Pervasive Violations of Wage Laws -- and What States Can Do About It

The good news is that over thirty states and the federal government raised the minimum wage in recent years.  The bad news is that many employers, even most employers in some industries, ignore existing wage and workplace regulations, so the real challenge now is to stop the systematic violation of these laws. 

As one more reminder of this enforcement problem, just last week the Brennan Center for Justice released "Unregulated Work in the Global City," a three-year study of broken labor laws across industries ranging from supermarkets to domestic work to home health care to taxis to manufacturing.  The Brennan Center study, focused on New York City, reflects trends highlighted in other industry studies, including a U.S. Department of Labor (DOL) study of the nursing industry which found in 2000 that 60% of nursing homes routinely violated overtime, minimum wage, or child labor laws, and a 2004 DOL study of the garment industry which found that 54% of contractors in Los Angeles violated the minimum wage law.

As the Brennan Center highlights and as we detailed in a Stateside Dispatch last year, states can take action to end this systematic illegal employer behavior, but the first step is to take this epidemic of criminal activity by employers as seriously as we do other crimes, most of which are less pervasive.

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Systematic Workplace Wage Violations

Our lives are surrounded by work conducted under illegal conditions, from grocery stores paying less than minimum wage to dry cleaners violating health and safety regulations to restaurants that ignore overtime laws as workers are subjected to 70-hour work weeks.  

What is most shocking from the Brennan Center report is the consensus from not only workers and regulators but the employers themselves that lawlessness is the norm in so many economic sectors.  Some interview responses from the report:

• Restaurants:  “At plenty of places there is no such thing as overtime,”? explained a restaurant employer. 
• Retail Workers:  “They work for 10 hours, they get 35 dollars, no lunch breaks, no overtime. The question of it never arises. The moment they talk about it they get fired,”? explained one community group about women retail workers in the organization.
• Day Laborers: “Some of the guys going three months are not getting paid. There tends to be a promise that eventually they will get paid. So they continue to work for free. The thing is the promise is never kept," said a lawyer who works with day laborers.
• Garment Industry: “You see people just die of exhaustion on the machines”? reports a staff member of a local community group.
• Commercial Laundries: "There’s an industry-wide problem about failure to pay the minimum wage," said a staff member of a regulatory agency, "and these workers are almost never paid time and a half. When we ask owners why they’re paying so little, they say, 'That’s what everybody else pays.'"

This pervasive illegal employer behavior has arisen in the context of three decades of economic restructuring of the American labor market to which regulators and legislators have increasingly failed to respond. Bottom-feeding companies have been allowed to dominate whole industries at the expense of law-abiding companies that would pay a decent wage if they were not undermined by illegal competition.

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How States Are Enforcing Wage Laws

To respond to these problems, our Stateside Dispatch last year, Cracking Down on Wage Law Violators, outlined a broad menu of options for states in toughening enforcement. A number of states are making progress in implementing some improved enforcement strategies. 

More Resources for Enforcement:  Most state enforcement divisions are woefully underfunded, but some states are taking new actions to better fund wage enforcement. One of the most obvious places for states to beef up enforcement is making sure public money doesn't fund lawbreakers. Ohio's Attorney General has announced a program to crack down on government contractors violating the state's prevailing wage law. Richard J. Hobbs, executive vice-president of the Association of General Contractors, a construction trade group, applauded the plan since it "keeps your low-rate, less of a quality firm from coming in and underbidding" legitimate honest firms.

As we highlighted a couple of weeks ago, a number of states are putting additional funds into independent legal services agencies, which can assist low-income workers in bringing civil cases when their employment rights are violated. 

Ending Misclassification of Independent Contractors:  States are also increasingly targeting the employer tactic of misclassifying employees as "independent contractors," which excludes workers from minimum wage, prevailing wage, overtime, health and safety, and right to organize protections.  

A February report by Cornell University researchers estimated, for example, that 704,000 of the seven million private-sector workers in New York state were misclassified as independent contractors, costing the state $175 million in unemployment insurance taxes each year and undermining those workers' rights.  In response, recently elected Gov. Elliot Spitzer has vowed to revitalize the state labor department to fight misclassification of workers.  And Colorado this year enacted a law requiring construction sites to make sure all workers, whether officially employees or "independent contractors," are covered by workers' comp insurance. 

Strengthening Freedom to Form Unions:  One clear finding of the Brennan report was that unionized employers obeyed employment laws at a far higher rate than their non-union counterparts, since unions act as on-the-ground enforcers of employment law. 

State legislative chambers across the country have approved resolutions calling for federal labor law reform, but states are also taking action to support worker freedom to form unions in other areas where they have legislative authority.  New York, Oregon, Illinois and Washington State have all in the last two years granted new rights to child care workers to organize unions.  Just this session, New Hampshire and Oregon legislatures have approved bills giving employees the right not to attend employer-sponsored meetings on politics or religion that are unrelated to job duties.

Not Enough:  Still, given the millions of workers suffering from illegal work conditions, states need to take far greater action and devote far more resources to the problem.

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Wage Enforcement and the Immigration Debate

Unfortunately, while we see many advocates of "fighting illegal immigration" claim to be doing so in the name of helping low-income workers, it is remarkable that almost none of them are addressing the pervasive theft of low-income worker wages by employers violating of wage laws.  Although only a minority of those working under illegal work conditions are undocumented immigrants, our nation's systematic lack of enforcement of wage laws has contributed to the dysfunction of our immigration system, while the denial of employment rights to such immigrants has only further undermined wage law enforcement. 

The proposed 2007 federal budget has a grand total of $177 million appropriated to enforce our wage and hour laws, compared to $13 billion in the budget for border enforcement -- that's nearly one hundred times as much spent for border enforcement as for wage enforcement at the federal level, and adding in state funds doesn't change the numbers significantly.

Increasing Immigrant Labor Rights to Undermine Employer Lawbreaking: In fact, cracking down on sweatshops and wage violators would probably be the most effective deterrent to employers recruiting undocumented immigrants, a point the Drum Major Institute makes in its "Principles for an Immigration Policy to Strengthen and Expand the American Middle Class." If all employers have to pay a decent wage, the attraction of hiring undocumented immigrants would diminish tremendously.

As the Brennan Center report argues:

"The best inoculation against workplace violations is workers who know their rights, have full status under the law to assert them, have access to sufficient legal resources, and do not fear exposure or retaliation when bringing claims against their employers."

Along this line, states like California and New York have established clearly that their laws fully protect undocumented immigrants against retaliation when they bring wage claims against employers.  In the words of New York's highest court, this is necessary since weak employment rights for undocumented workers makes "it more financially attractive to hire undocumented aliens [and] would actually increase employment levels of undocumented aliens, not decrease it."

Unfortunately, too many other states are going in the opposite direction. A number of states have focused on punitive measures against immigrant workers themselves, which only drives immigrant workers underground, feeding the expansion of sweatshops as employers know that their undocumented employees won't dare report wage violations to the authorities. Even when states target illegal behavior by employers, they tend to narrowly focus on their hiring of undocumented workers while failing to increase penalties for violating wage laws. Arizona, for example just approved tough punishments on employers hiring undocumented workers, yet its legislature has resisted any strengthening of state wage laws.

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Conclusion

Our states face a crime wave involving millions of victims of wage theft each year, yet the response is completely inadequate to dealing with pervasive employer violations of wage and other workplace laws.  Politically, we see right-wing anti-immigrant campaigns diverting attention away from those wage violations. 

However, we are beginning to see greater attention to these wage law violations -- the Brennan Center report being one example -- and states are beginning to enact new measures to rein in employer violations of wage laws. A lot more needs to happen but it's a start.