Wage theft — the employer oops that’s got workers fired up

Tessara Smith,  PayScale

There is a compensation epidemic taking over companies across the nation. It is called wage theft and your organization should avoid it at all costs. By definition, wage theft is the underpayment for money that has been clearly earned. This could mean paying employees less than minimum wage, refusing to compensate them for the hours they have worked, or neglecting to pay them overtime. You would think that most companies would stray from committing such a petty compensation crime, but wage theft is much more common than you think. It makes sense; the less you pay employees the more your company profits when you crunch the numbers at the end of the day. But is raking in more revenue worth causing your employees to be disgruntled or the massive penalties you might face if they decide to band together and file a lawsuit? 

No. Absolutely not.

If you have stopped at a convenience store, picked up your morning coffee, or taken a stroll down to your local deli to pick up lunch today, chances are you have encountered an employee who has been the victim of wage theft. Back in 2008, a survey conducted by NELP revealed the true nature of minimum wage compensation in New York, Los Angeles, and Chicago. According to their research 60% of workers had been shorted $1 per hour, 30% of tipped workers weren’t paid the legal minimum wage for tipped workers, and only 24% of the respondents who had worked overtime were paid what they were legally owed. This trend has continued in these cities and many others throughout the U.S., and really it’s just plain shady. Get it together corporate America.

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The wage theft problem is prevalent everywhere, but the state of Kentucky is one place were minimum wage workers have it particularly rough when it comes to getting their employers to pay up. Last August, protestors in Kentucky came together to try to put an end to the underhanded wage shortages lower level workers were facing. The shortages were so bad over that past year that the money employees were scammed out of ended up totaling more than the money that was stolen during bank robberies. Basically the honest and hardworking population of Kentucky was making less than the states most dangerous criminals. Huh? Needless to say workers finally got fed up with employer’s lack of empathy and disregard for the law. Even though the Kentucky Labor cabinet collects around $4.5 million is restitution fines annually, this has not even come close to resolving the massive wage theft problem that plagues this state.

It’s not just in Kentucky. Coast to coast employees are becoming fed up with being cheated by their employers. Take the case of Guadalupe Randal for example, a warehouse worker who was clocking 70 hours a week with no overtime pay. He slaved away unloading products and working hard for his employer and yet he did not receive fair compensation for his efforts. He and many other workers like himself are beginning to find it hard to keep quiet about the lag in reward for their dedication and they are stepping up to demand restitution money from the companies that are ripping them off. This is just one of many wage theft suits that are beginning to pour in to court rooms.

At this point you may be thinking, I don’t need to worry about wage theft, my company always pays employees what they are owed. While this may be true, incorrectly compensating workers turns out to be an easy mistake to make. In fact, assuming you are an honest employer, it is possible that you could be messing up on wages without even realizing. Employees are classified as either exempt or non-exempt and non-exempt employees are the ones who need to be paid for every hour they work plus overtime if they exceed 40 hours in a seven day period. It sounds simple, but the line between these two types of workers tends to become blurred; sometimes on purpose and other times by accident. My advice to you would be to do double check your comp program and make sure you are not underpaying employees that fall under the category of non-exempt. If your compensation program is top notch and no mistakes have been made, then kudos to you! Otherwise be sure to recognize any pay discrepancies and fight against them. Your employees will thank you for being on the ball when it comes to correcting compensation mistakes and you will save yourself the trouble of dealing with complaints and legal fines resulting from an honest mistake. 

Learn all you need to know about avoiding mistakes in classifying employees with PayScale’s Employee Classification Primer.



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1 Comment on "Wage theft — the employer oops that’s got workers fired up"

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Angela Greben

I filed wage theft charges against my former employer, the San Jose Museum of Quilts & Textiles. The investigation is still under way. However, the Executive Director recently announced that she will be resigning. Her biggest mistake she took after I addressed the “legal” problems with her is that she failed to contact an attorney. Her own sword struck her career ladder out from under her feet. If she were innocent of the charges she would have no reason to resign.