For many employers, wage theft makes good business sense. The probability of getting caught refusing to pay a worker overtime, shaving hours off their check or paying less than the minimum wage is low. And even in the small number of cases pursued by victims that see the inside of a courtroom, employees often only recover a fraction of what they’re owed. A new law in Connecticut, however, aims to change this.
This Wednesday, Connecticut Governor Dan Malloy signed into law Senate Bill 914, a measure that will allow victims of wage theft to collect double the amount due them. By making the cost of breaking the law outweigh the cost of following it, business owners will be deterred from committing the crime in the first place.
“This is going to mean the transfer of millions of dollars each year from cheating employers to low-wage workers,” says James Bhandary-Alexander, a lawyer for New Haven Legal Assistance who represents victims of wage theft.
And yet, as Bhandary-Alexander notes, SB-914 is only a “modest” step in providing workers fair compensation. Passed after years of effort by workers, immigrant rights advocates and myriad grassroots organizations, SB-914 paradoxically illustrates how large the holes are in existing labor laws across the country — and what an uphill struggle it will be to achieve what Bhandary-Alexander calls “major” progress: a $15 and hour minimum wage, fair scheduling legislation, the elimination of tip credit and other provisions.
“We can see now how big a battle it is,” he added.
Double down, triple to go
The new law is intended to alleviate a number of gaping holes in state law that allowed bosses to get away with stealing workers’ wages. Up until now, Connecticut employees had to prove “bad faith, arbitrariness or unreasonableness” on the employer’s part in addition to wage theft, making it extremely difficult for victims to collect. Courts regularly construed “bad faith” so narrowly that the majority of wage theft charges couldn’t pass muster.
In a 2010 case, for example, Ann Maratea was denied double damages because a Connecticut Superior Court held that her employer, Taylor Freezer, supposedly was “unaware” that it had to pay overtime for the entire 10-year period she worked there. According to the court, “although it was known to management personnel that Ann Maratea would arrive … well before the official 8 a.m. start of the work day,” failure to pay a single cent for the 10 extra hours Maratea put in every week for a decade didn’t amount to proof of employer “bad faith.” And so the judge ruled that Taylor Freezer didn’t have to pay Maratea the full amount she would seemingly be legally entitled to.
Now, in order to avoid paying double damages, employers who commit wage theft must demonstrate that they undertook specific investigation into how much constitutes a legal wage, and then somehow made a mistake. SB-914 lifts the burden of proof from the employee to the employer.
This is crucial because provisions under the federal Fair Labor Standards Act for double damages only apply to workers who are part of “interstate commerce” and those whose employers make over $500,000 a year. This means that, for millions of workers around the country, federal wage law simply doesn’t apply — making legislation at the state level, including SB-914, their only recourse.
Still, even advocates who pushed for the law say it’s far from ideal.
“To be honest,” said Megan Fountain, an organizer with Unidad Latina en Acción (ULA), a grassroots workers’ and immigrants’ rights organization whose members lobbied hard for the law, “SB-914 is nowhere close to the best wage theft laws in the country. Ten states make an employer liable for triple damages.”
But even among those states that provide for treble damages (Arizona, Idaho, Maine, Maryland, Massachusetts, Michigan, Nebraska North Dakota, Vermont and West Virginia), few make the grade in wage theft prevention. According to one 2012 study which gave states a letter grade based on the strength of their wage theft prevention laws, the two highest-ranking states, New York and Massachusetts, only got a C+ and a C. Connecticut brought home a D — and 18 states scored effectively zero.
“I’d say wage theft is the biggest crime wave in the country,” Bhandary-Alexander added.
Organize, organize, organize
In 1938, Congress passed the nation’s first-ever wage law, the Fair Labor Standards Act (FLSA), which made double damages a federal requirement. Yet nearly a century later, the gap between actual practice and national paper provisions is enormous.
In protests that continue to ripple across the country, workers have attested to the variety of ways by which they are deprived of their due pay: Employers regularly pay below minimum wage, withhold overtime pay or tips, misclassify their employees as independent contractors and engage in a whole host of other tactics to pay workers less than what they are legally owed. In many industries, wage theft is endemic.
National studies find that over 60 percent of workers in low-wage industries suffer wage violations each week, and that wage theft costs workers $50 billion a year. In 2013, the Connecticut Department of Labor recovered $6.5 million in unpaid wages. But many workers use civil suits instead of going through the DOL, and one can safely assume that many did not file complaints because of language barriers or fear of retaliation. The way the legal odds are stacked — and thanks to years of budget cuts that have reduced DOL Wage and Hour investigators to only about 20 percent their number in the 1970s — there are few incentives for an employer to not steal wages.
In her testimony in front of the Connecticut state senate in support of the new law, Karim Calle, a full-time student and worker from East Haven who said that in years past she had made as little as $30 a day waitressing, told the court what can happen to a worker trying to get back stolen wages. Calle spoke about two nail salons in Darien and New Canaan where manicurists were discriminated against, sexually harassed by their boss and paid neither minimum wage nor overtime. In addition, workers developed health problems because of the toxic chemicals they came into contact with daily.
In 2008, six of the women who worked in the salons filed a lawsuit for $370,000 in stolen wages. As the case wound its way through the courts, the employer’s three houses suddenly went into foreclosure, and he sold the two salons to his niece before disappearing. “Fraudulent employers use these practices frequently,” Calle said. Even though the court came to a judgment for $209,000, the employees had no way to collect it.
Calle is a member of ULA, and fought hard for SB-914 as part of a package of laws, including one that would have brought wage liens to Connecticut. Wage liens enable workers to put a legal hold on an employer’s property when filing a wage theft claim and ensure that an employer can’t “disappear” assets before being ordered to pay what they owe — as the nail salon owner did.
Liens have been used successfully in Wisconsin, Maryland, Alaska, Idaho and Washington, and are being fought for in states like New York, where it’s known as the SWEAT bill (Securing Wages Earned Against Theft). Yet SB-914 is the only bill of the group that made it through the Connecticut Congress thus far.
Yet perhaps the most important advance to come out of SB-914 was the high level of community and worker organization that coalesced around the law. Groups like ULA joined forces with Legal Services lawyers, union members, local students, activists from the Connecticut Immigrants’ Rights Alliance, the Fight for $15 campaign and others to secure the bill’s passage. According to Calle, this coalition is what made the bill’s passage successful.
“This isn’t just a legal problem,” said Bhandary-Alexander, “it’s a political problem and a cultural problem, too. We need to keep fighting the legal battles, yes, and keep increasing the cost of wage theft, but, on the bottom end, it’s organizing, organizing, organizing… SB-914 shows you both what you can do with not a ton of resources but a lot of patience and energy,” he concluded. “But the question is, how do we accomplish more?”
The law becomes effective October 1, 2015.