Wage Theft is a Crime: Law Enforcement and Victims’ Rights

December 1, 2015 by Julie A. Uebler, Esq.

In my practice, I often represent workers who have wage claims related to unpaid bonuses, sales commissions, or severance pay. In those cases, I had not considered the employer’s failure to pay those wages as “theft,” since the disputes are often based on different interpretations of an agreement to pay those wages. Recently, however, I have discovered that we are experiencing a wage theft crisis in our own community, primarily among low wage and other vulnerable workers who do not have the means to hire private counsel.

“Wage theft” is a catch-all phrase to refer to a company’s violation of the laws that apply to a worker’s wages. Typical violations include: paying workers less than the minimum wage ($7.25 per hour in Pennsylvania); refusing to pay workers for tasks required by the job, such as travel time between clients (“off-the-clock” violations); refusing to pay workers an overtime rate (1 ½ times the regular rate) for hours worked over 40 in a workweek; making unauthorized deductions from workers’ pay checks, such as for uniforms, supplies, or gas necessary to perform the job; misclassification of the worker as an independent contractor; and failure to provide a final paycheck. In these cases, an employer’s failure to pay these wages are not based on disputed interpretations of a compensation agreement. The law is straightforward. The failure to pay a worker his or her earned wage is a crime.

A study issued in June 2015 titled “Shortchanged: How Wage Theft Harms Pennsylvania’s Workers and Economy” (“Shortchanged Report”) by the Sheller Center for Social Justice at Temple University Beasley School of Law, reports that in any given workweek in Pennsylvania, close to 400,000 workers experience a minimum wage violation, over 300,000 workers experience an overtime violation, and more than 250,000 workers are not paid for off-the-clock work. Across the state, workers lose anywhere from $19 to $32 million in wage theft per week.

How does this happen if our current laws prohibit wage theft?

Companies in Pennsylvania (and many other states) commit wage theft because they can get away with it. At the federal level, the Fair Labor Standards Act (FLSA) is the law that requires employers, among other things, to pay minimum wage and overtime to workers. The Department of Labor’s Wage and Hour Division is charged with enforcing the FLSA. In Pennsylvania, the Pennsylvania Minimum Wage Act and the Pennsylvania Wage Payment and Collection Act govern the payment of wages to workers in the state. The state laws are enforced by the Pennsylvania Department of Labor & Industry. The government agencies at both the federal and state levels do not have the resources to effectively enforce the law. If an employer is found to be in violation, the consequences are typically insufficient to deter it from engaging in similar violations in the future. In other words, if the employer is caught for 1 out of every 10 or so workers, and is forced to pay the back wages and a minimal civil penalty, then there is a continued economic incentive to engage in wage theft.

What can be done to stop wage theft?

Criminal Prosecution

In a recent blog, I wrote about the efforts of the New York Attorney General to prosecute a Papa John’s franchisee for egregious wage violations. This time, in a rare move, the attorney general secured 60 days of jail time for the owner responsible for the violations in addition to restitution to the workers and civil penalties.

The Pennsylvania wage statutes mentioned above both include criminal penalties for violations, but they are not typically enforced. Law enforcement often has no greater resources to address these issues than the labor departments. In a sign that criminal enforcement may become a tool to prosecute wage theft in our state in the future, the Northampton County District Attorney recently announced a grand jury recommendation to indict Salukas& White Contracting Inc., a construction company, and one of its owners, Mark White, for violating the Construction Workplace Misclassification Act, a law that became effective in 2011. That statute contains monetary civil penalties and, for intentional or negligent violations, criminal penalties.

Legislation to Increase Enforcement Resources and Penalties

In mid-November 2015, Philadelphia passed an anti-wage theft ordinance to create a new enforcement mechanism and enhanced penalties for workers in the city to enforce wage theft claims between $100 and $10,000. In addition to streamlining procedures and increasing penalties, the new law permits the city to deny or suspend business licenses and permits for entities that violate the law. Similar efforts are underway at the state level. The Shortchanged Report includes additional recommendations to combat wage theft in our community.

No matter what your politics are on issues such as whether we should raise the minimum wage, or whether President Obama has exceeded his authority to increase the salary threshold for workers who are exempt from overtime, it seems we should all be able to agree that cheating workers out of wages they have already earned hurts all of us. Businesses who cheat their workers out of lawful wages not only hurt the worker and his or her family, but also have an unfair competitive advantage over businesses that do follow the law.

If you are a worker and believe you have not been paid the wages you earned, you can file a complaint directly with the U.S. DOL Wage & Hour Division or the Pennsylvania Department of Labor & Industry. You may also want to seek assistance from the Pennsylvania Legal Aid Network or from a private attorney who is a member of the National Employment Lawyers Association.

Julie A. Uebler, Partner | Employment Law