Wage Theft Costs American Workers Billions Each Year. Here’s How to Know if You’re a Victim

“Wage theft,” a term for when money that's rightfully owed to workers gets withheld by their employers, has recently become a topic of renewed interest.

In the wake of the protests following George Floyd’s killing, some experts (including former Secretary of Labor, Robert Reich) were quick to point out that the cost of damages incurred pales in comparison to the amount of money stolen from employees each year.

Wage theft is a crime that costs Americans billions of dollars annually, yet it’s rarely prosecuted, and the penalty for those found guilty is significantly less burdensome than most theft violations (the maximum penalty for employers who are found guilty of wage theft is only $1,000 for each violation, according to the Department of Labor).

A 2017 study from the Economic Policy Institute (EPI) found that 2.4 million employees across the ten largest U.S. states lost $8 billion annually to just one form of wage theft — employers paying less than the minimum wage. In states with the most severe cases like Pennsylvania and Texas, researchers found that the average victim lost 30% of their annual salary to wage theft.

If you assume wage theft patterns in the other 40 states are similar—and take into account that the national minimum wage has gone up by about a dollar since 2017—workers around the country are “losing about 17 billion dollars a year just to minimum wage violations,” says David Cooper, a senior economic analyst at EPI. (In comparison, shoplifting accounts for $14.7 billion in annual losses, according to figures from the liberal think tank, Demos.)

While there is a legally mandated national minimum wage ($7.25/hour) some protections meant to enforce the wage floor exempt positions like tipped employees, farm workers, and commercial fishery and cannery employees. This leaves these groups, which are often dominated by immigrants, more vulnerable to wage theft.

Minimum wage violations aren’t the only way that employers steal from their employees. Any scenario where you find yourself working without compensation, like bussing tables after you’ve clocked out, having deductions taken out of your paycheck to supplement costs like pre-paid lunch without your consent, or are misclassified as an independent contractor or subcontractor instead of a full-time employee is illegal.

That last one can be an especially sticky situation.

According to the IRS, you can only be considered an independent contractor if you control what and how work is done (i.e. a plumber who is contracted to install plumbing for a new housing development with their own tools and is reimbursed for any expenses). Companies have been known to try and get around these requirements to avoid paying out employee benefits like health care and worker’s compensation. The rideshare company Uber has famously been in the crosshairs of the employee vs. independent contractor debate because drivers control their hours but don't get reimbursed for fuel or damage repair. As it stands, this debate has landed in favor of the company, since Uber classifies itself as a “digital marketplace,” and its drivers "small business owners" that find customers through the app — though a California law requiring drivers to be considered employees is currently making its way through the courts.

Few people are as aware of wage theft as they are, say, the neighbor who steals their Amazon packages (or “porch pirates”). There’s no “gotcha”-style video compilations of bosses who make their staff work while off the clock in order to save money. And victims usually aren’t middle-class video doorbell obsessives who have the time—and power—to speak up.

“People of color, young workers, and immigrants have less bargaining power, historically speaking,” says Cooper. “Any time a worker doesn’t feel like they can speak up, they are more likely to be victimized.”

So legally, what can you do if you believe you’re not getting paid what you’re owed?

First and foremost, employees should always ensure that their time and compensation is well-documented: Improper—or in many cases, a complete lack of—documentation is one of the biggest problems when it comes to proving that wage theft has occurred.

“Believe it or not, most states don’t require businesses to provide pay stubs,” says Cooper. “The only requirement is that workers get documentation of what their salary will be when they start the job which creates opportunity for exploitation.”

If you feel comfortable, speak to your employer about making sure that your hours, wages, and deductions are accurately recorded. If they refuse, you can (and should!) keep your own independent record of your hours and pay in the event that you have to submit a claim with the Department of Labor.

The second measure to take—and this is important—is to seek out support services to help navigate your options and potentially file a claim.

Instead of forging ahead alone, where you have relatively little bargaining power due to the nature of your position, Cooper suggests reaching out to union leaders, legal aid groups, and state and local agencies that deal with these types of issues.

“An individual’s claim may be small in the eyes of an attorney,” Cooper says. When claims can be bundled together through collective action, there’s a better chance that victims will be able to receive restitution for at least a portion of their lost wages.

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