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Wage theft: Not a new concept

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According to many online pundits and journalists, a crime wave is sweeping the nation, but the alleged culprit is unexpected: Employers!

Though most employers are familiar with the Washington Minimum Wage Act (MWA) and the federal Fair Labor Standards Act (FLSA), the state and federal statutes that mandate employers pay employees a minimum wage for work performed, they may be unfamiliar with the term “Wage Theft.”

Wage Theft” is not a new concept, but the moniker is fairly new. Wage theft refers to employers’ alleged violations of wage and hour statutes, like Washington’s MWA and the FLSA.

These statues have been around for decades, but many are re-branding alleged wage and hour violations as “wage theft.” Claims of wage and hour violations, or wage theft, have been rising at alarming rates for the past few years. The Federal Judicial Center reported that in 2013, 7,764 FLSA claims were filed in federal courts, a 10 percent increase from 2012 and a 46 percent increase from 2008. In 2012, the U. S. Department of Labor helped 308,000 workers collect $280 million in back-pay for wage theft violations.

This spring, workers from McDonald’s chains in Michigan, New York, and California filed seven class action lawsuits against the corporate fast food giant (as opposed to the individual franchise), alleging wage theft. The lawsuits claim that McDonald’s is systematically stealing wages by forcing staffers to work off-the-clock, shaving hours off time cards and not paying them for overtime, among other practices. Each of the lawsuits is asking that workers be awarded the claimed unpaid wages, plus compensatory damages and disgorged profits earned as a result of the allegedly unlawful business practices.

Though wage theft claims are largely thought of to be a low-income worker problem like the claims against McDonald’s, a recent case between technology juggernauts Google, Apple, Intel, and Adobe and their software engineers illustrates that all industries and income levels can be affected. In their suit, the software engineers claimed that the listed companies colluded in a non-solicitation scheme that artificially lowered their wages, in effect “stealing” over $3 billion from the engineers in lost wages.

Given the uptick in wage theft claims filed in recent years, some politicians and activists are calling for increased penalties, including criminal sanctions, against employers who violate wage and hour laws.

Wage and hour statutes like the MWA and the FLSA provide employees with a civil remedy for recovering unpaid wages and, in some instances, their attorney’s fees from employers who violate the statutes. The statutes also provide for “liquidated” or “exemplary” damages in the form of double or triple wages and civil fines against employers who willfully violate the law. Both the MWA and the FLSA provide that violations of the statutes are criminal offenses, but, at least presently, employers are rarely prosecuted for such violations.

Recent opinion editorials in The New York Times and the Washington Post, as well as several state Attorney Generals, are lobbying for stiffer penalties against employers, including jail time for wage “thieves.” New York Attorney General Eric Schneiderman has filed felony charges against several employers for wage violations under New York’s new Wage Theft Prevention Act in the past two years.

Other localities are getting involved as well. In 2011, Seattle passed an ordinance making it a gross misdemeanor for employers to illegally withhold wages, punishable by up to 364 days in jail and a $5,000 fine. Though several Seattle workers filed criminal complaints alleging wage theft against their employers in the summer of 2013 citing the 2011 ordinance, the complaints did not result in any prosecutions.

In light of the recent onslaught of wage theft accusations by employees, employers should take a few steps to minimize the risk of having a wage theft claim brought against them.

Implement clear policies and procedures regarding timekeeping and payroll processing designed to avoid wage and hour claims and enforce them. For example, policies prohibiting “off-the-clock” work, requiring authorization for overtime, and requiring employees to accurately record their time can help to insulate employers from wage claims.

Train employees and supervisors regarding wage and hour compliance procedures to ensure that the procedures are enforced.

Enforce “break time” rules consistently. Non-exempt employees who volunteer to work through break time are usually entitled to compensation for the time worked.

Properly classify employees as exempt or non-exempt. Be on the lookout for new administrative rules regarding classification of exempt employees in the next few months, as the new rules are anticipated to raise the weekly salary requirement for exempt employees.

Consider performing a comprehensive wage and hour audit to limit exposure.

Erin McCool is an attorney with the Wenatchee office of Ogden Murphy Wallace, P.L.L.C., practicing in the areas of litigation, employment & labor law, and land use & water.

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