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The Crisis of Wage Theft (cont’d)

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Private Lawsuits Explode

There is perhaps no better evidence of the breadth of the crisis than the explosion of private lawsuits seeking to recover unpaid wages. The Fair Labor Standards Act, which covers minimum wage and overtime issues, provides workers the “private right to sue,” which means they can take their cases to private attorneys. They are doing so in record numbers.

Current business magazine headlines, including a frontpage Business Week cover story and management-side law firms’ articles tell the story:

“Wage Wars: Workers–From Truck Drivers to Stockbrokers–Are Winning Huge Overtime Lawsuits”

Wage and Hour Violations: An Employer’s Single Greatest Uninsured Risk

Time Bomb Waiting to Explode: Wage and Hour Claims over Exempt Employees

Wage and Hour Audits: Wage and Hour Laws Are Violated More Often than any Other Employment Law

According to the Administrative Office of the U.S. Courts, there were 7310 Fair Labor Standards Act (FLSA) lawsuits filed in 2007, compared to only 1633 in 1997. In ten years, the FLSA suits have more than quadrupled. In just one year, from 2006 to 2007, the number of FLSA cases filed increased by 73 percent. These figures account for only the federal lawsuits and do not include wage cases filed under state wage laws. Most of those lawsuits were filed for groups of workers, which means that these cases are recovering wages for several hundred thousand workers. The number of workers recovering wages would be much higher if workers didn’t have to “opt-in” to the suits. “Lawyers on both sides estimate that over the last few years companies have collectively paid out more than $1 billion annually to resolve these claims.”

Most of the big wage and hour lawsuits deal with overtime pay. The Fair Labor Standards Act has been clear since 1938 that all workers, except those exempt from the law, are eligible for overtime pay (1.5 times the FLSA “regular rate”) for hours worked over 40. The real issue is who is exempt and who isn’t. Thousands of workers and their attorneys claim they are “nonexempt” workers and thus due overtime pay. But many of the employers claim the workers are exempt and thus not due overtime. The crux of the matter is the classification of workers – whether they are really exempt or nonexempt. In an effort to clarify and streamline the overtime provisions, the Department of Labor issued new overtime regulations in 2004. Unfortunately, the regulations are still complicated, and employers continue to break the laws. Whether out of ignorance or willfulness, employers who illegally deny workers overtime are stealing wages.

Workers Centers and Wage Theft

Wage theft is acutely felt at the nation’s workers centers where workers whose wages have been stolen seek help. Jeffrey Steele is one such worker who sought help in New Orleans.

Steele, an African American from Atlanta, wanted to be part of history in rebuilding New Orleans after Hurricane Katrina. Responding to a flyer advertising “Free Room and Board, Free Food, Pay $10/hour,” he signed up with Workforce Development Corp, Inc., run by Carroll Harrison Braddy, and boarded a van to New Orleans in mid-October 2005. As it turned out, Braddy reneged on his flyers’ promises. Steele’s first few days were particularly miserable: he received no food, he had to sleep in the van, and he was made to work long hours. A few weeks after arriving in New Orleans, he was finally fitted for an aspirator, a critical piece of health and safety equipment for all those involved in the cleanup and exposed to dangerous contaminants.

When Steele’s first paycheck was due, he calculated he was owed $1400, not even assuming any overtime pay (1.5 times the regular rate over 40 hours per week). But Braddy only paid him $230. By mid-November, Steele left Braddy’s employment and went to work for another cleanup firm called JNE where he was promised $18 per hour. After four weeks of very long hours (almost 100 hours per week), Steele estimated he was owed about $7000. He was initially paid $300 and then got another $1000.

In January 2006, he started working for a third employer, with whom he stayed for nine months. This third employer paid him as an “exempt” salaried employee, even though he was probably legally eligible for overtime coverage (more on this issue later), which means he probably had wages stolen with this employee too.

At the last New Orleans’ job he worked, Steele injured his hand, which then required surgery. He received no workers’ compensation for his injury, nor did his employer provide any medical insurance. In all, Steele had four employers in New Orleans – and all of them stole wages or workers’ compensation from him. In testimony before the Domestic Policy Subcommittee of the Oversight and Government Reform Committee on June 26, 2007 in New Orleans, Steele said,

I went to New Orleans to help and to be part of history. I did the dirty, hard work that was needed. Yet, I was exploited by contractor after contractor who crammed us into filthy living spaces, provided next to nothing to eat, offered practically no safety precautions or equipment and paid workers late and so much less than even promised. If this is how this country allows employers to get away with treating hard working citizens while companies make a profit – then shame on us. I’ve worked hard all my life and I pay taxes. I’m a United States citizen. I’ve been working since I was 9 years old. I’ve never been to jail and I’ve never asked the government for nothing. If another catastrophe happens in this country, I hope you never let any one else treat workers and the people they are trying to help like they did in New Orleans.

Although wage theft was particularly bad in New Orleans immediately after Katrina, workers centers throughout the nation help thousands of workers annually who have had their wages stolen.

Many of the examples of wage theft are immigrant examples. This makes sense because the examples come from many of the IWJ workers centers that work with immigrants. Although the centers work with all workers in low-wage jobs, it is undocumented immigrants – who are most fearful of approaching government agencies – who flood the workers centers seeking help. Nonetheless, most of the workers whose wages are stolen are U.S. citizens. Perhaps the worst exploitation occurs among immigrants, but the crisis of wage theft would exist even if there were no immigrant workers in the society.

Wage theft affects all American workers by lowering the nation’s workplace standards, but especially those in middle- and low-income jobs. Stealing wages hurts workers and their families. Workers who aren’t paid their wages still have to pay their rent or their child care. Workers who are required to work long hours without overtime compensation are deprived of the opportunity to get another job or spend time with their families. Workers who are cheated of wages can’t save for their kids’ college or save for a home. For some earning the lowest wages, not getting paid means their families go hungry or become homeless. As a society, when we allow employers to steal wages from some workers, it drives down wages and standards for all workers.

Wage theft places ethical employers at a competitive disadvantage, thus undermining ethical businesses. Those businesses that pay workers legally and fairly and pay all their taxes as required are undercut by businesses that steal from workers and don’t pay taxes and insurances as required. In addition, wage theft steals from public coffers and denies communities of the economic stimulus generated when workers spend their wages.

[Excerpted from Wage Theft in America: Why Millions of Working Americans Are Not Getting Paid–And What We Can Do About It by Kim Bobo (The New Press, December). To order a copy of Wage Theft in America, go here. To learn more about the problem of wage theft, visit www.wagetheft.org.]

Kim Bobo, founder and executive director of Interfaith Worker Justice and a columnist for Religion Dispatches, is the author of Wage Theft in America: Why Millions of Working Americans Are Not Getting Paid -- And What We Can Do About It (The New Press) and co-author of Organizing for Social Change, the best-selling organizing manual in the country.

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