Wage Theft Demands Corporate Culture Shift
Thanks for all the insightful comments this week on wage theft. Everywhere I speak I have folks, like T.A. Frank did, admit that they too were victims of wage theft. Three radio interviewers live on-air said, "Hey, I'm paid as an independent contractor." (Radio interviewers are employees not independent contractors.) During one editorial board meeting, an editor confessed that she thought the newspaper drivers were all paid as independent contractors.
Young people have almost always experienced wage theft. Even students at prestigious colleges tell me about their experiences working off the clock or not getting their last paycheck. One student from Brandeis described how her employer always took a percentage of the wait staff's tips, but if the restaurant had a particularly "good" night, the employer took a higher percentage, claiming that the wait staff didn't need so much money.
Wage theft is clearly the norm in many sectors, such as landscaping, restaurants, nurseries, non-union janitorial services, and residential (non-union) construction. And, as Steve Greenhouse points out, wage theft is perpetrated by large companies as well as small.
As other discussants Liza Featherstone and Dean Baker have advocated, we clearly need more enforcement against wage theft. The worker who steals from the employer is fired and may go to jail. The consumer who shoplifts goes to jail. The employer who steals wages will probably not get caught. In the last decade, if an employer were caught stealing wages, the employer might have to pay back the wages, but probably not all the wages actually owed. Hopefully, the consequences for employers who steal wages will be more significant under the leadership of Secretary of Labor Hilda Solis. I must admit that I share Nathan Newman's optimism about the new team at the Department of Labor. Not only is Hilda Solis terrific, but the team of people nominated for leadership is excellent.
But the purpose of enforcement is deterrence. We've got to help employers take the issue of wage theft seriously, so that they will obey the law without enforcement actions. The Department of Labor will never have enough enforcement staff if all employers are breaking the law.
I met earlier this week with some ethical business leaders at a group called Winning Workplaces. The meeting was part of my ongoing effort to see if we could get the business community to help push business leaders on wage theft. (Thus far I've largely failed in this endeavor.) I'm afraid they thought I was exaggerating the extent of wage theft. From their point of view, I was addressing the problem from a "negative point of view." Although few who know me accuse me of being negative, I suppose its true in this situation. Winning Workplaces recognizes small and medium-sized businesses that treat their workers well (at least according to Winning Workplaces). The organization makes the case that treating workers well creates good companies and can increase the bottom-line. I'm for treating workers well, of course, and am fine to recognize good companies. On the other hand, there does seem to be a culture permeating many companies that suggests that the lowest wage you can get away with is the best wage. And given the pervasiveness of wage theft, we need some huge shifts - not only in wage enforcement but business culture.





















we need some huge shifts - not only in wage enforcement but business culture.
Yep - and changing business culture is most likely to happen if you impose financial pain for misbehavior.
If you combine this with an incentive for the employee to report it (say, a full day's wages per every instance of wage theft?), that would also help foster an environment where employers err on the side of caution rather than risk doubling their labor costs.
The most effective way to banics the practice, of course, is by unionizing huge swathes of the non-management labor force. EFCA will help with this; repealing the right-to-work provisions in Taft-Hartley will maybe help even more.
May 14, 2009 5:16 PM | Reply | Permalink
I think wage theft for hourly workers is pretty cut and dry, even if, as you say, it is not enforced. That's a problem of detection and enforcement.
The same case can be made for non-exempt, salaried workers, who are still supposed to get overtime--although this may be harder to detect.
But what about salaried workers who are exempt? Although, by law, they may not be entitled to overtime, there is a tendency in this country to expect more hours from salaried, exempt workers than the other two types. Is this not a form of wage theft?
I believe this will become increasingly prevalent as more salaried workers are placed in exempt status.
May 14, 2009 5:20 PM | Reply | Permalink
"Corporate Culture Shift" is nothing but pie in the sky.
What wage theft demands is strong unions, and if Obama backs off the EFCA, this game is over, and the bad guys win.
It's actually a little disingenuous to discuss wage theft as if it were an isolated problem.
Wage theft is part of an enormous imbalance in power between employers and employees, and until a decent balance is restored, proposals about "enforcement" are just meaningless blather.
May 14, 2009 5:37 PM | Reply | Permalink
It was a pleasure to meet with Kim yesterday, and I have no doubt that her experience working with some of the most vulnerable workers in the country is shockingly true. I commend her work in drawing attention to a problem that is all more acute in difficult economic times, when workers need the pay that they have earned more than ever. The most fundamental commitment that an employer makes to a worker is to regularly and predictably pay for work done at the agreed upon rate.
At Winning Workplaces we have chosen to create examples of the companies that demonstrate best practices, those organizations that not only pay their workers fairly, but also include benefits, learning opportunities, paid time off and ways to save for retirement. We do so because we believe that we can influence change by creating models that other organizations can learn from and emulate. We also point to research that validates the fact that good workplaces strengthen business. For example, in a 10-year study of 200 Fortune 500 companies regarded as having good work culture, those companies had 118% higher sales growth; 314% higher profit growth; 94% higher profit margins; 128% higher growth in earnings per share; and 116% higher total return on investment.
I believe that there is a place for both the advocate of the worker that is treated unfairly and the examples of companies that treat employees ethically and create opportunities that enrich employees’ lives.
May 14, 2009 5:44 PM | Reply | Permalink
. . . research . . . validates the fact that good workplaces strengthen business.
Except that in most cases of organizations large enough to have a "culture" it isn't the "business" which is responsible for wage theft; it's the mid-level managers.
As long as those managers see wage theft as a means to meet their budgets and thereby, "strengthen" their prospects for advancement, they'll be tempted to engage in it.
May 14, 2009 8:19 PM | Reply | Permalink
True, but given enough fines and lawsuits (and especially enough bad PR), the top executives will eventually put pressure on the mid-level managers to change their ways.
Right now, though, you're absolutely correct: in many of these organizations mid-level managers are judged primarily on their ability to keep expenses low--no questions asked.
May 15, 2009 7:00 AM | Reply | Permalink
Uh, in this case does PR refer to:
- Prison Rape
or
- Public Relations
?
My point being that if we can imprison someone for life in CA, for their 3rd shoplifting offense, we can certainly cast a mid-level manager(or VP or CEO) into general population for a number of months.
It's very clear that the current structure or fines and lawsuits aren't effective.
Deterrence has to have real teeth to work - bearing in mind that under some circumstances you simply cannot have high effectiveness. (Poverty for instance, regardless of the level of deterrence, will still generate a wide variety of crimes. Witness that Saudi Arabia still has thieves, as does Singapore.)
May 15, 2009 1:23 PM | Reply | Permalink
The problem is the attitudes of people and especially business executives and owners. It's and attitude that really has not changed all that much since the feudal past. That workers as such need only be treated as near slaves and should genuflect to their bosses.
C
May 14, 2009 5:48 PM | Reply | Permalink
In fact, one could even call it the "feudal present."
May 15, 2009 7:01 AM | Reply | Permalink
Realisticly if an employer is cheating low wage employees and an employee reports it to an enforcement agency that employee's job situation is in jeopardy. While it may be possible to annonamously report an across the board practice like forced working off the clock, individual acts could only be brought up after an employee gives up and quits. At that point the disgruntled employee defence could muddy the waters and unless there is documentation (unlikely) it would be one person's word against another.
In light of the difficulties presented by the power relationship I agree that only serious penalties for offending employers will make much of a dent in this problem. Even essentially decent employers seem to feel they are generously providing an oportunity for employees and therefore have no qualms about making up their own rules. Rules of compensation need to be uniform, unambiguous and strickly enforced.
May 15, 2009 6:07 AM | Reply | Permalink
I have spent years coordinating delinquency prevention programs, and I have learned that some of the most important factors that prevent youth from doing crime is peer and community influence; bonding with healthy leadership and having an expectation that “one way or another, I am going to make it!”
Those factors seem to also apply to your view about cultural influences about business practices of wage theft.
Actually, laws and punishment do not have much effect upon street crimes because only about 21% of REPORTED crime ever results in any kind of conviction. It’s probably worse in business crime.
I have to study this more, but I have a suspicion that a large portion of business leaders and professionals view their employees as an adversary, not as a partner that will help produce a profit. I have personally seen repeated times when executives and board members do not care if an employee gets sick or even dies just as long as the profit margin is satisfying----whatever amount that may be.
That perspective is so widespread that it has a lock on the minds of not only the executives and professionals, but the general public seems to have accepted this mind-set.
We have a lot to do to turn that community and peer mind-set around.
Bob Spencer
May 15, 2009 6:38 AM | Reply | Permalink
A few dozen high-profile convictions would certainly turn many managers' mindsets around. Especially if htey know that they could advance by dropping a dime on superiors who made unreasonable budget demands.
May 15, 2009 3:31 PM | Reply | Permalink
I work in the fashion industry as a designer.
Two things I have observed:
1. I worked for a woman who routinely had the sewers, cutters, technical staff, who were hourly workers, work overtime for weeks prior to market week.......she did not pay them time and a half. She WOULD NOT pay overtime. Instead, she would give them comp hours following the opening of her collection when things were slow and she had less work for them. She saved money this way. She also was notorious for hiring staff and then just before she'd have to pay for health insurance and be liable for unemployment, she would fire them. I was a salaried worker, so she expected me to be there for at least 12 hours a day, 7 days a week. If I worked until 11 pm and got to work anytime after 8:30 am the next day (official starting time:9 am; unspoken starting time: 8;30 am), I was given the silent treatment. She had such a lack of ethics, but could turn on the charm when necessary so got away w/ a lot. She stole from our vendors too. I would confront her about this. I finally quit. I just couldn't deal w/ her sleazy lack of ethics.
2. Now that we are in a recession, design houses are laying off their staff and "hiring" FREE interns......high numbers of them. They are inexperienced, but they are hungry for experience, so they are willing to do the work for no pay. In the meantime, there are vast numbers of experienced people out there without work because of this. I know of people in both categories (exploited interns and the unemployed).
I am slightly sympathetic to smaller, newer design houses that are struggling to stay in business, but there are many companies that are taking advantage of the bad economy to exploit their staff.
The lack of ethics I've described above is part of the reason I think our industry is tanking. That, and a lack of guts, vision and creativity on the business side of things.
May 15, 2009 3:54 PM | Reply | Permalink
One of the earlier posters mentioned the Walmart wage violation suits. Because of my job, I am intimately familiar with that litigation. In the process of interviewing former and current Walmart employees during discovery in one of those suits, I kept running into several ideas that kept workers from seeking help, even when they knew that they were being cheated.
The first (and in some ways the largest) hurdle was the education level of the employees that were the most vulnerable. Most lacked even high school degrees. This meant that they were more likely to stay in a bad situation, even if they were being cheated, because they knew how hard finding another job could be, and they had no guarantee that even if they found another job the same thing wouldn't happen again. Many simply assumed that working unpaid time was the way of the world; it didn't occur to them to think otherwise because the same thing had happened to them at several consecutive jobs.
Related to the above was the problem of language. The least-educated, minimum-wage workers were often instinctively hostile to the language used in workers' rights litigation. 'Union', 'labor', 'fair wage', 'workers' rights' and other terms were viewed as related to Communism, which none of these people wanted anything to do with. Especially in the deep South (where I live), where unions have historically had a very bad time of it, it was often important to try and find new ways to talk about how their bosses were stealing from them, because the language of the laws and the language of much of the academic work on such topics only alienated the workers it was intended to help.
Also related to the education level of the workers was a pervasive distrust of the legal system in general. Sometimes it was hard to find workers, even workers who'd been cheated for years, that were willing to speak about their experiences to a lawyer or legal staff. There was a feeling that going to the courts was 'more trouble that it was worth', and I remain firmly convinced that businesses rely on this mentality to keep their wrongdoings private. If we are to see a turn-around in the prevalence of wage theft, we need to find a way to make the courts less of an adversary to be mistrusted, and more of an ally to keep cheating corporations in line and honest.
Another problem of our current system is that workers' rights class actions are enormously expensive to litigate. Very few law firms are equipped to shoulder the $3-4 MILLION per suit (and there were 63 suits filed) that cases like the Walmart action cost to bring to trial or settlement. When the civil courts are the primary way of punishing employers who consistently defraud workers (through huge class actions), such fraud will always continue to be profitable, simply because the logistical barriers to bringing these suits are staggering.
I think that tighter scrutiny by law enforcement agencies will help the problem and larger penalties will aid deterrence, but if pervasive change is to be enacted, some of the work will need to be aimed at the workers themselves.
May 16, 2009 4:19 PM | Reply | Permalink
May I be the first to perhaps coin a new "syndrome" Anna?
As I read your descriptions of the employees who were reluctant or even hostile to report abuses, I couldn't help but think of the old "Battered woman's syndrome".
(Looks like they've changed the name)
http://en.wikipedia.org/wiki/Battered_person_syndrome
Perhaps a new one describing your anti-union subjects could be called something like "Exploited worker syndrome."
May 17, 2009 4:00 PM | Reply | Permalink
The headline of wage thefts to me meant over paid overpaid corporate executives and board members who receive an inordinate amount of the a company’s profits. Included should also be pro athletes with 10 or 20 million dollars contracts for playing games and entertainers who do not actually contribute anything beneficial to society.
May 18, 2009 7:55 AM | Reply | Permalink
I used to work in Banquets for a Major Resort hotel in Sonoma Valley, and the entire department was underpaid for overtime gratuity for years.
After I was laid off I went to the California Labor Commissioner's office and they tried to convince me I had no case until I cited the relevant law from their own web site. Within 6 weeks the company offered me a settlement, and after two more ex-employees complained the company settled with the entire staff.
Many workers are unclear about their rights and the law, and too many do not keep adequate records of their pay. Be vigilant, though their may not be enough enforcers, the squeaky wheels get the oil so know your rights and do not take no for an answer if you've been underpaid.
Also,in California employers and managers have no claim too employee tips and they may not be included in tip pools even if they are earning tips working a counter. Find out the law in your state. If we really want to move this issue we need to protect ourselves.
May 18, 2009 12:15 PM | Reply | Permalink
I am currently working in a Fast Food Restaurant. My employer, who is the owner-operator, created a policy that if an employee left without giving two weeks notice, their wages on the last check would be reduced to minimum wage. I usually advocate the two week rule, but there are times when that is not an option.
May 27, 2009 8:02 PM | Reply | Permalink