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April 25, 2013
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Editor's note: This article is part of an ongoing AlterNet series, "The Age of Fraud."
Imagine
you’ve just landed a job with a big-time retailer. Your task is to load
and unload boxes from trucks and containers. It’s back-breaking work.
You toil 12 to 16 hours a day, often without a lunch break. Sweat
drenches your clothes in the 90-degree heat, but you keep going: your
kids need their dinner. One day, your supervisor tells you that instead
of being paid an hourly wage, you will now get paid for the number of
containers you load or unload. This will be great for you, your
supervisor says: More money! But you open your next paycheck to find it
shrunken to the point that you are no longer even making minimum wage.
You complain to your supervisor, who promptly sends you home without pay
for the day. If you pipe up again, you’ll be looking for another job.
Everardo
Carrillo says that's just what happened to him and other low-wage
employees who worked at a Southern California warehouse run by a Walmart
contractor. Carrillo and his fellow workers have launched a
multi-class-action lawsuit for massive wage theft (
Everardo Carrillo et al. v. Schneider Logistics)
in a case that’s finally bringing national attention to an invisible
epidemic.
(Walmart, despite its claims that it has no responsibility for
what its contractors do,
has been named a defendant.)
What happened to Carrillo happens every day in America. And it could happen to you.
How big is the problem?
Americans
like to think that a fair day’s work brings a fair day’s pay. Cheating
workers of their wages may seem like a problem of 19th-century
sweatshops. But it’s back and taking a terrible toll. We’re talking
billions of dollars in wages; millions of workers affected each year. A
gigantic heist is being perpetrated against working people: they’re
getting screwed on overtime, denied their tips, shortchanged on
benefits, defrauded on payroll, and handed paychecks that bounce like
rubber balls. A conservative estimate of unpaid overtime alone shows
that it costs workers at least $19 billion per year.
The laws protecting workers are
grossly inadequate,
and wage thieves go unpunished. For giant companies like Walmart,
Citigroup and UPS, getting fined is just the cost of doing business. You
could even say that they're incentivized to cheat because punishment is
so unlikely, and when it happens, so light. The protections we used to
take for granted, like the right to receive at least the minimum wage,
the right to workers’ compensation when hurt on the job, and the right
to advocate for better working conditions, are nothing more than a
quaint memory for many Americans. Activist Kim Bobo, author of
Wage Theft in America,calls it a "national crime wave."
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The
sheer scope of the problem is jaw-dropping, sweeping across key
industries and inflicting massive damage on individuals and society as a
whole. In 2009, the National Employment Law Project (NELP) released a
ground-breaking study, “Broken Laws, Unprotected Workers,” which found
that in America, an honest day’s work is frequently rewarded with theft
and abuse. A survey of over 4,000 workers in Chicago, L.A. and New York
found that minimum and overtime violations were rife, and any attempt to
complain or organize was swiftly met with punishment. Among the
revelations:
- 26 percent of low-wage workers got paid less than the minimum wage.
- 76 percent of workers toiling over 40 hours were denied overtime.
- Workers lose an average of $2,634 a year due to these and other workplace violations.
Who gets cheated?
Women,
minorities, immigrants, and workers at the bottom of the wage scale are
hardest hit, but wage theft is thriving across the employment spectrum.
People
hired for jobs like yard work and domestic services in which the
employer pays cash are denied social insurance like Social Security, and
often what’s paid doesn’t add up to minimum wage. Some employees are
paid for piece work, like the number of shirts produced in a garment
factory, and get cheated when the tally falls below minimum wage (that’s
one of the things that’s alleged to have happened to Carrillo). Another
common form of theft is the “last paycheck” scam in which a worker is
either fired or quits and finds that her final wages are withheld.
Low-wage
tip workers are frequently the victims of theft in which the boss
illegally keeps tips or makes you pay for your uniform or a ride to the
job site. Restaurants are infamous for paying wages below the legal
minimum; some charge a fee to convert credit card tips into cash, while
others simply steal tips outright. When I was in college, I waited
tables at a restaurant where the manager required the waiters to turn
over tips at the end of the day, ostensibly so a certain percentage
could be distributed among the cooks and other staff. I thought my
manager was doing something to create fairness. Actually, he was
stealing tips.
Then there’s the payroll fraud scam. Misclassifying
workers as independent contractors means the business doesn’t pay
overtime, employer contributions to Social Security and Medicare, or
unemployment insurance. Sometimes bosses misclassify by mistake, but
often they do it knowingly. Temporary and seasonal workers are
especially vulnerable. The construction and trucking industries are
notorious offenders, but payroll fraud impacts people like engineers,
financial advisers, adjunct professors, and IT professionals. It doesn’t
matter if you have agreed to call yourself an independent contractor,
you may not be under the law.
Two tests are commonly used
to determine your status: the Department of Labor “economic reality”
test and the IRS “Right to Control Test.” These tests consider questions
like: Do you set your own hours? Can you make a profit or loss
depending on how you do the job? Is the job contracted for a specific
time period? Unfortunately, various federal and state entities have
their own criteria, creating widespread confusion. The independent
contractor issue is one of the fastest growing areas of litigation, with
class actions by independent contractors jumping by 50 percent in 2010.
Congress has introduced bills to deal with this problem, but they tend to die in committee.
You
might think that joining the managerial ranks would protect you from
wage theft. You would be wrong. Some people are given titles as managers
so they can be forced to work overtime without extra pay. Managers
pressured to “improve their numbers” sometimes resort to falsifying
employee records. Others deny breaks or deduct the break from the
workers’ wages. Walmart has engaged in so many of these practices that
researcher Susan Miloser of Washington & Lee Law School refers to
retail wage theft as a result of managerial strain the “Walmart Pinch.”
How did we get here?
The world of work in America has fundamentally changed in the last 30 years, and not for the better.
In
her paper, “Picking Pockets for Profit,” Susan Miloser traces a
struggle for protection that began over a century ago with the public
outcry over brutal workhouses where recent immigrants, women and
children were paid substandard wages. Massachusetts was the first state
to enact minimum wage legislation in 1912. Then came the Great
Depression, and President Franklin Roosevelt responded with New Deal
legislation that included the Fair Labor Standards Act pushed by his
labor secretary, Frances Perkins. One of the key things the Fair Labor
Standard Act did was ensure a minimum wage under the theory that wages
were subject to something economists call “market failure.” The idea is
that you, as a worker, are at a serious disadvantage compared to your
boss when negotiating your wages. So the government has to intervene to
correct this failure of the market and create a more level playing
field.
The act also made provisions regulating payment for
overtime. Employers who violated the law could be sued for back pay and
damages. Roosevelt insisted that businesses that violated fair labor
standards were toxic to the economy: “Goods produced under conditions
that do not meet rudimentary standards of decency should be regarded as
contraband and ought not to be allowed to pollute the channels of
interstate trade," he said. Roosevelt, we may assume, would frown on
shopping at Walmart.
Clearly, the New Deal has somehow transformed
into the Raw Deal. Since the rise of Ronald Reagan, the American
workplace has been morphing from a relatively level playing field into a
theater of exploitation. This process has been aided and abetted by
influential economists known as "free-market fundamentalists," who
dominate the Ivy League and policy circles. They have convinced policy
makers and politicians that a voluntary system magically guided by an
“invisible hand” produces outcomes that are good for most people. In
their view, the economy is a system of equal exchanges between workers
and employers in which everybody who does her part is respected and
comes out ahead. Obviously, they don’t focus their research on labor:
they may talk about unemployment or wages – keeping the former high and
the latter low -- but the conditions workers face are completely off the
radar of these economists. (If you’d like to see how this kind of
thinking plays in the mainstream media, take a gander at a recent post
by Slate’s Matt Yglesias: “
Different Places Have Different Safety Rules and That's OK.”)
Here’s
where we are: the twin evils of high unemployment and economic
inequality have joined forces to turn workers into so many expendable
units in the great capitalist machine. Union-busting, globalization,
outsourcing, downsizing, and recession have turned dignified jobs into
opportunities for employer predation. I have called job insecurity the “
Disease of the 21st Century”
and it has clearly metastasized into a situation in which people are
terrified of doing or saying anything to jeopardize employment, no
matter how egregious the abuse. As long as there aren’t enough jobs,
bosses maintain the upper hand. In the face of public opposition and
recent revelations about the
flaws in research used to support austerity,
deficits are still the focus of economic policy rather than job
creation. All of this conspires to protect crooked employers and exploit
workers, making wage theft a crime without punishment.
What do we do?
The
Department of Labor is supposed to enforce fair labor practices, but
budget cutting at the insistence of Big Business has had the desired
effect. Currently, there are only 1,000 enforcement officers protecting
135 million workers. That would be enough to cover, say, the city of
Chicago. Maybe! You can place a claim through the department, but you
may not get results. Workers are often left to fend for themselves. (One
thing every worker can do is consult the website
CanMyBossDoThat.com to at least get a sense of your rights.)
In
Wage Theft in America,
Kim Bobo outlines a variety of things that communities and activists
are doing to address the crisis, from creating task forces to
identifying agencies that help low-wage workers know when they are being
cheated. There’s been some good news: campaigns to strengthen wage
theft laws in several states, cities and counties are underway. The
state of New York has enacted statewide legislation to protect workers
from wage theft. In Miami-Dade County, a
city-wide ordinance
was established in 2010 which focuses on eliminating the underpayment
or nonpayment of wages and targeting unscrupulous businesses. Chicago’s
newly adopted wage theft ordinance
will strip employers of their business license if they are caught
cheating workers. But the key word is "if." Methods are sneaky and
workers often have no idea that they are being robbed.
Local
direct actions have sometimes been effective in highlighting and shaming
wage thieves. In Seattle, Eric Galanti of the Admiral Pub tried to
withhold the final paycheck of his cook Lucio when he was deported to
Mexico. But Lucio’s family, along with advocacy groups like Casa Latina,
fought back by plastering the city with posters, placing messages on
social media and picketing. Finally,
Galanti gave in. Stories like this are encouraging, but it's hard to imagine that sort of thing working in, say, Mississippi.
Immigration
reform is a key piece of the puzzle -- it will help many low-wage,
undocumented workers from being exploited by wage thieves who use
deportation as the threat. Modernizing record-keeping, imposing criminal
liability on wage thieves, and increasing public awareness of wage
fraud would also help to combat the problem. High unemployment remains
one of the biggest factors in encouraging wage theft, but we're not
making good progress in that area. The sequester is expected to lay off
750,000 Americans this year alone. Instead of helping the problem, our
elected officials are worsening it. Until these issues are addressed,
workers will remain vulnerable to predatory bosses. And that costs
everybody.
Lynn Parramore is an
AlterNet senior editor. She is cofounder of Recessionwire, founding
editor of New Deal 2.0, and author of 'Reading the Sphinx: Ancient Egypt
in Nineteenth-Century Literary Culture.' She received her Ph.d in
English and Cultural Theory from NYU, where she has taught essay writing
and semiotics. She is the Director of AlterNet's New Economic Dialogue
Project. Follow her on Twitter @LynnParramore.
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