Protection from Charges of Wage Theft | DCR Workforce Blog

Protection from Charges of Wage Theft

When an organization publishes its annual results everybody is interested in the amount of profit declared; which, in a capitalist economy, is exactly the way it should be; right? Maybe! So, how far does one go to see that the bottom line looks healthy? Can we shrink our wage bills by mis-classifying some of our staff; avoid paying them the stipulated wages and claim wrong exemptions? Just ask Mr. Machiavelli if the ends really justify the means? The smart cookie would say – no, most definitely not if they violate the law and land you in some real trouble!

Recently, the name of Wal-Mart was bandied around in a class action suit in Illinois where one of its outsourced warehouses hired workers through a Temporary Staffing Company; which has allegedly shirked its duty to compensate them in proportion to the number of hours worked. Wal-Mart has to accept responsibility for the actions of the two companies, either for failing to put proper sub-contracting guidelines in place or for neglecting to ensure that they are implemented in letter and in spirit. The fact that many more businesses (McDonald’s, Tyson and Target to name a few) as well as nursing homes, garment factories, farming, poultry, restaurants, state and federal governments are all facing similar legal action is a matter attracting serious concern from the regulatory bodies, and strong interest from the legal fraternity and many others.

Monitoring the compliance with wage-related laws is an extremely difficult if not impossible task. There are various ways and means through which an employer can commit wage theft, especially when the employee is considered incapable of taking a stand and/or seeking legal recourse. Many of the deliberate violators take calculated risks and indulge in violating the law using a risk versus reward approach, which holds good only for the extremely short-sighted. The theft could take many forms as when the worker is paid less than the stipulated amount of (minimum) wages, when the worker is made to work overtime but denied any payment, or when they are not paid at all (unbelievable, but true, as claimed by some of the plaintiffs in the Wal-Mart case!). Many workers are not paid for their breaks and have illegal deductions made to their paychecks.

While it is an open secret that immigrants bear the brunt of this malpractice, it is the middle-income workers who lose the highest amounts in unpaid overtime, when they are wrongly classified of independent contractors when in reality they work as employees. This practice also results in a huge loss to the exchequer in tax dollars. The workers are deprived of their rightful wages as well as health benefits. Many of these violators maintain little or no documentation while choosing to apply exemptions in inappropriate and undeserving cases, creating a nightmarish predicament for an auditor especially as the victims hardly ever voice a protest.

Estimates by The Economic Policy Foundation put the total amount of illegally stolen wages in unpaid overtime at $19 billion in a year and labor law practitioners say the real number must stand even higher! That makes this an evil of enormous proportions, which is bound to attract severe punitive measures to correct the situation. The recent Wage Theft Prevention Act in New York is a clear demonstration of what the future will hold. The rise of social media is a real shot in the arm for the voiceless workers, who have finally found a very public forum to leave feedback upon their employers – without fears of retaliation (which, incidentally, is another violation). Once the regulatory authorities wake up to the possibilities offered by the Net and start putting its contents to good use – these violations will gain visibility in no time.

Organizations, in the meantime, could ensure that their claims of innocence are well documented and can be demonstrated – or face damages, back pay liabilities, penalties, fines and that final nightmare of all, a bad press. The paper trail would require a proper job description and a wage classification analysis to avoid any kind of mis-classification charges as well as charges for claiming wrong exemptions; and a complete record of the compensation structure and actual payments made and the details of how they were worked out! On the other hand, employees must be encouraged to protect themselves by ensuring that they clearly document their work hours using time cards and getting their supervisor to approve them. In case of a wage dispute where the pay check not matching the hours worked, the employee should raise a written complaint with the HR as well as the supervisor.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.