The U.S. Supreme Court’s recent refusal to consider a case involving several thousand Walmart employees brought attention to what employment advocates in Pennsylvania call a hidden crisis: wage theft.
Legal aid agencies and advocacy organizations such as the Pennsylvania-based Women’s Law Project use the term to describe employers’ refusal to pay wages due their workers.
“Shortchanged: How Wage Theft Harms Pennsylvania’s Workers And Economy,” a study released by the Sheller Center for Social Justice at Temple University’s Beasley School of Law, revealed that cooks, dishwashers, and food preparers, along with stock/office clerks and retail salespeople, were among the largest low-wage worker groups experiencing weekly minimum wage violations.
Employers commit wage theft by paying a daily rate that does not meet Pennsylvania’s $7.25 hourly minimum wage requirements, misclassifying people who work as independent contractors, paying in cash, failing to keep adequate records, and taking money out of paychecks to account for uniforms, supplies, and other products necessary to perform the job.
Terry L. Fromson, managing attorney at the Women’s Law Project, a public interest legal center, told Rewire that the practice compromises women’s economic security in Pennsylvania, where women make up about two-thirds of people who work for minimum wage, and where the minimum wage is the lowest allowed by federal law.
“Factor in losing 15 percent of a would-be paycheck to wage theft, and a family led by a primary or sole breadwinning mother sinks further into poverty,” Fromson said.
In the Walmart case, first decided by a Philadelphia jury in October 2006, 186,000 current and former employees from the retailer’s Pennsylvania stores were awarded $187 million in a class action suit for unpaid wages that were withheld between March 1998 and April 2006.
The workers’ counsel, Donovan Litigation Group, said the employees had been owed $140 million of the $187 million and will now split $224 million due to interest, according to the Philadelphia Inquirer.
Walmart had appealed the decision in 2006, taking the case to Pennsylvania’s Supreme Court, who affirmed the jury verdict in 2014. U.S. Supreme Court justices on April 4 decided to not take up the case and to support the state’s high court decision.
In the years since Walmart employees first took action, workers and legal aid agencies across the United States, including in Pennsylvania, have brought many more wage theft cases.
Last year, for example, more than three dozen people who work for low wages at the Denver-area Carniceria y Verduleria Guadalajara grocery store won $305,000 in back wages and penalties in a U.S. District Court ruling using federal and state “wage theft” laws.
Papa John’s franchisees in New York were found guilty of wage theft last year and ordered to pay back more than $500,000 to settle claims that they swindled employees out of earned income.
There remains, however, little information as to how prevalent wage theft has become across the country, advocates for low-wage workers told Rewire. The Sheller Center last year sought to fill the void in wage theft data in Pennsylvania.
The study, which used the state’s right-to-know law to obtain data from the Pennsylvania Department of Labor and Industry (DLI) and relied upon extrapolations rather than original data, found that the state’s people who work for low wages, on average, lose about 15 percent of the their earnings to wage theft.
The study suggested that nearly 400,000 people who work in Pennsylvania experience a minimum wage violation and more than 300,000 experience an overtime violation every workweek. The weekly loss amounts to an estimated $19-32 million in wages, according to the “Shortchanged” authors.
The study revealed that the DLI, the state agency responsible for handling wage theft matters, was unable to collect wages in more than half of the complaints filed by people who work.
In fact, despite closing 5,000 cases annually, the DLI collects wages in about 2,000 of those incidents, according to the Temple University study.
The U.S. Department of Labor in a study released last year acknowledged the prevalence of wage theft among wage and salary workers in California and New York.
The report concluded that more than 300,000 people who work in those states were victims of wage theft. Many of those affected, the federal study revealed, work in service-based positions in the restaurant and hotel industries and were more likely to be women, people of color, and undocumented people.
Undocumented residents in New York, for example, were 3.1 times more likely to experience wage theft.
A local report released by Centro de Trabajadores Unidos en Lucha in Minneapolis found that nearly half of low-wage workers in the Twin Cities have experienced wage theft.
Nadia Hewka, senior attorney at Community Legal Services, a Philadelphia-based legal aid outlet, said many businesses exploit undocumented workers’ vulnerabilities.
“Employers cut corners—some of them will choose to hire immigrant workers because they think they won’t complain,” Hewka told Rewire.
At Community Legal Services, Hewka said many people who work don’t know they are entitled to overtime and often seek to recover wages after they haven’t been paid for extended periods of time.
“That often happens with immigrant workers who are not familiar with laws in the U.S.,” said Hewka, co-founder of the Pennsylvania Immigrant Workers Rights Coalition.
The “Shortchanged” authors noted that undocumented workers fear their supervisors will call immigration authorities, while immigrants with employment visas are often afraid they may lose visa privileges if they speak up.
Identifying Wage Theft
The Temple University study, which excluded low-wage employees in more rural settings, like farm, forestry, and fishing workers, outlined the many ways employers get away with wage theft.
The report relied upon a landmark investigation released in 2009 called “Broken Laws, Unprotected Workers,” which surveyed low-wage workers in Chicago, New York City, and Los Angeles.
The “Broken Laws” study estimated about 90 percent of home health-care workers were victims of off-the-clock violations.
Philadelphia resident Natasha, whose last name was withheld by the “Shortchanged” authors, was a victim of wage theft while working as a home health-care worker.
Her employer, who often avoided workers and created barriers to keep employees from engaging each other about their paychecks, failed to compensate Natasha for travel time between client homes and even missed paycheck due dates.
The mother of four, who made $9.50 per hour and witnessed her boss call the police on coworkers who complained about wage theft, was ultimately fired after becoming ill despite her stellar attendance and documented excuse for missing work.
“I was so frustrated and I wanted to break down and cry because I couldn’t spend another week not being able to feed my children, having to choose between bread, eggs or milk,” she said, according to the study. “It was the worst experience of my life.”
Advocates for people who work low-wage jobs contend that wage theft also hurts the state’s economy, because money that would otherwise be spent in the economy is stolen from people who work, while businesses evade taxes that could be used to fund schools and road projects.
Law-abiding businesses may struggle to compete with enterprises that steal wages, advocates said.
The U.S. Department of Labor study noted that the burden of wage theft ultimately shifts from the private sector to the government because people who work for low wages will seek public assistance if their pay is insufficient.
People who work for low wages and their allies have looked to key policy changes to address wage theft, though it’s proven difficult because of resistance in Pennsylvania’s Republican-controlled legislature, Hewka said.
Some measures proposed during the 2015-2016 legislative session, like HB 250, which sought to raise the penalty for wage theft and for retaliating against an employee for reporting said theft, get stuck in committees and die there, she said.
A resolution to discharge the house’s labor and industry committee from further consideration of HB 250 was presented in October 2015.
Legislators in other states have proposed measures aimed at addressing wage theft. Democratic lawmakers in Wisconsin last year proposed legislation that would allow the state’s Department of Workforce Development to charge interest on unpaid wages and levy fines up to $1,000 per violation against employers who break state wage theft laws.
Hewka added that government oversight, overall, is weak and laws only provide a slap on the wrist when they are enforced, she said. Pennsylvania—much like the federal government—lacks enough regulators, she said.
In Pennsylvania, the Minimum Wage Act and the Wage Payment and Collection Law are the protections low-wage workers can rely on to reclaim stolen wages.
The Wage Payment and Collection Law limits penalties to the higher of $500 or 25 percent of wages owed, and includes criminal fines limited to $300.
The state’s minimum wage law, on the other hand, doesn’t offer any damages to people who work low-wage jobs, unlike federal law.
“Shortchanged” authors have recommended harsher penalties for employers, including business license revocation and allowing people who work to place a hold on employer’s property until they receive unpaid wages.
Other solutions encourage state policymakers to collaborate with community groups to target investigations and to create a process for workers to submit anonymous or confidential complaints.
The state has enjoyed some successes in battling systemic wage theft against people who work.
Philadelphia City Councilman William “Bill” Greenlee sponsored a bill that will create a wage-theft watchdog in the city’s Managing Director’s Office.
The bill, which was unanimously approved by the council in November, requires a wage-theft coordinator to respond to worker complaints and find victims who may lack education about their rights.
The coordinator will be responsible for looking at thefts of anywhere between $100 and $10,000, and can revoke business licenses and impose a city fine of $2,000 per incident.
Hewka, who worked with Greenlee on the measure, said the city should be prepared to handle complaints in July.
The measure, she said, will offer relief to low-income citizens who cannot afford a private lawyer and legal aid groups who can only provided a limited amount of free services.