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How companies rip off poor employees and lax enforcement lets them get away with it

The Washington news organization the Center for Public Integrity found that about 8,500 U.S. employers were cited in 2019 for minimum-wage and overtime violations.

Ruth Palacios and Arturo Xelo, a married couple from Mexico, work at their fruit stand in Queens. They worked seven days a week for months, disinfecting COVID-19 patients’ rooms at Memorial Sloan Kettering Cancer Center in New York City but weren’t paid overtime, according to a federal lawsuit they filed against the contractor that hired them. They’re now selling fruit to make ends meet
Ruth Palacios and Arturo Xelo, a married couple from Mexico, work at their fruit stand in Queens. They worked seven days a week for months, disinfecting COVID-19 patients’ rooms at Memorial Sloan Kettering Cancer Center in New York City but weren’t paid overtime, according to a federal lawsuit they filed against the contractor that hired them. They’re now selling fruit to make ends meet.
Marshall Ritzel / AP

Companies that hire child-care workers, gas station clerks, restaurant servers and security guards are among the businesses most likely to get caught cheating their employees on what they owe them, an investigation by the Center for Public Integrity has found.

The nonprofit Washington news organization analyzed citations for minimum-wage and overtime violations recorded by the U.S. Department of Labor.

It found that, in a single year, 2019, the federal agency cited about 8,500 employers nationwide for taking about $287 million from workers.

Major U.S. corporations are some of the worst offenders. They include Halliburton, G4S Wackenhut and Circle-K stores, which records show have collectively taken more than $22 million from their employees since 2005.

Companies have little incentive to follow the law. The Labor Department’s Wage and Hour Division, which investigates federal wage-theft complaints, rarely penalizes even repeat offenders, according to a review of records covering October 2005 to September 2020. The agency fined only about one in four repeat offenders during that period. And it ordered them to pay workers cash damages — penalty money in addition to back wages — in just 14% of those cases.

Millions kept from employees

Millions kept from employees AP

Also, it often lets businesses avoid repaying their employees all the money they’re owed. The agency has let more than 16,000 employers get away with not paying $20.3 million in back wages since 2005, the records show.

“Some companies are doing a cost-benefit analysis and realize it’s cheaper to violate the law even if you get caught,” says Jenn Round, a labor standards enforcement fellow at the Center for Innovation in Worker Organization at Rutgers University in New Jersey.

The federal data provide a revealing — though incomplete — look at a practice that pushes America’s lowest-paid workers deeper into poverty despite not including violations of state wage-theft laws or cases where employees sued.

Some economists say wage theft is so pervasive that it’s costing workers at least $15 billion a year — far more than the amount taken in robberies.

Daniel Galvin, a political science professor and policy researcher at Northwestern University: Companies are more prone to cheating employees of color and immigrant workers.
Daniel Galvin, a political science professor and policy researcher at Northwestern University: Companies are more prone to cheating employees of color and immigrant workers.
Northwestern University

Companies are more prone to cheating employees of color and immigrant workers, according to Daniel Galvin, a political science professor and policy researcher at Northwestern University. His research, based on data from the Census Bureau’s Current Population Survey, shows that immigrants and Latino workers were twice as likely to earn less than the minimum wage from 2009 to 2019 compared with white Americans. Black workers were nearly 50% more likely to get ripped off in comparison.

Through much of the Jim Crow era, the federal government ignored racial disparities in pay. It wasn’t until the Great Depression that Congress tried to establish a national minimum wage and overtime pay for workers. To get Southern Democrats to vote for the Fair Labor Standards Act of 1938, Northern Democrats agreed to exclude agricultural laborers, nannies and housekeepers from the protections. In the South, most of those workers were Black. Out West, a large number were Mexican American.

Congress amended the law during the 1960s and 1970s to cover most of these excluded workers. But their employers often flout the law anyway.

In his forthcoming book “Alt-Labor and the New Politics of Workers’ Rights,” Galvin writes that the lowest-paid workers lost roughly $1.67 an hour — about 21% of their income — to wage theft from 2009 to 2019.

Yuri Callejas, a 40-year-old single mother, cleaned hotel rooms at a Fairfield Inn & Suites franchise in Pelham, Alabama. Callejas complained to her boss that he was paying her only $9 an hour even though she was hired at $10 an hour, according to a federal lawsuit filed in January 2020.

She said she was working more than 40 hours a week but wasn’t getting paid overtime, either, according to the suit, which says she quit when her boss refused to change her pay rate. She says she was owed $1,272.

With help from a lawer with the Adelante Alabama Worker Center, Callejas sued the owner of the hotel, AUM Pelham LLC, which denied that Callejas was hired at $10 an hour and that she worked overtime but agreed to a settlement. Company owner Rakesh Patel did not respond to requests for comment.

Callejas walked away with $2,500 in back wages and damages but can’t forget what she went through.

“Every time I paid my bills,” she says, “I never had enough money.”

Isaac Guazo, an economic justice organizer for Adelante Alabama, says fewer workers have reported wage theft during the pandemic, but that doesn’t mean it’s happening less.

“It’s the opposite, actually,” Guazo says. “Workers will tolerate a lot more abuse right now because it’s so hard to find another job, and they need to pay rent.”

Palacios and her husband Arturo Xelo disinfected COVID-19 patient rooms at Memorial Sloan Kettering Cancer Center in New York City, working seven days a week for months and not getting overtime pay, Palacios says. At the start of the pandemic, they made the local minimum wage of $15 an hour, but, after a few months, their boss lowered their pay to $12.25, she says.

“The little guys have to speak up because people — the bosses — are taking advantage of their workers,” says Palacios, who lives in Queens.

Palacios, Xelo and two of their former co-workers filed a federal lawsuit in January against BMS Cat, the contractor that hired them.

The company has denied in court records that it paid the cleaners less than minimum wage or that it owed them overtime pay.

Neither BMS Cat nor the hospital responded to requests for comment.

In Brevard County, on Florida’s Treasure Coast on the Atlantic, Danielle Wynne’s job was ringing up customers at a Circle-K gas station. She worked shifts that started at 4:30 a.m. and ended in the early afternoon. Before and after clocking in, Wynne says, her manager made her work for free, according to a federal lawsuit she filed in February 2020. She says she counted cash in the register, brewed coffee, cleaned the store, set out condiments and refilled the lottery machine — all while off the clock.

The unpaid work added up to about $1,250 in one year, according to the suit. For someone paid $10 an hour, that’s about three weeks of pay.

Wynne says in court papers that she didn’t complain at the time because she was scared of her “vindictive” boss.

Circle-K Stores denied the underpayment allegations, though it settled the case for $2,500 in October.

Labor Department records show the company repeatedly has been cited for taking wages from its employees, though with few repercussions. The records show federal investigators caught Circle-K stores underpaying employees 22 times since 2005, most recently in February 2020. The total: $54,069 taken from 120 employees.

But the Labor Department fined the company only four times, ordering it to pay damages to employees just twice. In six cases, the company didn’t pay all the back wages it owed employees. The agency closed those cases anyway without further action.

Circle-K Stores didn’t respond to requests seeking comment.

Labor Department investigators are just as lenient with other repeat offenders.

The oilfield services company Halliburton illegally withheld $18.7 million from 1,050 employees, Labor Department records show, but investigators never ordered the company to pay damages in addition to the back wages. The department fined Halliburton in three of eight cases it brought against the company.

Halliburton declined to comment. In 2015, it told the news website Inside Energy that the company had misclassified employees as exempt from overtime pay.

G4S Wackenhut and its subsidiaries, which provide security services to companies and courthouses, illegally denied nearly $3.3 million to 1,605 employees, the Labor Department found. Federal investigators never ordered the company to pay damages to employees and issued a fine in nine of 47 cases, totaling less than $41,000. Though G4S Wackenhut later repaid employees in nearly all cases, it didn’t pay full back wages on two occasions — and the Labor Department closed those cases anyway.

Sabrina Rios, a spokeswoman for the company, says most of the money owed involved G4S subsidiaries that were under independent management. that the claims don’t reflect the company’s practices, that some of the cases date back more than 22 years and that the company cooperated with the Labor Department “to investigate each case and made appropriate payments to the individuals totaling about $3.3” million.

A Labor Department official says the agency orders companies to pay damages when appropriate, that fines usually are assessed when a company repeatedly or willfully breaks the law and that it tries to resolve cases administratively to avoid taking employers to court.

“The department exercises its prosecutorial discretion in determining whether to litigate specific cases, based upon careful consideration of our priorities, resources, and mission,” according to a written statement from Jessica Looman, principal deputy administrator for the agency’s Wage and Hour Division.

Nancy Leppink, who headed that division during the Obama administration, says the agency doesn’t have enough lawyers to take every employer to court when they don’t pay up. The division hired 300 investigators during her tenure but had only about 787 to enforce wage theft laws as of February — about one investigator per 182,000 employees covered by the Fair Labor Standards Act, a figure that’s far below the one investigator per 10,000 workers recommended by the United Nations’ International Labour Organization.

Leppink, now commissioner of the Minnesota Department of Labor and Industry, says she pushed investigators to demand cash damages for workers in every possible federal case. For example, if an employer took $1,000 from an employee, the agency could demand that amount in back wages plus $1,000 in damages.

“If all you do is collect wages, why would a company bother complying until [an investigator] walks through the door?” she says.

The percentage of cases with damages jumped during Leppink’s tenure but has never surpassed 15%.

Decisions on whether to pursue damages sometimes are dictated by the strength of the evidence, the urgency in getting workers back wages and the level of noncompliance by the employer, Leppink says, as well as by a lack of staff.

Last year, in response to the pandemic, the Trump administration ordered federal investigators to stop seeking damages for workers in most cases. In April, the Biden administration reversed that decision.

Lawyers who represent workers in wage-theft cases say they often discourage clients from filing a complaint with the Labor Department because they rarely get paid damages or quick results. The typical case took 108 days to investigate, according to the agency’s data.

At a 2015 hearing, Jennifer Lee, a Temple University law professor, told the Philadelphia City Council that employers stole wages from tens of thousands of Philadelphia workers every week: “It’s not a few bad apple employers or a few new businesses that don’t understand the law but rather a calculated approach by employers to maximize their profits on the backs of their workers.”

The hearing helped launch a local wage-theft law that allows workers to get their money back more quickly than they would by filing a complaint with the state or federal government.

The 2016 ordinance sets a 110-day limit for city staff to investigate and close a wage-theft case. It also gives workers three years to file a complaint with the city, versus the two-year statute of limitations under federal law. And penalties are steep: The city can revoke or deny local permits and licenses to companies that steal wages.

Legal experts and community groups point to strong local wage-theft laws as an effective way to get around lax enforcement at the federal level and in some states. The city of Chicago passed such a law in 2013.

But other workers’ rights advocates want to see federal reforms, considering that the Labor Department protects the largest number of workers. They want Congress to boost funding to the Wage and Hour Division so it can double the number of investigators, hire more lawyers and take on more wage-theft cases. They also want lawmakers to extend the federal statute of limitations beyond two years.

Leppink says the federal government could revoke franchise licenses and federal contracts from companies with a history of wage theft.

Jennifer Marion, a former policy adviser with the division, says the Wage and Hour Division at least can order employers to pay damages in every possible case,

“If you know you are likely to pay double than what you owed,” she says, “that changes everything.”