigating federal wage-theft complaints, “rarely penalizes repeat offenders” the Center for Public Integrity reported. According to Campbell and Yerardi’s report, between October 2005 and September 2020, the agency fined “only about one in four repeat offenders.” In just 14 percent of the documented cases were companies ordered to pay workers cash damages—penalty money in addition to owed wages. Since 2005, the agency has allowed more than 16,000 employers avoid paying more than $20 million in owed back wages, according to the Center for Public Integrity’s analysis.

As of February 2021, the Labor Department’s Wage and Hour Division only employed only 787 investigators, making for 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 Wage and Hour Division employed 1,000 investigators, or one investigator per 22,600 workers. The 2017 Economic Policy Institute noted that a lack of sufficient federal investigators was “especially problematic” for workers in states that lack their own enforcement agencies: Some 14 states “lack the capacity to investigate wage theft claims or lack the ability to file lawsuit on behalf victims,” the Economic Policy Institute’s report noted.

A September 2021 report, produced by One Fair Wage and the University of California Berkeley’s 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 the surveyed service workers reported that tips plus additional wages from their employers did not bring them up to their state’s minimum wage; and 46 percent reported that employers did not compensate for “time and a half” when working overtime (beyond 40 hours).

Strong local wage theft laws can help protect workers and make up for lax enforcement at the federal level. Campbell and Yerardi’s report documented local successes in Chicago (from 2013), Philadelphia (2016), and Minneapolis (2019). But, as Campbell and Yerardi also noted, workers’ rights advocates continue to seek federal reforms, appealing to Congress to allocate funding to double the number of Wage and Hour Division investigators and take on additional wage theft cases.

In May 2021, CBS News covered the Center for Public Integrity’s report on wage theft, but otherwise corporate news outlets have paid little attention to wage theft as a systemic social problem. Other corporate news coverage on wage theft, such as a September 2021 report by NBC News, frame wage theft as “disputes” involving “dueling claims that are difficult to verify.”

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

Student Researcher: Annie Koruga (Ohlone College)

Faculty Advisor: Robin Takahashi (Ohlone College)