National Consumers League

If You’re Cheated Out of Wages, You May Be On Your Own


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by Reid Maki, NCL Director of Social Responsibility and Fair Labor Standards

Have you or a friend ever been cheated out of your pay? The most common wage violations in America involve employers who refuse to pay the minimum wage or refuse to pay the overtime wages that workers earn. Often, these violations affect the working poor—the very people who can least afford to lose the wages.

The Wage and Hour Division of the U.S. Department of Labor is supposed to protect American workers who don’t receive their proper pay, but the agency is not doing enough, according to testimony at a House of Representatives Education and Labor Committee hearing I attended on July 15th.

“As a nation, we face a crisis of wage theft,” testified Kim Bobo, the executive director of Interfaith Worker Justice, a national network of 60 local affiliates that engage the religious community in efforts to help workers, especially low-wage workers. According to Bobo, two million U.S. workers aren’t paid the minimum wage, three million are misclassified as independent contractors instead of employees, and millions more are illegally denied overtime pay. “The Wage and Hour division is failing to protect workers from wage theft because of its woefully inadequate enforcement of the federal wage and hour laws,” she complained.

One of the primary reasons for this lack of enforcement: Wage and Hour is grossly understaffed. Less than 750 investigators are available to go out into the field and look into workers’ complaints about being cheated. That translates to one investigator for every 10,000 businesses. Bobo noted that if the ratio of investigators to businesses that existed in 1941 held today, we would have 34,000 investigators.

Two officials from the Government Accountability Office (GAO) testified about Wage and Hour’s performance. Ann-Marie Lasowski, acting director of education, workforce and income security issues, testified that from fiscal year 1997 to 2007, the number of Wage and Hour enforcement actions decreased by more than a third, from approximately 47,000 in 1997 to just under 30,000 in 2007. Lasowski said that Wage and Hour did not allocate resources well. She said the division commissioned studies to help it identify industries where abuses were likely to occur—mostly in low-wage industries —but then failed to allocate extra resources to enforce violations in those industries.

Greg Kutz, GAO’s managing director of forensic audits and special investigations, told the House panel that when researchers looked at 15 Wage and Hour investigations they found frighteningly inadequate performance. Some complaints by workers were rejected simply because employers failed to provide accurate information. In some cases, Wage and Hour investigators could not locate employers even though GAO researchers found the same employers easily. In another case, Wage and Hour closed a complaint because the employer refused to pay back the lost wages that the investigator determined they owed the worker. In another instance, Wage and Hour delayed investigating a case for a year and then told the worker that they were dropping the complaint because the statute of limitations for assessing back wages was close to expiring.

Acting Administrator of the Wage and Hour Division Alexander Passantino denied GAO’s claims and attacked the GAO’s research methodology. Passantino noted that in fiscal year 2007, Wage and Hour collected $220 million in back wages, the highest total ever collected, despite a drop of over 220 investigators—23 percent—over the last seven years.

Democrats on the committee, including Chairman George Miller of California, did not accept his defense of the Department of Labor, suggesting that DOL was failing the American worker. “Although the Department of Labor has the necessary tools to fight wage theft, the GAO investigation suggests that the problem of wage theft is only getting worse because of weaker enforcement,” said Miller.

The National Consumers League is concerned about any system that asks a single federal investigator to enforce labor violations in over 10,000 work places. That’s just asking for failure. We hope the next president will take a step toward correcting this problem by pledging to double the number of investigators in his first term—that’s still not enough to solve the problem, but it’s a start. In the meantime, DOL should take a hard look at the GAO’s recommendations to see if Wage and Hour can do a better job of allocating resources to protect American’s most vulnerable workers.