What Is Wage Theft & Why Is It Important?
Wage theft occurs when an employer fails to provide the full compensation or benefits owed to an employee as guaranteed by either contract or law. In other words, it is when an employer doesn’t pay a worker some or all of what they are due.
Wage theft comes in numerous forms (like failure to pay overtime rates or asking an employee to skip legally mandated breaks) and is surprisingly common in the United States. It affects workers across all income levels, but it is most commonly associated with lower-income positions and the service industry.
Some types of wage theft are easier to identify than others, but the vast majority of unpaid wages go unreported and thus unrecovered. The Economic Policy Institute estimated that around $3 billion worth of stolen wages were recovered between 2017 and 2020 and that this sum represented just a small fraction of the wage theft committed in the U.S. during that period.
The sheer magnitude of wage theft in the U.S. makes it an important topic, but the fact that the phenomenon receives so little legal and media attention compared to less common types of theft—like burglary, armed robbery, shoplifting, and auto theft—underscores the need for additional resources and attention devoted to reducing its prevalence.
How Common Is Wage Theft?
Wage theft is by far the most common type of theft in the United States. Overall, it is estimated that it accounts for over three times as much economic loss annually as all other types of theft (bank robberies, shoplifting, credit card fraud, etc.) combined.
Because most wage theft goes unreported, and because many American workers are paid “under the table,” the phenomenon is difficult to quantify, but according to a 2014 release from the Economic Policy Institute, it could be costing American workers up to $50 billion annually. In California alone, wage theft costs workers around $2 billion per year, according to a 2017 report by the same institute.
What Are the Different Types of Wage Theft?
Some of the most commonly reported types of wage theft include the following:
- Paying less than minimum wage
- Not paying for all time worked
- Not paying overtime wages
- Misclassifying non-exempt employees as exempt
- Not following through on promised bonuses or vacations
- Not reimbursing business expenses
- Making unauthorized pay deductions
- Not paying interns who are entitled to pay under the FLSA
- Misclassifying employees as independent contractors
- Not paying final wages
- Withholding tips
- Not granting required breaks
- Refusing pay for work done during unpaid breaks
What Industries Are Most Affected by Wage Theft?
According to Curran Law, a Missouri-based legal firm that specializes in personal injury, wrongful death, and workplace law, three prominent industries with high rates of wage theft are restaurants and hospitality, construction, and farming and agriculture.
2021 data from the California Department of Industrial Relations broke the nearly 17,000 wage theft claims filed in California that year into the following categories:
- Healthcare and social assistance: 12.9%
- Retail and gas stations: 11.3%
- Hotels, bars, & restaurants: 10.1%
- Office support, waste management, & janitorial: 9.9%
- Legal, scientific, & technical: 9.5%
- Transportation & warehousing: 7.5%
- Manufacturing: 7.1%
- Other services (including hair salons and car washes): 5.2%
- Construction: 4.6%
- Media & publishing: 4.2%
It’s important to remember that this data comes from filed claims, and most wage theft cases go unreported, so these statistics may not accurately represent the degree to which certain industries are affected. Additionally, those for whom English is not a first language and those who work under the table are less likely to file wage theft claims than others due to potential language barriers and legal and logistical concerns.
What Sorts of Workers Are Most Vulnerable to Wage Theft?
According to Raise the Floor Alliance, a Chicago-based non-profit legal clinic and worker-advocacy organization, low-wage workers are the most vulnerable to wage theft. Within that category, foreign-born workers are 1.5 times more likely to experience wage theft than their domestic-born peers, and African-American workers are 27 times more likely to be victims of wage theft than their white peers.
Frequently Asked Questions (FAQ)
Below are answers to some of the most common questions workers have about wage theft in the United States.
Is Wage Theft Illegal?
Wage theft is illegal under the Fair Labor Standards Act of 1938, which established the legal requirement to pay all non-exempt workers a minimum wage and pay at least 1.5 times a worker’s wage for any hours worked beyond 40 in a given week. This law also prohibits the employment of minors in “oppressive child labor.”
Who Is Responsible for Enforcing Wage Theft Laws?
The Wage and Hour Division, an arm of the Department of Labor, is responsible for enforcing the Fair Labor Standards Act, investigating wage theft claims, and recovering stolen wages. According to the DOL, local Wage and Hour Division investigators stationed across the country “conduct investigations and gather data on wages, hours worked and other employment conditions or practices, in order to determine compliance with the law.”
More information about the Wage and Hour Division’s investigation process can be found on the DOL’s website.
What Are the Penalties for Wage Theft?
According to the Department of Labor, employers who knowingly or repeatedly violate the minimum wage or overtime requirements set out by the FLSA can be fined up to $1,000 per individual violation. Those that violate the child labor requirements of the act may be fined up to $10,000 per individual violation.
Violations that are determined to be willful may also result in criminal prosecution, with a second conviction resulting in prison time.
What Can a Worker Do if They Are Victim to Wage Theft?
If an individual believes they or someone else may be the victim of wage theft in one of its many forms, they can contact the Wage and Hour Division of the Department or Labor, either by filing a complaint online or contacting the department by phone at 1-866-487-9243. The Wage and Hour Division has offices scattered across the U.S., and after taking an individual’s report a representative may direct a complainant to a local office to provide further information.
What Major Corporations Steal the Most Wages?
According to a report released jointly in 2018 by GoodJobsFist.org and the Jobs With Justice Education Fund, the 10 American companies that had paid the most in fines as a result of wage theft violations were as follows:
- Walmart
- FedEx
- Bank of America
- Wells Fargo
- JP Morgan Chase
- State Farm Insurance
- AT&T
- United Parcel Service (UPS)
- ABM Industries
- Tenet Healthcare.
It’s important to note that fines paid aren’t necessarily indicative of total violations committed. Again, the vast majority of wage theft violations go unreported, and large corporations with thousands of employees are by far the most visible.
What Is the Wage Theft Prevention Act?
The Wage Theft Prevention Act (WTPA) was passed in 2011 and requires employers to provide all employees with annual written notices that outline their pay rate, pay frequency, overtime pay entitlement, and the terms of their employment. These notices must be provided in English and the employee’s primary language if it is something other than English.
