Getting serious about wage theft
Over $203 million in wages were stolen by employers from nearly 127,000 workers in New York between 2017 and 2021, according to a report last year by Documented and ProPublica. Of that amount, more than $52 million was stolen from people working in restaurants – the most in any industry. Wage theft was also rampant in health care and construction, where employers stole $28.4 million and $27.6 million, respectively. Most of these workers never received the money they were owed.
New York lawmakers are now advancing proposals to hold more employers accountable. Last week, Senate Labor Chair Jessica Ramos (D) and Assembly members Kenny Burgos (D), Harvey Epstein (D), and Linda Rosenthal (D) introduced three new bills focused on aggressively deterring wage theft. The legislation takes a simple but powerful approach to curbing wage theft: violators would not be able to continue doing business in the state.
The first bill, S8451, would give the State Liquor Authority the power to suspend the liquor licenses of businesses that have racked up wage theft violations exceeding $1,000. The second bill, S8453, would empower the State Tax Department to suspend a business’s “certificate of authority” if it owes more than $1,000 in wage theft violations. The third bill, S8452, would authorize the New York Department of Labor to issue stop-work orders on businesses that owe more than $1,000 in back wages. This approach is already paying dividends in neighboring New Jersey, which issued "stop-work orders that shuttered the doors of 27 Boston Markets" last year until the company paid "more than $630,000 in back wages" to more than 314 workers.
Federal regulators lack both the resources and the authority to effectively deter wage theft. Due to a declining number of investigators at the Department of Labor, the likelihood that an employer will be investigated for wage theft is about 0.5%. In the unlikely event that an employer is found to have stolen wages, its actions are almost always treated as a civil offense, punishable by a penalty of just $2,374. For comparison, in Australia, employers can face fines of up to $630,000 per violation.
States seeking to protect their workers have had to pick up the slack. In September 2023, Governor Kathy Hochul (D) signed a law that made wage theft violations a form of larceny, allowing prosecutors to seek harsher penalties against violators. The risk of being completely shut down would be an even more powerful deterrent for New York employers.
Ending the blame game
Large companies have been able to profit from wage theft by subcontracting aspects of their work, such as janitorial services, at favorable rates. The subcontractors then exploit the workers by stealing some or all of their wages. This allows smaller subcontractors to "close up shop, declare bankruptcy or change names when accused of wage theft." Meanwhile, "building owners or other companies that hired them escape liability.”
States like California are seeking to end this exploitative practice.
A 2018 citation by the California Department of Industrial Relations stated that the Labor Commissioner’s Office found that between 2014 and 2017, 559 janitorial workers working for subcontractors at eight locations of The Cheesecake Factory “logg[ed] up to 10 hours of unpaid overtime each week.” The janitors “began their shifts around midnight and worked until morning without proper meal or rest break periods,” and “were not released” until “kitchen managers conducted walkthroughs to review their work,” which often resulted in additional duties to be performed before leaving. The Cheesecake Factory had hired Americlean Janitorial Services for cleaning services, who then subcontracted the work to a company called Magic Touch.
The original citation stated that workers were due “$3.94 million in minimum wages, overtime, liquidated damages, waiting time penalties and meal and rest period premiums,” but the case was ultimately settled for $1 million. California has contacted 60 former employees impacted by the case, but is still looking for around 500 former employees that may be eligible.
The settlement will be split between the three companies, with The Cheesecake Factory paying $750,000, Americlean paying $200,000, and Magic Touch paying $50,000, according to KQED. The Cheesecake Factory has also agreed to vet future janitorial services contractors in California for a history of wage theft and require its janitorial contractors in California to teach their staff about labor laws in both English and Spanish.
Legislators in Colorado are also seeking to combat wage theft by holding employers responsible for subcontractors in the construction industry. HB 1008, which was introduced on January 10, would specify that a general contractor and its subcontractor are both liable for an employee’s wages. Under the legislation, if a subcontractor does not pay its employee’s wages, the general contractor would be responsible for payment.
The legislation, which is scheduled to be considered in the Business Affairs and Labor Committee on Thursday, would apply to 180,000 construction workers in Colorado. In a press conference, Colorado House Majority Leader Monica Duran (D), one of the sponsors of the bill, referenced a report by the Colorado Fiscal Institute that estimated that workers in Colorado “suffered $728 million in wage theft annually.”
The legislation mirrors a law passed last year by the Denver City Council that applies across all industries. Duran said that her bill would focus on the construction industry “as a way to test a new initiative that she believes will spread to other sectors in time.” Members of the Denver City Council at the press conference stated that the legislation “nearly doubled [the Denver Auditor’s Office] annual recovery of unpaid wages — from $1.1 million to $2 million in the year after the new law passed.”
The Colorado legislation is facing opposition from the Colorado Chamber of Commerce. In a statement, the Colorado Chamber of Commerce claims the bill "incentivizes wage theft by rewarding bad behavior" by “bypassing the subcontractor completely."