The Equity Factor

When It Comes to Stealing Money From Workers, Businesses Are More Savvy Than Ever

Since 2009, the federal government has recovered $1.3 billion in back wages. Here’s how to find out if some of that money is yours.

(Photo by Wouter Engler)

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About a 30-minute subway ride from Times Square, Queens’ Flushing neighborhood doesn’t have massive skyscrapers or semi-nude street performers — but it is an important center of the national fight against wage theft.

“There were a lot of workers who were coming out about wage theft in the Flushing area, but employers are very well-organized,” says Sarah Ahn, an organizer at the Flushing Workers Center, which opened a few years ago. “They threatened workers who speak up with blacklisting or other crazy forms of retaliation, sometimes even using physical violence.”

Wage theft includes not paying for all hours worked (overtime too), paying below minimum wage and withholding benefits. While it occurs at all levels of the income ladder, low-wage workers suffer the most from it by far. According to one study, employers in New York City are stealing nearly a billion dollars a year in wages from low-income workers.

As of August 2013, New York State’s Department of Labor had a backlog of more than 17,000 open wage theft cases, more than three times as many as in 2008. Three-quarters of open wage theft cases had been open for more than a year.

Without organizing workers across shops, across different industries, it’s hard for them to get anywhere with wage theft cases, Ahn says. Enforcement mechanisms have yet to catch up with employers in today’s economy of transient workers, independent contractors, and small retail or other service-sector businesses. “I think employers got very savvy about how to get away with wage theft, compared to not too long ago,” she adds.

As a result, workers are losing, even when they’re winning. There are at least $125 million in unpaid wage theft judgments and court orders in New York State, according to a report released earlier this year.

“So many employers, when faced with employees’ legal action, declare bankruptcy or reorganize their companies through a series of LLCs to escape judgment,” New York State Assembly Member Linda Rosenthal wrote recently. “Employees who do win a judgment are left with an unenforceable piece of paper and hundreds or thousands of dollars in unpaid wages and overtime.”

To counter that, Rosenthal authored the SWEAT Bill, which would allow courts to freeze assets of employers at the beginning of wage theft proceedings. The Flushing Workers Center is part of a coalition advocating for the bill’s passage.

“We want workers to have the legal tool to hold employers’ assets at the beginning of investigations so they can’t come to court three years later and say they have nothing,” Ahn says.

At the federal level, authorities have already taken several recent steps to get momentum back behind workers in the age-old arms race against scofflaw employers.

In order to deal with the changing economy, the U.S. Department of Labor’s Wage and Hour Division (WHD) began shifting toward initiating more of its own investigations as opposed to focusing on responding to claims. WHD only has about a thousand investigators to police 7.3 million establishments and protect 135 million workers. Initiating its own investigations allows WHD to prioritize and direct those limited resources to where the data and evidence show the problems are largest, where emerging business models lead to violations, and where workers are least likely to exercise their rights.

In fiscal year 2014, more than 43 percent of WHD investigations were agency-initiated, up from 35 percent in 2009. The shift has led to a 37 percent increase in back wages recovered for low-wage workers, and 41 percent more low-wage workers helped in 2014 compared to 2008.

Since 2009, WHD has recovered $1.3 billion in back wages and distributed those funds to more than 1.5 million workers. The average amount per wage theft case is $890. In most cases, workers have three years to claim back wages before DOL hands the money over to the U.S. Treasury.

Earlier this year, WHD launched Workers Owed Wages (WOW), an online tool that allows workers — or their advocates — to find out if WHD is already holding back wages owed to them.

“I was surprised at how simple the WOW process was,” worker Bruno Silva says in a Department of Labor blog post promoting the effort. Silva received $1,200 in stolen wages through WOW.

WHD verifies claims by asking workers a few questions and comparing answers to investigation documents. Information collected by WHD for the purposes of delivering back wages is not shared with immigration authorities or other agencies; it is only used for delivering wages owed, regardless of workers’ immigration status. WHD has even reached out to foreign consulates in cases where they have reason to believe workers owed wages have already returned or been deported to countries of origin.

The top five states with back wages currently sitting in the Department of Labor bank account, waiting to be claimed through WOW: New York ($25.7 million), California ($13.7 million), Texas ($13.5 million), New Jersey ($6.8 million) and Florida ($4.1 million).

While only 150 workers have claimed wages through WOW so far (WHD started active outreach this summer), those workers have collectively claimed a total of more than $800,000.

Every victory, no matter how small, matters a great deal when it comes to getting momentum back in workers’ direction. As Ahn says, “If workers can’t win when they come forward, why would anyone risk their jobs and use up valuable time and other resources?”

The Equity Factor is made possible with the support of the Surdna Foundation.

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Oscar is Next City's senior economic justice correspondent. He previously served as Next City’s editor from 2018-2019, and was a Next City Equitable Cities Fellow from 2015-2016. Since 2011, Oscar has covered community development finance, community banking, impact investing, economic development, housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha and Fast Company.

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Tags: jobsincome inequality

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