Skip to content

How companies rip off poor employees — and get away with it

Already harmed by long hours and high illness rates, critical jobs battling the pandemic face a new hazard: bosses who rob their salaries. When a recession occurs, American businesses are most likely to penalise their lowest-wage employees. These establishments often pay less than the minimum wage,


Already harmed by long hours and high illness rates, critical jobs battling the pandemic face a new hazard: bosses who rob their salaries.

When a recession occurs, American businesses are most likely to penalise their lowest-wage employees. These establishments often pay less than the minimum wage, require workers to work off the clock, or fail to pay overtime rates. In the most heinous situations, employers fail to pay their workers at all.

According to a Center for Public Integrity report of minimum wage and overtime breaches from the United States, employers that hire child care assistants, gas station clerks, restaurant servers, and security guards are among the most likely to be found misleading their employees. Labor Department. In 2019, the department cited about 8,500 contractors for stealing about $287 million from employees.

Major American corporations are among the worst offenders. They include Halliburton, G4S Wackenhut, and Circle-K stores, which have taken more than $22 million from their staff since 2005, according to department reports.

Their victims serve on the lower levels of the labour force. People like Danielle Wynne, a $10-an-hour grocery store worker in Florida who claims her employer forced her to work off the clock, and Ruth Palacios, a Mexican janitor who paid less than the minimum wage to clean a New York City hospital during the pandemic.

Companies had no reason to abide by the rules. According to a study of statistics from the Labor Department’s Wage and Hour Division, which reviews federal wage-theft complaints, repeat offenders are seldom penalised. The documents were accessed by Public Integrity by a Freedom of Information Act request spanning October 2005 to September 2020.

During that time, the department only fined about one out of every four repeat offenders. In only 14% of those cases, the court ordered the companies to pay workers cash damages — penalty money in addition to back wages.

Furthermore, the division also allows companies to stop repaying their employers in full. According to Public Integrity’s report, the department has let over 16,000 employers get away with not paying $20.3 million in back salaries since 2005.

“Some employers are conducting a cost-benefit study and know it’s easier to break the rule, even though you get caught,” said Jenn Round, a labour rights compliance fellow at Rutgers University’s Center for Innovation in Worker Organization.

The federal data offers an illuminating – if imperfect – glimpse at a practise that drives America’s lowest-paid jobs back into poverty. The data does not contain violations of state wage-theft regulations or lawsuits filed by workers. It also overlooks all of the employees who do not file charges, either because they are unable to or are ignorant of their rights.

Employers who steal their wages are a hazard of hard times for essential workers struggling through the pandemic. According to a study conducted by the Center for Public Integrity, businesses had no motivation to enforce the legislation.
However, some analysts believe that income fraud is so widespread that it costs employers at least $15 billion a year — much more than the amount taken in robberies.

According to Daniel Galvin, a political science professor and policy analyst at Northwestern University, companies are more likely to defraud employees of colour and foreign jobs. Based on data from the Census Bureau’s Current Population Survey, his study found that immigrants and Latino jobs were twice as likely as white Americans to make less than the minimum wage from 2009 to 2019. In contrast, black jobs were almost 50% more likely to be taken advantage of.

The federal government dismissed racial wage inequalities for most of the Jim Crow period. It wasn’t until the Great Depression that Congress attempted for the first time to establish a national minimum wage and overtime pay for workers. Northern Democrats voted to exempt farm labourers, nannies, and housekeepers from the law’s protections in order to persuade Southern Democrats to opt for the Fair Labor Standards Act of 1938. The majority of those jobs in the South were Black. A huge number of Mexican Americans lived in the West.

In Pelham, Alabama, Yuri Callejas, a 40-year-old single woman, cleaned hotel rooms at a Fairfield Inn & Suites franchise. According to a federal court lawsuit filed in January 2020, Callejas complained to her boss that he was only paying her $9 an hour when she was hired at $10 an hour. Despite the fact that she claimed to work more than 40 hours a week, she was not paid overtime, according to the lawsuit.

According to the lawsuit, her employer declined to change her pay limit, so she resigned. Her tally of what she was owed: $1,272.

Callejas sued the hotel’s owner, AUM Pelham LLC, with the assistance of an attorney from Adelante Alabama Worker Center; the firm disputed that Callejas was working at $10 an hour or that she served overtime, but it agreed to a settlement. Rakesh Patel, the company’s director, did not respond to requests for comment.

Callejas received $2,500 in unpaid pay and penalties. But it didn’t take her struggle away from her.

“I never had enough money to pay my bills,” she remembered.

According to Isaac Guazo, an economic justice activist for Adelante Alabama, less jobs have recorded wage theft since the pandemic, but this does not mean it is less common.

“Actually, it’s the opposite,” he said. “Right now, workers can endure a lot of violence because it is too difficult to find another job and they continue to pay rent.”

Ruth Palacios and Arturo Xelo, a married Mexican couple, disinfected COVID-19 patient rooms at New York’s Memorial Sloan Kettering Cancer Center. They served seven days a week for months, according to Palacios, but were not compensated for overtime. They were paid the local minimum wage of $15 per hour at the onset of the pandemic, she said, but after a few months, their supervisor reduced their wages to $12.25.

“The little guys have to stand up because people — the employers — are taking advantage of their workers,” Palacios said over the phone from her Queens house.

On April 13, Ruth Palacios and Arturo Xelo live at their fruit stand in New York’s Queens borough. Marshall Ritzel/AP Photo
In January, Palacios, Xelo, and two of their former coworkers filed a federal lawsuit against the contractor that hired them, BMS Cat. Requests for comment were not returned by the company. According to court documents, it denied paying the cleaners less than the minimum wage or owing them extra wages. The hospital also did not respond to requests for comment.

Danielle Wynne worked shifts beginning at 4:30 a.m. at a Circle-K gas station in Brevard County, Florida. It began in the early afternoon and finished in the early afternoon. According to a complaint brought in federal court in February 2020 by Wynne, her boss made her work for free both before and after clocking in. When off the clock, she counted cash in the register, brewed coffee, swept the restaurant, laid out condiments, and refilled the lottery machine.

According to the court filing, the unfinished labour totaled around $1,250 over the course of a year. That is roughly three weeks’ pay for someone earning $10 per hour.

According to court documents, Wynne did not complain at the time because she was afraid of her “vindictive” employer.

Circle-K Stores denied the claims of underpayment in legal filings, but the matter was settled for $2,500 in October. However, data from the Labor Department reveal that the organisation routinely withholds pay from its workers with no repercussion.

Circle-K stores were caught underpaying staff 22 times since 2005, most recently in February 2020, according to federal prosecutors. The gross amount is $54,069, which was taken by 120 workers. However, the Labor Department only disciplined the corporation four times and ordered it to pay employee restitution in two cases. In six occasions, the corporation did not pay any of the money accrued to workers, a practise known as back wages. Regardless, the department dismissed those proceedings without further intervention.

Multiple calls for comment were not returned by Circle-K Stores.

According to Public Integrity, Labor Department prosecutors are almost as lenient with other repeat criminals.

According to Labor Department documents, the oilfield services firm Halliburton unlawfully stole $18.7 million from 1,050 workers, but staff inspectors never forced the company to pay financial fines in addition to back salaries. Just three of the eight lawsuits brought against Halliburton resulted in a fine.

Halliburton did not respond to requests for comment on the events. However, a spokesman for the firm told Inside Energy in 2015 that it had misclassified workers as excluded from overtime pay.

“The corporation reclassified the defined vacancies, and Halliburton collaborated diligently and cooperatively with the U.S. Department of Labor to equitably remedy this situation,” wrote Susie McMichael, a Halliburton public relations official.

G4S Wackenhut and its subsidiaries, which provide security services to businesses and courthouses, unlawfully withheld nearly $3.3 million from 1,605 employees. Federal prosecutors never directed the firm to pay employee restitution and instead fined the company in nine of 47 cases, costing less than $41,000. And the fact that G4S Wackenhut ultimately compensated employers in almost all circumstances, it did not pay full back salaries on two occasions, and the Labor Department closed both cases anyway.

According to Sabrina Rios, a business spokeswoman, the majority of the money owing included G4S branches that were managed independently. She went on to say that the lawsuits do not represent the company’s best activities and that some of the proceedings date back to 22 years.

“The corporation collaborated with the DOL to review each case, and sufficient payments of approximately $3.3 (million) were made to the individuals,” she wrote.

According to a Labor Department official, the government demands businesses to pay fines where they are appropriate, which is decided on a case-by-case basis. Fines are normally imposed after a corporation violates the rule routinely or intentionally. To stop dragging employees to arbitration, the government attempts to settle lawsuits administratively.

“The department exercises prosecutorial discretion in deciding whether to litigate individual cases, based on careful analysis of our interests, finances, and mission,” Jessica Looman, principal deputy administrator for the Wage and Hour Division, said in a statement.

Nancy Leppink, former director of the Wage and Hour Division under the Obama administration, stated that the department would not have adequate attorneys to take any contractor to court if they want to pay their employees. Despite hiring 300 new agents during her term, the division only had about 787 to prosecute wage theft laws as of February.

That equates to only one investigator for every 182,000 employees protected by the Fair Labor Standards Act, much less than the one investigator for every 10,000 jobs proposed by the International Labour Organization of the United Nations.

Leppink, who is now the commissioner of the Minnesota Department of Labor and Industry, said that she pushed prosecutors to seek cash restitution for jobs in any potential federal lawsuit. For example, if an employer withholds $1,000 from an employee, the agency will seek that amount of back pay as well as an additional $1,000 in penalties.

“If what you do is earn salaries, why does a business bother complying before (an investigator) comes in?” She said.

Although the number of cases with damages increased during Leppink’s term, it never exceeded 15%, according to the report. According to Leppink, the agency’s decision to claim damages is often determined by the severity of the facts, the importance of providing employees their back pay, and the degree of noncompliance by the employer — and often simply by a lack of personnel resources.

In response to the coronavirus pandemic last year, the Trump administration directed federal investigators to cease seeking worker compensation in most cases. According to Looman, the Biden administration overturned the decision in April.

Lawyers who counsel employees in wage discrimination lawsuits said they often deter clients from making a lawsuit with the Labor Department because they seldom get monetary penalties or see immediate results. According to the agency’s reports, the average case took 108 days to investigate.

During a 2015 hearing in Philadelphia, a Temple University law professor testified before the City Council that bosses withheld jobs from tens of thousands of Philadelphia employees every week. Jennifer Lee, the scholar, was referring to the results of a survey conducted by the university’s Sheller Center for Social Justice.

“This teaches us the wage theft is not an accident,” Lee told city council members. “It’s not a few rotten apples or a few new firms that don’t grasp the law; it’s a deliberate approach by companies to increase their gains on the backs of their employees.”

The hearing aided in the passage of a municipal wage-theft bill, which helps employers to recover their money more easily than if they filed a lawsuit with the state or federal government.

The ordinance, which went into effect in 2016, gives city staff 110 days to investigate and close a wage theft case. It also allows employers three years to make a lawsuit with the county, as opposed to the federal law’s two-year statute of limitations. And the consequences are serious. Companies who loot salaries will have their municipal permits and licences revoked or denied by the city.

Legal scholars and advocacy organisations look to strict municipal wage theft legislation as an important means to circumvent weak regulation at the federal and state levels. In 2013, the city of Chicago enacted such legislation. Minneapolis will follow in 2019.

Many workers’ rights activists, on the other hand, wish to see government legislation, given that the Labor Department protects the greatest number of workers. They want Congress to increase Wage and Hour Division support so that it can double the number of agents, employ more lawyers, and take on more wage theft lawsuits. They still want congress to increase the state statute of limitations from two years to three years.

According to Leppink, Minnesota’s labour regulator, the federal government has the authority to revoke franchise licences and federal contracts from businesses with a history of wage theft.

According to Jennifer Marion, a former policy advisor for the Wage and Hour Division, the Wage and Hour Division will require employers to pay penalties in any practicable situation.

“If you know you’re going to pay twice as much as you owe,” she said, “it changes everything.”