When it Comes to Wage Violations There is Plenty of Liability To Go Around | DCR Workforce Blog

When it Comes to Wage Violations There is Plenty of Liability To Go Around

wage lawLast week, Walmart managed to be in the headlines again for labor violations. For the second time in less than six months, Walmart and its subcontractor, Schneider Logistics, are at the center of a lawsuit claiming “wage theft”. Walmart subcontracts the operation of some of its California-based distribution centers to Schneider Logistics. Schneider staffs these facilities with a combination of permanent and temporary workers.

In December 2013, Schneider was required to pay $4.7 million to 568 workers who were forced to waive meal breaks, work overtime without compensation, and sign away their rights in documents written in English, a language not spoken or understood by the workers. The more recent case is a bit different – for the first time a court ruled that Walmart was a co-defendant. In the settlement, Schneider will pay $21 million to 1,800 workers for violations that include for off-the-clock work, unpaid overtime premiums and wages, illegal compensation schemes in which workers were paid a “piece rate” wages below state and federal minimum levels, and unsafe working conditions..

Although Walmart was not required to contribute to the $21 million, the courts did rule that Walmart was aware of the violations and – by virtue of a dozen Walmart managers on site at any given time – had daily control over the workers.   This has come as a timely warning to all those employers who subcontract the job of finding workers to staffing agencies, and then exert pressure on them to keep the costs low; forcing them to cut corners and violate regulations. The argument presented by Walmart and Schneider that the workers were provided by staffing agencies and consequently not their ‘employees’ was struck down by a federal court; setting a very important precedent in future cases.

Why would employers risk the cost of such violations and the infamy which follows in its wake, by choosing to transgress the wage and hour laws? In the Walmart case, a spokesperson claimed that eighteen months ago the company established policies and procedures to ensure that all workers at Walmart facilities are treated fairly and legally. Their current situation underscores the importance of continually verifying that these policies and procedures are achieving the desired result. . Ultimately, an employer is responsible for the decisions taken with regard to the wages they pay; the overtime they pay (or withhold), the meal breaks they give to workers and the creation of a safe work environment in which employees do not fear retaliation for protesting against working conditions. These days, more states are legislating to expand the definition of “employer” to consider level of control as well as provider of compensation. These legislative actions aim to ensure that companies cannot escape liability by shifting the blame to the staffing agency which ‘hired’ these workers out.

Wage Theft:

Described as a crime wave everyone avoids talking about, wage theft is any act which deprives workers of legally mandated wages. It could happen in any number of ways, including (but not limited to):

  • Making a worker log out and return to work, off the clock.
  • Forcing personnel to work through meal and rest breaks, or keep the workers on the job waiting for relief –but pay only the regular wages.
  • Paying less than minimum wages
  • Denying full pay through misclassification of exempt/non-exempt status.
  • Paying late or retaining tips provided to workers.
  • Documenting payrolls improperly or deducting pay for work-required transportation, uniforms, tools, damages or losses.
  • Paying “piece work” rates that fall below minimum wage requirements.
  • Exploiting the workers’ need for a job or lack of legal status in the country and their fear of deportation – by threatening to suspend or fire them if they complain.

According to estimates, wage theft is estimated at a whopping $19 billion per year. Almost everyone has been a victim of wage theft at one time or the other, starting with baby sitters – who are paid a fixed amount even though the session extends beyond the agreed upon time – to workers who stay late to meet deadlines on projects, without any mention of overtime pay.

Regulatory Fix:

To contain this problem and eliminate it, states like California, Illinois, and New York are legislating to tighten wage theft controls. They are also asking workers to directly lodge their complaints on a website provided specifically for that purpose.

Some fixes proposed by the different legislations include:

  • Complaints can be lodged without employing any attorney.
  • While complaints cannot be lodged anonymously, the legal status of the person is not considered.
  • Evidence of employment may be presented using emails, text messages, job invoices, ledgers or even pictures.
  • The worker does not need to speak or understand English to file a complaint. The website offers other languages also, on an optional basis. Even at a legal hearing, translation services are available for people who do not speak English.
  • Erring employers will be made to pay the actual administrative processing and legal costs and also pay the worker all back wages owed as well as double (or, treble) those wages as damages.

In cases where temporary workers are provided through staffing agencies, it is the joint responsibility of the supplier agency, the client, and any involved intermediaries to ensure complete compliance with all regulations regarding wages and work conditions. To stay clear of these liabilities, all parties will need to keep accurate time records for all workers. This is necessary even for exempt employees, when there is a possibility that the exempt status could come into question and be revoked. It is equally important to establish, audit and enforce strict policies for the treatment of all workers.

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.