WAGE THEFT – Part 1: A Nationwide Epidemic. What it is and what you can do about it


What is Wage Theft?

While most employers attempt to deal with employees fairly, there remains a tendency among some to pay their workers as little as possible under the law. Over time, cutting small corners to save on payroll has led employers down the rabbit hole of unlawful wage practices. These practices are collectively referred to by the term “Wage Theft.”

Simply put, wage theft is any practice by an employer that violates existing Federal and/or State Labor Laws, and results in the unfair or inadequate compensation of their employees. It can consist of:

withholding or failing to pay wages is wage theft
  1. mis-classification or bad record-keeping, resulting in a failure to compensatefor required overtime;
  2. compensating “tipped” employees with wages that fall below the minimum wage without ensuring that the tips received meet the hourly minimum wage threshold; or
  3. outright theft of wages owed by simply failing to pay workers once the work is done.

Compliance is NOT Optional

The Fair Labor Standards Act (FLSA) and California Labor Codes outline what is and is not permissible with regard to earned wages. Yet, despite of a wave of legislation across the country to combat this epidemic, employees continue to be cheated out of monies earned on the job. To add salt to the wound, victims of wage theft are generally the most vulnerable in the workforce: low-wage earners, women, minorities and the undocumented.

Compliance with existing labor laws on the part of employers is not optional. It is a duty owed the workforce within the community they serve, and it is expected in exchange for being granted the privilege of doing business. It is not a matter of choice.

Employee Abuse

The internet is rife with reports of incidents of employee abuse in the form of inadequate wages or wages withheld altogether.

In the case of Everardo Carrillo v. Schneider Logistics, plaintiff filed a class action on behalf of employees at the loading dock for Wal-Mart (Schneider is a sub-contractor), who were working 12 – 16 hour days, often without a break. Their hourly wages were converted to a “by the box” scheme, amid assurances by the employer that this “deal” would result in a higher net wage for the workers. The result, however, was a drastic cut, taking them all to well below the required minimum wage. The employees in this case were smart enough to seek legal counsel for unpaid wages and overtime. Wal-Mart has been named as a defendant, though they are claiming they had no knowledge that their subcontractor was acting in an unlawful manner.

This kind of activity is happening nationwide on a scale some experts say totals over $19 billion dollars per year in unpaid overtime alone. A survey of over 4,000 workers in Chicago, L.A. and New York found that minimum and overtime violations were rampant, and any attempt to complain or organize was swiftly met with punishment. The survey concluded that: 26 percent of low-wage workers got paid less than the minimum wage; 76 percent of workers toiling over 40 hours were denied overtime; and that individuals lost an average of $2,634 a year due to these and other workplace violations.” [1]

This is only the tip of the iceberg.

Although paying workers below the minimum wage is illegal, the current economy presents the perfect storm for these unfair labor practices to thrive. First, there are far more people looking for work than there are jobs. Second, employers are feeling the crunch of the stagnant economy, and historically wages are the number one expense of running a business. Lastly, and perhaps most significantly, government cutbacks to the agencies designed to protect the worker and oversee the enforcement of these practices have caused them to be functioning at an all-time low.

The above statistics are unacceptable in a country where hard work is supposed to be rewarded with a fair day’s pay. However, an employee in a low-wage position often has little choice but to put up with some form of wage theft. If they complain, they fear they will lose their jobs, or have their hours cut, leaving them with even less money with which to support themselves and their families. When speaking out means your children will almost certainly go hungry, people tend to remain silent. It is this culture of fear that has allowed this blight on the American dream to fester. Hard-working Americans who find themselves victims of employer-generated wage theft, feel they have no voice: most have no union representation, and many are undocumented, all factors which contribute to employers’ taking advantage of them in record numbers.

California AB 469 & AB 263

California Governor Jerry Brown signed into law Assembly Bill 469, also known as The Wage Theft Prevention Act of 2011 (the Act), requiring employers to provide all new nonexempt hires with written notice of specific wage information. It also increases the penalties for nonpayment of wages due, including overtime premiums and minimum wage for all hours worked. Additional legislation was enacted last year, and much of it became law in January 2014.

Among those issues addressed was the minimum wage, which was increased to $9 per hour, effective in July 2014 (AB 10 Alejo); in January 2016 this bill will bring the minimum wage up to $10 per hour.

AB 263 (Hernandez), adds hefty fines for employers who retaliate against workers for reporting wage-theft issues and demanding pay. Employers are prohibited from firing or otherwise retaliating against employees who make written or verbal complaints regarding Unfair Wages Practices.[2] Included as prohibited retaliation is the common tactic of threatening an undocumented worker with unfair immigration-related practices. Similarly, SB 666 (Steinberg) strengthens the position of workers with regard to these practices, including protections from retaliation in situations where they may be witnesses in court or other proceedings, and providing that they do not need to exhaust administrative remedies or procedures to bring a civil action under any Labor Code provision.

But the new legislation barely scratches the surface of what needs to be done. Recent studies continue to highlight the need for reform. Many employees who have spoken out and have successfully taken an employer to court, have found payment of back wages elusive. Judgments awarded them remain unpaid, as violating employers become ever more creative in evading the law and, as a result, the debts owed their employees.

Immigrant Workers Fight Back

From 2008 to 2011, data collected showed that thousands of mainly immigrant workers in California who work as janitors, car wash attendants and in the garment industry, among other fields, took their employers to court. These minimum- and low-wage workers were successful, and were awarded monetary judgments against their employers. But the result? They were never paid. During that time, only 17% of court-ordered claims for back pay and labor law penalties were collected, according to the report by the National Employment Law Project and the UCLA Labor Center. Only about 58% of the monies owed were recovered, as companies against whom these judgments were rendered often vanish, simply going out of business to resurface elsewhere with a new name and a “clean” record.[3]

With long-term unemployment at its highest since the Great Depression and the nation’s workforce collectively stressed out about maintaining whatever source of income they currently have, if any, it is an easy time for employers to take advantage. To say they were making the most of a bad situation would be to grossly understate the current epidemic of violations of wage and labor laws nationwide.

Which brings us to…

What you can do about it?

First, before you become victim of some form of wage theft, know your rights. Read up on the issues. Second, it never hurts to contact your State and Federal representatives and let them know which issues you feel strongly about. Demand stronger laws to protect America’s workers. If enough people make their voices heard, even those politicians who worry about little else will have reason to worry about re-election: a strong motivator in getting legislation enacted.

Lastly, should you, or someone you know, find yourself in a position where wages are owed you that remain unpaid, or should you be aware of an employer who is skirting the law to save a buck at the expense of his employees, contact an experienced employment attorney. There may be remedies available to you, both to stop the practice, and to secure what is owed you.

Coming Soon: PART TWO – Tip Theft & Unlawful Tip-Sharing

Lazear Mack, LLP
Employment Law Attorneys
436 14th Street, Suite 1117
Oakland, CA



[1] “When Your Boss Steals Your Wages: The Invisible Epidemic That’s Sweeping America,” Lynn Stuart Parramore,  AlterNet, April 2013

[2] “Unfair immigration-related practice” is defined as: (1) requesting more or different documents required under 8 U.S.C. § 1324a(b) or a refusal to honor documents tendered pursuant to that section that on their face reasonably appear to be genuine; (2) using the federal E-Verify system to check the employment authorization status of a person at a time or in a manner not required under 8 U.S.C. § 1324a(b), or not authorized under any memorandum of understanding governing the use of the federal E-Verify system; (3) threatening to file or the filing of a false police report; or (4) threatening to contact or contacting immigration authorities. Excluded is any conduct undertaken at the express and specific direction of the federal government.

[3] “Many low-wage workers who won judgments were never paid” Marc Lifsher, LA Times, June 27, 2013

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