The New Administration Can Stop Wage Theft–and Stimulate the Economy

Kim Bobo: How to Stop Wage Theft

President-elect Barack Obama and his team are going to have their hands full when they take the reins of government in January. Wage theft probably won’t be the Obama administration’s top priority, but it should be near the top of the list for the new secretary of labor as the nation’s leaders seek to stimulate the economy. Unlike the banking industry meltdown or the war in Iraq, wage theft is relatively easy to fix. It will require some money, but nothing like the bailout or the Iraq war. A modest investment would result in billions of dollars of stolen wages to be paid directly to workers. Within one four-year term, the nation could stop most wage theft if we had the political will to do so.

At least 30 billion dollars, perhaps more, is stolen each year from millions of workers’ paychecks by employers who do not pay them what they are legally owed. A handful of federal wage and hour investigators, fewer than 750 to be precise, are charged with protecting the nation’s 130 million workers against wage theft. For a modest 500 million dollars, an estimated 5 billion dollars could be given back to workers through the direct collection of the stolen wages and, more important, through the deterrent effect created by strong enforcement.

Wage theft is when employers don’t pay minimum wage as required by law, deny their employees overtime, take illegal deductions from paychecks, steal tips, misclassify workers as independent contractors or simply don’t pay them at all. The New York Times recently reported a classic example of wage theft, in which thirty-six food-delivery workers at two Manhattan restaurants were paid less than $2 per hour. Wage theft is not a small or isolated problem. It is a widespread crisis affecting millions of U.S. workers from whom billions of dollars are stolen each year.

Although perhaps the most egregious wage theft occurs among undocumented immigrants who are easily exploited by unethical employers, the largest dollar amounts are stolen from native-born, middle-class workers who are not paid overtime or are misclassified. And the Department of Labor’s wage and hour division (the division most responsible for addressing wage theft), despite the best efforts of many heroic career staffers, is incapable of stopping and deterring it without new leadership, direction, and resources.

President-elect Obama needs to appoint a secretary of labor who is committed to the mission of the Department of Labor and to the deterrence of wage theft. With a wage and hour administrator directly accountable to the secretary, the secretary of labor should implement a four-year plan to stop wage theft. Here’s what he or she should do:

On Day One:
Advocate a halt on workplace raids. The decision for this does not rest with the secretary of labor, but the secretary should be a vocal advocate, along with the U.S. Catholic Bishops and most other religious bodies, for stopping workplace raids.

Publicize the Department of Labor’s commitment to protect all workers regardless of immigration status and publicly affirm its promise not to report workers to Immigration and Customs Enforcement (ICE). The wage and hour leadership assures me that they do not report workers to ICE, but workers don’t know or believe this and it dissuades them from contacting the Labor Department.

Work cooperatively with worker centers, legal clinics, unions, employment lawyers, ethical business groups, and others to fight wage theft.

Talk with employers about the problems of wage theft. If you read most of the speeches made by current Secretary of Labor Elaine Chao, she repeatedly says what a great job the Bush administration is doing and what a great job employers are doing. She has never once mentioned wage theft. She’s the secretary of labor. She should have been leading the charge against it. Speaking with employers may not make the new secretary the most popular, but if the he or she doesn’t address these issues, who will?

Within the First Year
Develop a plan for quadrupling the wage and hour’s enforcement staff. There are fewer than 750 enforcement staffers to protect 130 million workers in 7 million workplaces. The wage and hour division of the Department of Labor has fewer than half as many enforcement staffers today as it did in 1941 and it does half as many investigative actions as it did when it was responsible for only 15.5 million workers. There aren’t enough cops on the job. The Department of Labor leadership must make fighting for more staff more of a priority–without it the agency can’t possibly stop or deter wage theft.

Develop clear protocols around punishing those who steal wages in meaningful ways. The Department of Labor has lots of enforcement tools it can use to punish those who steal wages, but they are seldom used. When employers are caught stealing wages, many end up paying workers significantly less than what they should have paid the workers in the first place. Consequently, it becomes a smart business practice to steal wages. If employers knew that they would pay double the wages owed plus fines, they would think twice before stealing wages.

Publicize those who steal wages. The Department of Labor should post violations against employers who steal wages and should aggressively publicize egregious wage theft cases. Other agencies do this. Again, it would help employers think twice before stealing wages.

Coordinate with and help network state enforcement agencies. Some states are trying new approaches to wage enforcement. The federal Department of Labor should coordinate with them and help them learn from one another.

Create joint investigative taskforces between the Wage and Hour Division and Occupational Safety and Health Administration. There are many industries, such as poultry and residential construction, that have both widespread wage and hour violations as well as widespread health and safety problems. Taskforces should be created to work together in particular industries.

Within the First Term
Make the agency more user friendly for workers. The Department of Labor is not organized in ways that are easy for workers to access. The Department should pilot a number of new approaches and tools for assisting workers in the recovery of lost wages, including looking at one-stop approaches for workplace problems. (Right now, if a worker has a wage problem, a health and safety problem, and a discrimination problem, the worker will need to call and visit three different agencies, even though only one employer is involved.)

Increase the staff devoted to targeted investigations. Currently, most of the DOL staff’s time is spent in the office, working by phone , in response to complaints. Although it is important for the DOL to respond to complaints, it also needs to target industries that are routinely violating the law and investigate them without waiting for complaints. This is the most effective way to clean up industries.

Develop a comprehensive legislative reform package–drawing upon a blue-ribbon panel composed of business, labor, and worker advocate–to strengthen the Fair Labor Standards Act and recommend other laws for protecting workers. As important as the Fair Labor Standards Act is for protecting workers, it needs to be updated and expanded. Too many workers are excluded from overtime coverage. It’s unclear to workers and advocates alike who is covered by the law. And there are many additional problems that workers are having that aren’t addressed in current labor law. Much could be done to strengthen legal protections for workers.

These recommendations are not difficult to implement. Wage theft is a national crisis, but one we can solve. Obama just needs to choose the right leadership.

Kim Bobo is the founder and executive director of Interfaith Worker Justice and the author of Wage Theft in America: Why Millions of Working Americans Are Not Getting Paid – And What We Can Do About It (New Press).