From Wage Theft to Wage Justice

November 10, 2011

By Reyna Ramolete Hayashi

A Silent Plight

Thousands of temporary workers employed at Labor Ready’s nine branches in Western New York were owed tens of thousands of dollars in wages. Labor Ready made illegal wage deductions from workers who accepted their daily wages in cash. It issued vouchers to be used in a company-owned cash machine, which deducted a $1 processing fee. 1  The fees generated $8.3 million in revenue nationally in 2000 alone. 2 Most of these low-wage workers did not have bank accounts and were barely able to survive on daily cash wages. 3

Thirty-six workers employed at two Ithaca restaurants, Taste of Thai and Tamarind, were collectively owed $28,388 in wages. 4  Most of the workers were of Thai decent and limited English proficient. Their employer denied them overtime pay, appropriated their tips, kept inaccurate time and payroll records, and refused workers a day of rest each week required by law. 5  Soon after, a New York State Department of Labor (NYSDOL) investigative sweep of Ithaca restaurants, found that 77% of those visited were violating New York Labor Law. 6

New York City home health care workers filed a class action lawsuit against their employer, McMillan's Home Care, for unpaid wages. Home care workers allege that McMillan’s failed to pay them overtime, made them buy cleaning supplies, falsified payroll records, and forced workers to attend trainings without pay. 7  While home health care is one of the fastest growing industries nation-wide, a New York City study found 83% of home health care workers were not paid overtime and 84% worked "off the clock" without pay. 8

These stories are not the exception, but the norm in low-wage industries. Wage theft—systematic wage violations by employers—is a national crisis that has only intensified in the current recession. Millions of low-wage and immigrant workers are routinely being paid less than the minimum wage, denied overtime pay, forced to work off the clock, subject to illegal deductions, misclassified as independent contractors, or not paid at all. Even when workers chose to exercise their rights, they often face illegal retaliation. 

National Employment Law Project’s (NELP) 2009 landmark survey of low-wage workers in New York, Chicago, and Los Angeles, revealed that wage theft is a frightening epidemic in the U.S. 9 26% of the workers surveyed had minimum wage violations in the prior week and 76% of those who worked more than 40 hours a week experienced overtime violations. 10  There were exceptionally high rates of wage theft in low-wage service industries, retail, service in private households, and residential construction. 11  On average, workers in these industries were robbed of 15% of their earnings. 12   The total loss in wages amounted to $56.4 million every week in these three cities alone. 13  Wage theft produces an underclass of workers whose labor is exploited, and what little wealth these workers have earned is jeopardized. It is time workers and their advocates re-assert a fundamental workplace right—the right to be paid.

Grave Impact on Communities

Wage theft has grave ripple effects on workers, families, communities, and economies. When workers are robbed of their wages, their families struggle in poverty. When working families cannot pay for their basic needs, it weakens local economies and economic recovery. When scofflaw employers siphon off wages, law-abiding employers cannot compete, creating a race to the bottom—more low-wage jobs and ever-worsening labor market standards. When masses of workers are underpaid, payroll tax revenues for government programs are lost to unscrupulous employers.

While no one is immune to wage theft, foreign-born workers, women, and people of color fall victim to wage theft at disproportionate rates. Women are significantly more likely than men to experience wage theft. 14  Foreign-born workers are two times more likely to experience wage theft than American-born workers. 15 Latinos fall victim to wage theft at a rate four times that of their white counterparts.  African-Americans suffer wage theft at a rate triple that of white workers, Asians double. 16 For low-wage immigrant workers, who live by working paycheck to paycheck, not being paid can result in hunger and homelessness.  Language barriers, fear of deportation, workplace raids, use of employment verification systems, denial of compensation for over-time and workplace injuries, criminalization of undocumented workers, and trafficking all drive immigrant workers further into the underground economy and into more exploitative conditions.

Lack of Oversight, Advocacy, and Resources

Both locally and nationally, government agency enforcement of wage and hour laws suffer from inadequate and declining resources, failure to use existing legal tools to enforce compliance, failure to proactively target high-violation industries, and ineffective complaint-driven strategies. A U.S. Government Accountability Office investigation revealed that in the face of an increasing numbers of covered workplaces and employees from 1997 to 2007, the number of enforcement actions by the Wage and Hour Division (WHD) of the U.S. Department of Labor decreased by more than one third from about 47,000 to 30,000. 17 The number of WHD investigators decreased by 20% during the same period. 18 Moreover, the number of WHD-initiated enforcement actions declined by 45%. 19   In spite of available data demonstrating that low-wage workers are the most vulnerable to wage and hour violations, WHD failed to implement evidence-based enforcement to effectively target low-wage industries. 20 

Private litigation is hampered by the small size of individual claims for workers in low-wage industries, making suits unattractive to lawyers. With only 6.9% 21 of private sector employees unionized, the challenges of increasing monitoring in the workplace in the short term are significant. Further, while there are limited legal services available for farm workers in Western New York, there are almost no legal services targeted to meet the wage claim needs of low-wage, urban and suburban workers. Workers in these industries regularly fall victim to wage theft—temporary workers, domestic, home health care, construction, janitorial, car wash, hotel, restaurant, retail, grocery, factory, manufacturing, and warehouse workers—and are left without access to legal services.

Forging a Path to Wage Justice

Wage theft not only robs low-wage workers of their already-inadequate earnings, imperiling their ability to support their families, but further robs the communities and local economies to which they belong. To fight this compound injustice, Empire Justice Center launched the Wage Justice Project to empower low-wage and immigrant workers to eradicate wage theft using a multi-pronged approach to systemic legal advocacy: grassroots organizing & community education, direct representation, and bottom-up policy reform.

The goal of the first year of the project is to provide direct representation, community education, and empowerment through the establishment of a wage claim clinic with the long term goal of incubating an independent grassroots-led worker collective.  The wage claim clinic will use a law and organizing model to cultivate worker participation in all aspects of the wage claim process, linking the provision of legal services with participation in organizing. Workers will be empowered to exercise their rights and become their own advocates, rather than fostering dependence on legal expertise.  The clinic will conduct trainings using popular education curricula to educate workers about their rights. Direct action campaigns will be launched to expose abusive employers, collect wages due, nurture a collective consciousness amongst workers, and develop a sustainable collective of workers ready to act for one another.  Workers will be encouraged to bring in co-workers with wage claims to facilitate outreach, peer education, and workplace organizing.  The clinic will evaluate individual claims and the appropriateness of direct action and/or legal advocacy to re-claim back wages. Direct action escalation campaigns may entail sending demand letters, utilizing media, distributing flyers, and picketing to put public pressure on an employer to negotiate a payment agreement.  Legal advocacy will include legal advice and referral, filing claims with the state or federal Department of Labor, and direct representation in wage cases.

The second year of the project will focus on bottom-up systems change through impact litigation, policy and legislative advocacy, and possibly the development of worker cooperatives. Litigation will be used not only to remedy one instance of wage theft, but also as a platform to educate the community about wage theft, generating media coverage and community activism around this growing epidemic. Litigation will also be used as a tool to educate low-wage workers about how the legal system functions and the costs and benefits of using litigation as a tactic. Impact litigation will be explored to obtain the broadest interpretation of wage and hour law to benefit the largest number of low-wage workers.

The clinic will allow for information gathering about the phenomenon of wage theft and gaps in the law. This will provide foundational evidence to identify bottom-up policy changes, draft model legislation, and lobby for legal reform in state and local laws and administrative agencies.  Legal reform initiatives to fight wage theft may include: wage theft prevention, stronger enforcement mechanisms, protections for immigrant workers, collections strategies, and living wage campaigns.

In the long-term, the clinic will also aim to identify workers who want to develop worker-owned cooperatives, connect them with micro lending institutions, financial and business literacy training, and refer them to lawyers to provide transactional legal assistance Cooperatives help workers fight wage theft by gaining democratic control over their working conditions, wages, and terms of employment, and can be a useful organizing model and job creation strategy for low-wage workers.. By eliminating the power imbalance inherent in the employer-employee relationship, worker-owned cooperatives allow workers to leverage their collective bargaining power, develop vocational and business skills, enhance job security, and become worker-owners of a business through collective governance.

The movement to fight wage theft is growing and blazing a trail of successes nation-wide.  The National Employment Law Project recently reported on community groups’ critical successes in legislative reform at the state and local levels in their Legislative Round-Up. 22  The New York Wage Theft Prevention Act increases damages to workers, enhances anti-retaliation protections, requires written pay notices to workers, and allows the Department of Labor to require wage bonds to deter abuse. 23  New York’s Domestic Worker Bill of Rights brings domestic workers, a workforce historically segregated by gender and race, within the range of protections offered to other workers including a right to overtime, a day of rest, and three days of paid leave annually. 24 At the local level, community groups in San Francisco, CA, Seattle, WA, Fayetteville, AK, and Miami-Dade County, FL successfully passed local wage theft ordinances which include provisions ranging from business license revocation, to triple damages for unpaid wage claims, and protection from retaliation based on immigration status. 25

Empire Justice is determined to join the growing movement of workers and community groups around the country who have coalesced around anti-wage theft work. Led by workers centers and jointly convened by labor unions, faith groups, and grassroots organizations, these coalitions are developing a wide range of organizing, legal, and policy strategies to eradicate wage theft. Wage theft is a grave social, racial, and economic justice issue facing impoverished workers in Western New York. The Empire Justice Center’s establishment of the Wage Justice Project is a critical first step in moving this region’s economy from wage theft to wage justice.

1.  Angello v. Labor Ready, Inc., 7 N.Y.3d 579, 859 N.E.2d 480 (2006).
2.  Id.
3.  Id.
4.  New York State Department of Labor, Labor Department Recovers $28,000 in Unlawful Wage Underpayments from Two Ithaca Restaurants (2009), available at http://www.labor.ny.gov/pressreleases/2009/Jan21_2009.htm.
5.  Id.
6.  New York State Department of Labor, Targeted Labor Department Investigation finds Ithaca Restaurant Workers Victimized by Wage Theft (2009), available at http://www.labor.state.ny.us/pressreleases/2009/December10_2009.htm.
7.  New York Overtime Pay Lawsuit: Home Health Care Workers File Class-Action Lawsuit for Unpaid Wages, NEW YORK EMPLOYMENT LAWYER BLOG, http://www.new-york-employment-lawyer-blog.com/2010/04/new-york-overtime-lawsuit-home.html (last visited Oct 27, 2011).
8.  Id.
9.  NATIONAL EMPLOYMENT LAW PROJECT, BROKEN LAWS AND UNPROTECTED WORKERS: VIOLATIONS OF EMPLOYMENT AND LABOR LAWS IN AMERICA’S CITIES (2009), available at http://nelp.3cdn.net/59719b5a36109ab7d8_5xm6bc9ap.pdf.
10.  Id. at 2.
11.  Id. at 4.
12.  Id. at 5.
13.  Id. at 6.
14.  Id. at 5.
15.  Id. at 5.
16.  Id. at 5.
17.  U.S. GOVERNMENT ACCOUNTABILITY OFFICE, FAIR LABOR STANDARDS ACT: BETTER USE OF AVAILABLE RESOURCES AND CONSISTENT REPORTING COULD IMPROVE COMPLIANCE 2, 5 (2008), available at http://www.gao.gov/new.items/d08962t.pdf.
18.  Id. at 6.
19.  Id. at 9.
20.  Id. at 13.
21.  This reflects employment figures reported for 2010.  United States Department of Labor Bureau of Labor Statistics, Economic News Release January 21, 2011 [Press release]. Referenced from http://www.bls.gov/news.release/union2.nr0.htm.
22.  National Employment Law Project, Winning Wage Justice: Round-Up of Recent State and Local Activity to Combat Wage Theft (2011), available at http://www.nelp.org/page/-/Justice/2011/WinningWageJusticeStateandLocalLegislativeRoundUp.pdf?nocdn=1.
23.  Dellinger, Peter, New Protections for Paychecks: The Wage Theft Prevention Act. Empire Justice Center (March 17, 2011), available at http://www.empirejustice.org/issue-areas/employment/laws/new-protections-for.html.
24.  Villena, Daniel, “New York Recognizes the Household as a Workplace.” Empire Justice Center Legal Services Journal - Fall 2010 Issue. Referenced from http://www.empirejustice.org/issue-areas/employment/laws/new-york-recognizes-the.html.
25.  National Employment Law Project, supra note 22.