The Wage Theft Epidemic
Thanks to a wave of government cuts, there’s no one to stop your boss from withholding your pay.
Spencer Woodman
Last October, Anthony M. Van Buren drove 135 miles south from his home in Charlottesville, Va., to the small town of Moneta in search of his former boss, Robert Brown, the owner of Star Valley Painting Contractors Inc. The visit was neither invited nor welcome. According to Van Buren, Brown’s site manager had fired him, along with several others, after they’d complained about not being paid for their work on a large painting project. The company, he says, owed him more than $1,000 for three weeks of work. Struggling financially, Van Buren, 59, had tried and failed to work out a deal with his landlord to forestall eviction. He needed his pay, and fast.
Driving to Moneta was a last resort. Days before, Van Buren had called Virginia’s Department of Labor and Industry to report his employer’s nonpayment, a crime under Virginia state law. To his disbelief, the agency told him they were no longer taking wage-and-hour claims and that it was up to him to investigate and prosecute the alleged crime. They referred him to a private lawyer, but the attorney’s fees alone would have amounted to more than the sum he sought.
Van Buren brought along two other men: his cousin and another fired worker also seeking back wages from Brown. Having grown up in Harlem in the 1960s, Van Buren was no stranger to confrontation. Yet he did worry that the unannounced visit would attract the attention of the Moneta sheriff, an unappealing prospect for an African-American out-of-towner entering a tiny municipality at the foot of the Appalachians. He even considered, briefly, alerting the local authorities of his plan. “I wasn’t going up there for no trouble or anything,” Van Buren says. “All I wanted was my money.”
As the three men sped through the southern Shenandoah Valley in a 1989 Honda Accord, Van Buren prayed for two things: that he’d get his money, and that, in doing so, he wouldn’t be harmed.
No enforcers of the law
Even as the ranks of low-wage workers have swelled since the recession, Democratic and Republican legislatures in more than a dozen states have quietly slashed funding for the agencies that enforce minimum wage law. Budget cuts are no surprise in an era of austerity. Yet the effect of these cuts on wage-and-hour investigative units—charged with examining and settling wage disputes—has seriously compromised an essential line of defense for already vulnerable low-wage earners, according to experts. State labor officials and researchers around the country tell In These Times that low-wage workers facing abusive employers increasingly have nowhere to turn.
The victims of nonpayment of owed wages—referred to as “wage theft”—are most frequently workers at the bottom of the income scale. The U.S. Department of Labor, which significantly expanded its investigative force under former Labor Secretary Hilda Solis, can take wage theft cases, but it is less familiar with local particulars and is prohibited from investigating many employers covered by state laws. Most private attorneys are unwilling to take wage theft cases, since they involve comparatively small sums of money.
Former investigators interviewed for this article say that budget cuts over the past decade have impeded their ability to perform meaningful investigations. They paint a stark picture of weakened enforcement divisions, lacking both necessary staff and funding, that regularly close claims of wage theft that appear legitimate. Such closed cases represent de facto wins for employers.
“This sends a powerful message to employers that they’re not likely to get caught and that following minimum wage laws isn’t a priority,” says Catherine Ruckelshaus, legal co-director at the National Employment Law Project. “It’s to the point where, in some industries, there’s no minimum wage floor at all.”
Cuts to state minimum wage investigative units have happened with almost no fanfare. The change reflects budgetary realities and also a successful decades-long attempt by business groups to frame employee protections as a partisan issue, not suitable for public dollars. As union ranks shrink and average wages decline, weakened labor law enforcement represents yet another locus of power shifting away from the interests of the labor movement.
In some cases, agencies that enforce labor law have been singled out by conservative groups such as the U.S. Chamber of Commerce as being bad for business. Over the past decade, the chamber has ardently denounced “aggressive enforcement” of labor law, asserting that, even without policing, the laws will enforce themselves. Last year, the chamber stated, “Regulations have an impact regardless of whether a company gets inspected.”
Lax enforcement rewards businesses that break the law to undercut competitors, according to Jacob Meyer, a staff attorney with the National State Attorneys General Program at Columbia Law School. Meyer co-authored a 2011 study on state wage-and-hour enforcement, which warned of a lack of meaningful enforcement leading to a “regulatory race to the bottom” among states seeking to attract business. “It directly undermines those employers who abide by the law,” Meyer says.
Over the past five years, as states slashed budgets, legislatures in Ohio, Wisconsin, South Carolina and Missouri cut their investigative staffs by half or more. This has come as each of those states has added tens of thousands of low-wage workers to its workforce over the past decade. In North Carolina, Michigan, Hawaii, Oregon and New Jersey, wage-and-hour departments have also suffered significant cuts.
Virginia offers an extreme case. Last July, the state eliminated its entire wage-and-hour enforcement unit. All six of the state’s minimum wage investigators retired or were reassigned, leaving many wage theft victims either to give up or—like Anthony Van Buren—to resort to vigilantism to retrieve pay.
Until last July, Bobby Myers worked as a wage-and-hour investigator in Virginia. During his last two years on the job, his caseload resembled that of other hard-hit departments around the country. When he first arrived in 2009, the staff was large enough that an investigator was usually available to focus on hard cases—and could even drive hours to personally visit a non-compliant employer. But by 2011, each compliance officer was solely responsible for some 250 wage claims a year, a job Myers describes as a chaotic race against a swelling backlog that often left him “just filing ‘no’” on tough cases.
“Our powers were just really weak. We were constantly bluffing,” says Myers. “Some repeat offenders eventually learned to call our bluff, and then there was very little we could do. That was when the claimant would see just how powerless we were to enforce the wage law of the commonwealth of Virginia.”
Often, an accused employer would simply refuse to hand over essential, potentially incriminating documents, and after several attempts to coax the employer by phone and mail, Myers would have to close a case without further investigation. Thus, for at least several savvy employers in Virginia, Myers says, there was effectively no minimum wage.
“When someone’s been screwed out of money that they’ve worked for and that’s going to make a difference in how they’re going to live—and you, as the investigator on the case, cannot help—it makes you feel hollow, just impotent,” says Myers.
Last May, Myers’ boss told him to hand over his outstanding claims to two investigators in Richmond tasked with winding down the state’s caseload. By August, the state had put up a website announcing the department’s liquidation and referring workers to DunlapWeaver, a private law firm. Poor workers can rarely afford lawyers, and few lawyers will take such cases on contingency because the payoff, if it indeed comes, is low. In December, DunlapWeaver announced it would no longer take on wage theft cases.
A costly trend
For 20 years, Stephen Hampton worked as a wage claim investigator in Iowa, a state that has paved the way in defunding wage-and-hour compliance units.
In the mid-90s, Hampton worked alongside three other investigators. By 2002, Hampton was the only one left, responsible for the state’s some 1.3 million private-sector workers—and an epidemic of wage theft that cheated Iowa workers out of $600 million annually, according to a 2012 study by the Iowa Policy Project, a liberal think tank. In the last five years of his work, Hampton scrambled to find ways to handle as many as 1,000 cases a year.
“There was one trucking outfit, for instance, that had literally hundreds of wage claims filed against it,” said Hampton, who retired in 2010 and spoke with In These Times shortly before he passed away in February. “So I had to step outside the box. I finally called them one day and told them that, in the future, I was going to start finding in favor of the employee without investigation,” Hampton said. “That seemed to work pretty well.”
Hampton’s superiors turned a blind eye. “As long as I was keeping things running smoothly, they wouldn’t ask any questions,” Hampton said.
Like Myers, the passion Hampton showed when speaking of the minutiae of his work lends credibility to his assertion that he spared no effort to be as effective and fair an investigator as possible. Even so, he admitted that, if he had had sufficient resources, a greater portion of workers who filed wage theft claims with his department would have won their cases. Upon his departure, Iowa Workforce Development (IWD) was finding employers responsible in just 25 percent of all claims, according to IPP.
In 2011, Democratic state senators proposed a law to cut through the red tape by shifting the burden of proof from workers onto employers. However, the bill faced concerted opposition from the Iowa Association of Business and Industry—which serves as Iowa’s Chamber of Commerce—and died in a subcommittee in the Republican-controlled House.
Now, Iowa’s wage-and-hour investigative unit appears to be in even worse shape. Hampton’s replacement has been assigned to also help with child labor investigations, leaving the wage-and-hour unit without a single dedicated wage theft investigator.
Vanessa Marcano, a community organizer at the Iowa Citizens for Community Improvement (ICCI) worker center in Des Moines, says that her office works closely with the state’s wage-and-hour division. “You can definitely tell they need more money from the state to hire more staff,” Vanessa said. “They even send workers to us, saying, ‘Go to ICCI if you want anything done quickly.’ But they work hard and they’re one of the only resources out there.”
Last summer, Nataly Espinoza, a single mother of three in Des Moines, signed up with a temporary staffing agency following an exasperating job search. For two months, the agency shifted her between local warehouses to pack and sort boxes, and file orders.
After several weeks on the job, Espinoza began to suspect that her bossdidn’t seem keen on paying her for her first week of work. Then she began hearing rumors that the temp agency was failing to pay some workers in full. Preferring to forgo any further pro bono warehouse temping, she quit.
Espinoza filed a wage claim for $300 at IWD and one month later, received a check for $125 that IWD had obtained from her former employer. Disappointed yet grateful for the small sum, she went immediately to the bank. The check bounced, leaving Espinoza to pay a penalty fee. Espinoza drove in desperation to her former employer’s office to ask for her pay in person. To ensure her safety, Espinoza brought along an employee from ICCI. Her former boss told the pair that Espinoza had only worked a fraction of the hours she claimed and, refusing to discuss it any further, showed them the door.
Finally, in January, IWD secured another $125 check for Espinoza from her former employer. This one cleared.
A smart business decision
Van Buren had only slightly better luck on his own journey to seek his pay. He says that after he and his former coworker waited outside the Moneta office for an hour, Brown arrived and told the men that their pay was coming, that it was his bookkeeper’s fault and that he would look into it. When Van Buren insisted on payment, he says, the boss handed $250 checks to each of the former employees and promised he’d talk with his payroll person about the remaining money Van Buren said he was owed.
After a week went by with no word from Brown, Van Buren sought the help of lawyers at the non-profit Legal Aid Justice Center in Charlottesville, and has since helped put together a wage theft case on behalf of 19 workers. The workers claim that Brown’s company—which had been hired by the general contractor Eilerson Development Corporation to help paint a huge suburban mall and cinema complex—failed to compensate them for thousands of dollars in a willful effort to profit from stealing wages.
“The trail of devastation that this subcontractor left on these guys' lives is pretty remarkable,” says Tim Freilich, one of the case's lead attorneys. “Anthony lost his apartment, another guy lost his vehicle, other guys got their cell phones shut off, some took out payday loans and got screwed on those—it has been a cascading series of disasters for the financial lives of these workers.”
Brown declined to comment for this story.
Freilich says that his and other legal aid programs in the state are seeing more workers hoping to pursue claims privately since the state eliminated its minimum wage unit. Even when the department was downsized in its final years, Freilich says, hundreds of cases were solved quickly through the division's routine administrative process. Now workers must go through the far more complex channel of private enforcement, which Freilich says involves “wasting tons of time and resources.”
In December, Freilich got Van Buren and the rest of the workers most of their money by pressuring the general contractor who had hired Brown into paying the workers on Brown's behalf. Six of the men, including Van Buren, are still pursuing thousands of dollars they are owed for work they did painting a firehouse in Richmond for Brown, a job they say included overtime for one marathon 18-hour workday.
“It's getting to the point in Virginia where if you're an unscrupulous employer,” says Freilich, “you can basically make a smart business decision to not pay your employees and then treat getting caught as an extra business expense.”
In an effort to bring the number of wage cases under control, the Legal Aid Justice Center lobbied the state legislature early this year to pass a bill to give workers the proper tools to recover stolen wages independently. Republicans killed the bill in a House committee in February, but Freilich's organization is still pushing for budget amendments to restore funding to the wage claim unit.
“We simply don't have the capacity to handle all these wage claims,” says Freilich. “What's the point in having a Virginia Payment of Wage Act if the state isn't even going to enforce it? This is as basic as it gets.”
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Spencer Woodman is a journalist based in New York. He has written on labor for The Nation and The Guardian.
You can follow him on Twitter at @spencerwoodman and reach him via email at Contactspencerwoodman@gmail.com.
