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U.S. Crackdown on Pay Violations Yields $240.8 Million in Wage Recoveries

U.S. labor investigators recovered $240.8 million in back wages for American workers last year amid an intensified crackdown on pay abuses in low-skill industries.

That newly released total – which reflects the amount of back wages that employers agreed to pay, or were ordered to pay, following government investigations – amounted to $890 per affected worker.

However, a recent report prepared for the Labor Department suggests that the back wage recoveries only scratch the surface of what underpaid workers actually are owed.

The report by Eastern Research Group, issued in December, estimated that in California and New York alone, minimum wage violations in 2011 cost workers at least $32.7 million a week—or about $1.7 billion a year. At least 50,000 families in the two states suffered income losses due to minimum wage violations, and at least 14,800 families were brought below the poverty level, the report found.

Photo of janitor courtesy of iStock

(iStock)

It also estimated that minimum wage violations led to the loss of about $373 million in U.S. and state income taxes and other payroll taxes.

David Weil, an economics professor and labor market expert who took over as administrator of the Labor Department’s Wage and Hour Division last May, said in an interview that his unit is increasingly targeting industries prone to pay violations largely because agency resources “are always going to be limited.”

“We oversee 7.3 million workplaces. We have just a little bit over 1,000 investigators. So our efforts have been for a number of years now to really focus those resources on the industries, the workplaces and the workers where the largest problems lie.”

Judy Conti, a lobbyist for the National Employment Law Project, which advocates for low-wage and unemployed workers, lauded the Wage and Hour Division’s current strategy. She said targeting abusive industries instead of relying heavily on worker complaints is important because many of the most vulnerable workers are afraid to complain.

“Though there are protections against retaliation in federal law, those often take a long time to remedy and enforce,” Conti said. “And low-wage workers whose financial security is so precarious really don’t have the luxury to stand up for what’s right and complain when their legal rights are being abused because they can’t risk losing even the tenuous foothold on the economic ladder that they have.”

Although the back wage recoveries in 2014 were down from $250 million in 2013, federal officials pointed out that the amount is well up from the $172.6 million recovered in 2009, the first year of the Obama administration. Since 2009, recoveries have totaled more than $1.3 billion in back wages for more than 1.5 million workers.

Weil said his division was slowed somewhat in the past fiscal year because of the 16-day government shutdown in October 2013. The 2014 federal fiscal year ran from Oct. 1, 2013 through Sept. 30, 2014.

The division’s figures for concluded cases and registered complaints also were down from 2013, and the number of workers found to be due back wages rose only slightly.

The Wage and Hour Division has taken aim at what has come to be known as wage theft, a catch-all term for payroll abuses that cheat workers of income they are supposedly guaranteed by law. Included are overtime and minimum wage violations, as well as misclassifying workers as independent contractors to dodge wage rules and to avoid paying for such things as social security and workers compensation insurance.

As FairWarning reported last year (stories here, and here), authorities say wage theft is rampant in some low-paid, low-skill industries.

Business advocates counter that the extent of wage theft is exaggerated, and that many alleged violations stem from gray areas in the law, such as whether certain workers can be exempt from overtime or treated as independent contractors.