Public Comment

No Police To Arrest Corporate Criminals

Harry Brill
Saturday June 23, 2018 - 12:57:00 PM

Working people in the aggregate lose billions of dollars annually due to wage theft by both big and small business. The money stolen from workers is substantial and so the consequences are often severe. Wage theft increases poverty and makes low wage employees even poorer. Women, African Americans, and Hispanics have been disproportionally impacted. The most common crimes that are committed include paying below the legal minimum wage, violating overtime pay, and requiring hourly workers to perform various unpaid tasks before they clock in and after they clock out. As one researcher commented, "Wage theft is built into the business model of a substantial portion of corporate America." 

Among the corporations that have been guilty of wage theft are Walmart, AT&T, Bank of America, Wells Fargo, JP Morgan, United Parcel Service, FedEx and Allstate. Each of these companies had profits last year of $3 billion or more. Their executives each receive a yearly pay of millions of dollars. So these and many other highly profitable corporations cannot justifiably complain they have to cut corners. Also, wage theft in the restaurant industry is rampant. Nine out of ten employees in fast food establishments claim that they have been victims of wage theft.  

To explain why business is able to violate the law and get away with it requires understanding the complicit role of the various sectors of federal and state governments. Rather than the various branches of government doing what they can to prevent this serious crime from flourishing, they have been exacerbating the problem. In effect, they have been giving business the right of way. 

Because wage theft is widespread, to successfully tackle this issue demands a larger budget for agencies to hire and retain a sufficient number of committed federal and state investigators. But not surprisingly, legislative bodies, bowing to business pressure, have been unwilling to allocate sufficient funds.  

According to a report sponsored by the AFL the working class population increased by seven fold since 1948. Yet the number of investigators in the Department of Labor's Wage and Hour Division have been reduced by 10 percent. At the state level, six states have no investigators to check on minimum wage violations. Twenty-six other states have less than ten investigators. Worse still, only eight states enforce wage theft penalties. Clearly, the lobbying campaigns by business interests, particularly the bribes, which are euphemistically called campaign contributions, have been very persuasive. 

But haven't many corporations been compelled to pay millions in law suit settlements? In fact, several corporations have paid out over a hundred million dollars to settle disputes in lost wages. Understandably, many members of the public are impressed with the size of the payouts. But by taking a closer look we learn that the settlements are actually a raw deal for employees who are victims of wage theft. 

Here is what is actually occurring. When the Department of Labor prevails in a suit against a corporation, it settles for substantially less money than private suits brought collectively by working people. As a result employees recoup only some of the money they lost. The penalties these corporations pay for wage theft are just the cost of doing business. 

The evidence that workers are being short changed is apparent because these settlements encourage rather than discourage business to continue the same practices afterward. Walmart is among the corporations that after paying its penalties is later sued for continuing similar illegal labor practices. In a comprehensives study of the problem of wage theft about 600 other corporations also paid penalties for repeatedly engaging in similar wage theft practices. They wouldn't do so if it wasn't worth it. 

Ideally, rather than the Department of Labor's Wage and Hour division as well as other relevant government bodies negotiating with business about the magnitude and terms of a penalty, they should attempt to mandate a verdict After all, that is what judges do in criminal cases. These verdicts should not only completely cover the amount of money that was stolen plus interest. In addition the corporation should be required to pay a high enough punitive penalty to increase the likelihood that the offense will not be repeated. Also, violations by executives could result in a prison sentence for up to six months. But that provision of the law is never used. 

Since government law suits settle for substantially less than suits brought by workers collectively, many employees have decided to bypass government in favor of private action. But this route is not problem free. These suits can drag on for a long while, and they are also very expensive. The compensation that lawyers receive when winning a case is far and above what working people earn. 

Also, as a result of two important developments, workers are being stripped of their democratic rights to sue collectively. Many employers are requiring newly hired workers to sign forced arbitration agreements as a condition of being hired. This deprives working people of the right to go to court. Second, the U.S. Supreme Court recently decided that employers can prevent employees from filing class action suits. This decision is very worrisome. Without allowing workers to band together in their own interests the high court chose to close a major avenue for challenging the theft of their wages. 

The California Legislature has passed legislation that can get around these handicaps. Relatively speaking California has been more protective on wage issues than most states. The state has rejected the right of employees to force employers to sign arbitration agreements. With regard to the onerous Supreme Court decision, California allows victims to sue in the name of the state rather than workers collective suing. The state even approved a law that requires a business if it loses a case to reimburse their opponent for legal expenses Also, access to the courts in California are much easier than elsewhere. Particularly important California passed a law that permits the state to take possession of the property of an employer until the wages that are owed are paid. 

Although workers could benefit from more protective laws, there are many good laws already on the books that are not enforced. The problem is that working people are short on clout. Wage theft has flourished as labor unions have precipitously declined. Since the mid-fifties union density has dropped from 35 percent to only 6.5 percent of the workforce currently. Without the protections of unions the ability to exploit and cheat workers have increased tremendously. 

Of course, workers can still make important advances. However, nothing less than building a formidable labor movement and, ideally, with the cooperation of government (by electing progressive candidates) can working people be rescued from the nightmare that many are now experiencing.