Does Your Boss Steal Your Pay?

In the worst economy many Americans can remember, it’s easy to imagine the country divided into two groups: the unhappy jobless and the happy employed.

But it’s far from being that simple.

Certainly the jobless are unhappy, but the employed are under stress, frightened of layoffs and often overworked from doing more than one job. And a surprising number have another problem: a percentage of their pay is being stolen by their employers.

There are places in America where wage theft takes up to 16 percent of the earned income of certain low-paid groups, according to Broken Laws, Unprotected Workers, a report based on a study of wage practices in New York, Los Angeles and Chicago. The study was sponsored by the Center for Urban Economic Development, UIC; the UCLA Institute for Research on Labor and Employment; and the National Employment Law Project. The NELP has estimated that a billion dollars a year is stolen from workers in New York City alone.

The problem is everywhere, and the Valley is not exempt.

Wage theft includes whatever deviates from the full and proper payment of earned wages. It takes many forms, depending on the nature of the work in question. It includes, among other things:

*refusal to pay (most often, refusal to pay the final check for a person terminating employment)

*paying wages that are less that those originally offered

*payment of less than the minimum wage (in Massachusetts, for example, the employer is supposed to make up the difference if a server’s base pay of $2.63 an hour and tips don’t add up to the $8-per-hour minimum wage)

*stealing tips

*improper deductions from the worker’s paycheck

*payment without stubs or other documentation, including (in most states) paying with prepaid bank cards unless the worker is guaranteed at least one no-fee withdrawal during each pay period

*check-splitting by temp agencies to avoid paying overtime to people who work for more than one company during a given week

*unpaid or inadequately paid overtime or off-the-clock work

*misclassification of employees as outside contractors (one of the most profitable gambits for employers)

*failing to pay workers for work done during designated meal breaks.

A dramatic example of misclassification by a large company came to light last year, when FedEx Ground drivers in Illinois won a summary judgment enabling them to mount a suit for misclassification. FedEx said they were independent contractors; the drivers said, among other things, that they had to wear FedEx uniforms, paint their trucks—which they own, not the company—with FedEx’s well-known color and logo, and use the trucks exclusively for FedEx business unless they masked the large logo. The court agreed with their claim, and when similar actions were carried on in courts in other states, Massachusetts Attorney General Martha Coakley won an award of $3 million for the commonwealth from FedEx.

Coakley claimed that the misclassification of workers had cost the state payroll tax revenue and contributions to worker’s compensation and unemployment funds. The claim underscores the fact that wage theft—in this case, misclassification—cheats the wider society as well as the worker by enabling businesses to avoid taxes and other fees.

Misclassification is widespread in the construction industry, where it relieves employers of the responsibility to pay for workers’ compensation. A case of misclassification on a construction project in Springfield gave the Valley one of its most active workers’ rights programs, run by the community organizing group Alliance to Develop Power (formerly the Anti-Displacement Project).

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In Holyoke, where the Alliance to Develop Power improvised office facilities after the recent tornadoes took the roof off its Springfield headquarters, the group pushes forward with its housing, economic and worker advocacy initiatives, including its wage theft project. William Cano, who heads half a dozen ADP programs, directs this one, too. It operates under the umbrella of the agency’s Workers’ Center/Casa Obrera, which opened in 2006 after the ADP, working with Carpenters Local 108 of the New England Council of Carpenters, won a court judgment on behalf of misclassified workers.

The plaintiffs in that case were doing construction work for several companies during a $20 million renovation of the Pynchon Apartments/Edgewater Terrace housing project in Springfield. One employer “was misclassifying workers, paying $16 an hour instead of $24,” Cano told the Advocate. Some workers weren’t paid for overtime. One subcontractor paid two immigrant workers, who were demolishing windows that needed to be replaced, with scrap metal from the windows they removed instead of money. “The sleaziest things I’ve seen came out of that project,” recalls Carpenters Local 108 business manager Jason Garand.

The ADP and the union won $130,000 in back pay for workers at the Pynchon project.

Misclassification is the most common form of wage theft that the ADP deals with, Cano said. (The U.S. Department of Labor estimates that 30 percent of firms misclassify employees.) “The employer hires you as a subcontractor,” he explained, “and the employer doesn’t pay taxes. The employee must pay taxes, but it’s less tax. It hides the real amount of money that the employer makes.”

Sometimes workers only learn that they are misclassified when the need arises for a benefit, such as workers’ comp. Then they find that no workers’ comp is available to them, that no Social Security or Medicare has been withheld for them, and that if the job ends, they will be unable to collect unemployment.They are told that they must pay income tax on themselves as self-employed, but for that they must have an advanced ability to speak and read English, thorough documentation of what they have been paid, and perhaps even the help of accountants. Studies have shown that some 30 percent of the income of misclassified workers goes unreported.

In other lines of work, other forms of wage theft arise. “Our three main sectors are restaurant, factory and farm,” Cano said. “Many people that work on farms are paid under the table. [Their employers] don’t want to give them a check because they don’t want to take the responsibility for them.”

He added that his organization has had complaints from farm workers being paid $2 an hour because their employers are counting the cost of housing them as part of their pay (according to the state Attorney General’s office, no more than $35 a week may be deducted from workers’ checks for housing in Massachusetts).

And it’s not uncommon, Cano added, for farm workers to “work the last two weeks but never get the paycheck.”

Restaurant workers, Cano continued, are often underpaid. “They never get overtime, working off the clock,” he said. “We have members that we know are working 14 hours a day, and if they miss even one day they are fired, because there are 10 people waiting for the job. That happens in Northampton, that happens in Amherst, in those fancy restaurants. That happens in all places.”

Agencies that hire temporary workers to do manual labor may avoid paying overtime, Cano said, and may fire workers who are injured rather than providing continued employment and covering medical expenses.

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At the Alliance to Develop Power, typical clients are restaurant employees and blue-collar workers in basic industries like construction, farming, manufacturing. A Holyoke lawyer whose clients run a wider gamut is Jeffrey Morneau of Connor, Morneau and Olin. Morneau’s specialty is wage and hours disputes; he has represented firefighters, nurses, salespeople, construction workers, administrative assistants, drivers, servers, and, in one of his best-known cases, cable technicians.

Around 2007, Morneau was approached by a man named Brian Benoit who worked as a technician for Tri-Wire Engineering Solutions, a Massachusetts firm, with a branch in Chicopee, that installed telephone, Internet and cable systems. (Currently, Tri-Wire has such high-profile clients as Comcast and Cox Communications.) Benoit and a few of his fellow installers suspected that they weren’t being paid for the number of hours they actually worked, but weren’t sure if their employer was guilty of a legal infraction.

“In my opinion, they were not getting paid in accordance with the law,” Morneau recalled. “The company wasn’t counting all the hours that these technicians were actually working, and they weren’t getting any overtime pay.”

Morneau sued in U.S. District Court in Springfield. The company argued that it was covered under a federal overtime exemption for firms employing drivers of light vehicles; the court disagreed. The case was settled and the workers got $500,000. Over $43,000 that was unclaimed went to Western Massachusetts Jobs With Justice, another organization that advocates for workers’ rights.

Morneau, who said he has helped win roughly $5 million for 5,000 clients since 2008, told the Advocate that wage theft is “rampant throughout the country, throughout the state and throughout the region. A lot of employees are performing extra work at home for which they’re not getting paid. They’re performing a lot of work off the clock, and the employers are aware of it—people preparing reports at home, sending e-mails at home, working on weekends, things that the employer is aware of and the employee is forced to do.”

Asked if wage theft were on the rise because of the sagging economy, Morneau said he believes some employers have actually become better educated about proper wage and hours practices over the last few years. But it’s also true, he said, that hard times put employers “under pressure to get more work out of fewer people.”

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If an employer can cheat a lot of people out of a little money—so little that to the individuals, it doesn’t seem worth fighting for—he can make a fortune, say Morneau and others familiar with wage theft. “Many employers may be shortchanging their workers by only a few dollars a day or a few dollars a week,” Morneau pointed out, “but when you add it up over a period of years and you add it up over a large number of workers, it is not such a small amount.”

The Alliance to Develop Power offers education and advocacy for people who believe they have been victims of wage theft. Says Cano, “We want to be the agency out there to give you the info about what’s going on. Also we want to educate our people, telling them where they can go to file a claim, what are their rights.”

ADP’s Workers’ Center has translators in several languages, though the growing diversity of its hundreds of members sometimes outstrips its linguistic resources. “When I need to talk to the Chinese people I have, I have to coordinate the translation piece,” Cano said “I say, Come, and we will figure it out.”

The group has a legal clinic staffed by a network of attorneys versed in immigration and labor issues. “They work on contingency,” Cano explained, “so we can tell our members, Don’t be afraid to start a claim, because you don’t have to pay any money.”

So far, Cano said, the Center has filed more than 120 cases and collected over $1 million. “We’ve also gotten medical coverage, including medications,” he says, “and reimbursement for disabled workers who were fired.”

Workers in the building trades can also get help from the carpenters’ union, which will assist even people who aren’t members. As Garand said, “If you’re swinging a hammer, you’re important to us.”

The construction industry, which often uses immigrant labor in crews brought to work sites by subcontractors, has a large layer of workers who are easily exploitable, said Mike Rabourn, a researcher for the Carpenters Local 108. Wage theft, he explained, can happen at “any construction [project where they’re bringing in workers who don’t have a lot of protections, they don’t have a grasp of the language, they’re trucked in from out of state. There’s a whole system of moving around immigrant labor. Brokers bring them in from all over the country.

“In many cases they’re in the country illegally or their status is not stable in that community. We’ve got several bilingual organizers who almost exclusively for the last couple of years have been ingratiating themselves into the world of immigrant workers, building trust and helping them get paid in these situations. The threat of legal action will get contractors to pay, but [the workers] don’t know how to start an action.”

Garand pointed out that wage theft not only impoverishes workers but gives unscrupulous employers an unfair advantage over decent ones. “It not only penalizes [good employers],” he said, “it puts them out of business.”

Last year, New York State passed a wage theft law that came into effect this April. The law toughens penalties for wage theft, which is often so lightly punished that employers profit by stealing wages even if they’re caught and have to pay fines. Cano told us that he would “absolutely” like to see a wage theft law in Massachusetts, but that it’s “going to take time.” At the moment, he said, “The state Department of Labor, the Wages and Hours Division, has a strong law, but they don’t have the resources to enforce it.”

Author: Stephanie Kraft

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