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

Already battered by long shifts and high infection rates, essential workers struggling through the pandemic face another hazard of hard times: employers who steal their wages.

When a recession hits, U.S. companies are more likely to stiff their lowest-wage workers. These businesses often pay less than the minimum wage, make employees work off the clock, or refuse to pay overtime rates. In the most egregious cases, bosses don’t pay their employees at all.

Companies that hire child care workers, gas station clerks, restaurant servers and security guards are among the businesses most likely to get caught cheating their employees, according to a Center for Public Integrity analysis of minimum wage and overtime violations from the U.S. Department of Labor. In 2019 alone, the agency cited about 8,500 employers – including major corporations – for taking about $287 million from workers.

Companies have little incentive to follow the law. The Labor Department’s Wage and Hour Division, which investigates federal wage-theft complaints, rarely penalizes repeat offenders, according to a review of data from the division. Public Integrity obtained the records through a Freedom of Information Act request covering October 2005 to September 2020.

The agency fined only about 1 in 4 repeat offenders during that period. And it ordered those companies to pay workers cash damages – penalty money in addition to back wages – in just 14% of those cases.

On top of that, the division often lets businesses avoid repaying their employees all the money they’re owed. In all, the agency has let more than 16,000 employers get away with not paying $20.3 million in back wages since 2005, according to Public Integrity’s analysis.

“Some companies are doing a cost-benefit analysis and realize it’s cheaper to violate the law, even if you get caught,” said Jenn Round, a labor standards enforcement fellow at the Center for Innovation in Worker Organization at Rutgers University.

The federal data provides a revealing – though incomplete – look at a practice that pushes America’s lowest-paid workers further into poverty. The data doesn’t include violations of state wage-theft laws or cases where employees sued. And it misses all the workers who don’t file complaints, either because they’re afraid to or are unaware of their rights.

But some economists say wage theft is so pervasive that it’s costing workers at least $15 billion a year – far more than the amount stolen in robberies.

Companies are more prone to cheating employees of color and immigrant workers, according to Daniel Galvin, a political science professor and policy researcher at Northwestern University. His research, based on data from the Census Bureau’s Current Population Survey, shows that immigrants and Latino workers were twice as likely to earn less than the minimum wage from 2009 to 2019 compared with white Americans. Black workers were nearly 50% more likely to get ripped off in comparison.

Galvin reports in his forthcoming book, “Alt-Labor and the New Politics of Workers’ Rights,” that the lowest-paid workers lost roughly $1.67 per hour – about 21% of their income – to wage theft from 2009 to 2019.

A Labor Department official said the agency orders companies to pay damages when appropriate, determined on a case-by-case basis. Fines are usually assessed when a company repeatedly, or willfully, breaks the law. The department tries to resolve cases administratively to avoid taking employers to court.

“The department exercises its prosecutorial discretion in determining whether to litigate specific cases, based upon careful consideration of our priorities, resources, and mission,” Jessica Looman, principal deputy administrator for the agency’s Wage and Hour Division, wrote in a statement.

Yuri Callejas, a 40-year-old single mother, cleaned hotel rooms at a Fairfield Inn & Suites franchise in Pelham, Alabama. Callejas complained to her boss that he was paying her only $9 an hour when she was hired at $10 an hour, according to a lawsuit filed in January 2020 in federal court. Though she said she was working more than 40 hours a week, she wasn’t getting paid overtime, either, according to the complaint.

Her boss refused to change her pay rate, the complaint said, so she quit. Her accounting of how much she was owed: $1,272.

With help from an attorney at Adelante Alabama Worker Center, Callejas sued the owner of the hotel, AUM Pelham LLC. The company denied that Callejas was hired at $10 an hour or that she worked overtime, but it agreed to a settlement. Company owner Rakesh Patel did not respond to requests for comment.

Callejas walked away with $2,500 in back wages and damages. But that didn’t wipe away the memories of her struggle.

“Every time I paid my bills,” she recalled, “I never had enough money.”

Isaac Guazo, an economic justice organizer for Adelante Alabama, said fewer workers have reported wage theft during the pandemic, but that doesn’t mean it’s happening less.

“It’s the opposite, actually,” he said. “Workers will tolerate a lot more abuse right now because it’s so hard to find another job and they need to pay rent.”

Ruth Palacios and Arturo Xelo, a married couple from Mexico, disinfected COVID-19 patient rooms at the Memorial Sloan Kettering Cancer Center in New York City. They worked seven days a week for months, Palacios said, but weren’t paid overtime. At the start of the pandemic, they earned the local minimum wage of $15 an hour, she said, but after a few months, their boss lowered their pay to $12.25, she said.

Palacios, Xelo and two of their former co-workers filed a federal lawsuit against the contractor that hired them, BMS Cat, in January. The company did not respond to requests for comment. In court records, it denied that it paid the cleaners less than the minimum wage or that it owed them overtime pay. The hospital did not respond to requests for comment, either.

“The little guys have to speak up because people – the bosses – are taking advantage of their workers,” Palacios said in a video call from her home in Queens.

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This story is a collaboration between The Associated Press and The Center for Public Integrity, a non-profit investigative newsroom in Washington.

Alexia Fernández Campbell is a senior reporter at Public Integrity. She can be reached at [email protected] Follow her on Twitter at @AlexiaCampbell. Joe Yerardi is a data reporter at Public Integrity. He can be reached at [email protected] Follow him on Twitter at @JoeYerardi.

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