Chicago’s Innovative Effort to Stop Wage Theft

cityofbroadshoulders

The city of Chicago this month  became the second, and biggest, city to pass an ordinance addressing the problem of  wage theft.

The Chicago ordinance appears to be an innovative and potentially highly effective initiative to combat a  problem that disproportionately affects low wage workers and undocumented immigrants.

  The ordinance states any licensee that is in the business of debt collection must comply with federal and state wage and hour laws. It states that failure to comply with these laws  can result in the revocation of the company’s business license for at least four years.  The ordinance potentially covers most licensees, since most  companies  engage in debt collection in the ordinary course of business. This includes everything from licensed day care centers to hotels and beauty parlors.

 Last fall, the Broward County Commission in Florida passed an ordinance that allows employees who are owed $60 or more for work done in the county to turn to the county for help.  Before filing the complaint, however, the employee must write a letter to the employer outlining how much is owed. If the paycheck shows up within 15 days, the complaint wouldn’t be filed.

Epidemic

Wage theft is widely considered to be epidemic in the United States.

Aaccording to a report released last year by the Progressive States Network (PSN ) state laws are grossly inadequate to combat  “wage theft” by unscrupulous employers. Some states levy no fines at all for wage theft, according to the report, while most others invoke penalties smaller than a speeding ticket.

 There is, of course,  an overarching  federal law that prohibits wage theft – the Fair Labor Standards Act (FLSA) – but it largely relies upon voluntary compliance.

 The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour and overtime pay at a rate not less than one and one-half times the regular rate of pay is required after 40 hours of work in a workweek.

 The FLSA is technically “enforced” by the Wage and Hour Division of the U.S. Department of Labor (DOL) but, as the PSN report notes, the DOL has only one enforcement agent for every 141,000 workers, down from one per 11,000 workers in 1941.

 The PSN estimates that more than 60% of low-wage workers suffer wage violations each week.  On average, the PSN reports, low-wage workers lose $51 per week to wage theft, or $2,634 per year. For low-wage workers, that amounts to 15% of their annual income, at average earnings of $17,616 per year.

Misclassification of Employees

Rogue employers often evade complying with wage and hour laws by classifying non-exempt employees as exempt under the FLSA and thus not entitled to overtime.

I once worked for an organizaton that misclassified administrative assistants  as exempt, requiring them to work long periods of uncompensated overtime at conferences and events. After years of this, one employee filed an anonymous complaint with the DOL. The organization was forced to pay affected employees who were  then on the payroll minimal amounts to supposedly compensate them for their loss.  This was an insignificant penalty for the employer,  considering the years of abuse that had occurred and the many uncompensated victims who were no longer working at the company.

To qualify for an  exemption from the FLSA, an employee must be paid on a salary basis at a rate not less than $455 per week, must perform work directly related to the  management or business operation of the employer, and must be responsible for exercising independent judgment or discretion with respect to matters of significance.

 Another way that employers circumvent the FLSA is to classify employees as independent contractors. This is not inherently illegal but it can be if the purpose of the independent contractor classification  is to deny the employee access to benefits and protections – such as family and medical leave, overtime compensation, minimum wage pay and unemployment compensation.

 In 2011, the DOL launched a “Misclassification Initiative” to address the problem with respect to independent contractors. Thus far, the states of Iowa, California, Colorado, Connecticut, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington have signed memorandums of agreement to join the DOL initiative. The agreements will enable the DOL to share information and coordinate enforcement efforts with the participating states.

 Misclassification creates economic pressure for law-abiding business owners, who find it difficult to compete with those who are skirting the law. Employee misclassification also generates substantial losses for state Unemployment Insurance and workers’ compensation funds.

 Alderman Ameya Pawar spearheaded the Chicago effort to pass the wage theft ordinance is quoted as stating: “I sponsored this ordinance because it’s something that’s deeply personal to me.  I’ve worked with refugees in the past and I’ve seen how vulnerable populations have become victims to wage theft.”

Getting Fired

FIRED!

The capstone of a campaign  of workplace abuse and bullying is often termination from the job.

 And that reality  – or even the fear of being fired  – can be a devastating blow to a worker who has endured months of  abuse that has stripped away his or her sense of mental and physical well-being.

 But today what does it really mean to be fired?

 I know business leaders who were fired  and recovered to achieve impressive new success.

 Sallie Krawcheck, past president of Merrill Lynch, US Trust, Smith Barney, the largest wealth management business in the world, suggests that if you don’t get fired at least once, maybe you’re not trying hard enough?

 She says that as the pace of change in business increases, the chances of having a placid career are receding. And if in this period of rapid change, you’re not making some notable mistakes along the way, you’re certainly not taking enough business and career chances.

 Being fired is not always a reflection of performance.

Research shows that some targets of workplace bullying are dismissed because they are creative, hard-working and well-liked employees who are seen as a threat by a supervisor or co-worker. They may be among the best in their workplace and that is why they are targeted.

 I also know bureaucrats (and I use that term  in the worst sense of the word)  who should be fired but probably never will be, despite their obvious incompetence.  They have managed to insinuate themselves into secure positions, by surrounding themselves with synchophants and/or by avoiding any personal responsibility for anything, except to claim success for others’ work.

Many  employees are fired because  a new supervisor wants to put in his or her own team in place or the worker’s values or vision don’t  comport with that of  the supervisor.

Many workers are fired for illegal reasons –  they are victim of discrimination on the basis of  age, sex, race, religion, etc.  Some are fired because they asked for a legal right – such as the right to be paid overtime under the Fair Labor Standards Act.

 So if you were fired in the past year or expect to be in the year ahead, try to  keep it in perspective. Any employee who was fired can likely think of some things that they could have done better.  Hindsight is 50-50.  Nobody’s perfect.  Etc.   Hopefully, your new and hard-earned  knowledge will help you succeed the next time?

 Ms. Krawcheck also advises:

 I  had a friend tell me shortly after I left “When something like this happens, you think you’re thinking straight, but you’re not. You won’t think straight for at least three months.” If you have the luxury of avoiding any major career decisions that long, the perspective you gain after decompressing can be valuable.

Federal Courts Disregard Longstanding Worker Rights

Workers continue to lose ground in federal courts, where judges are disregarding a ruling by the National Labor Relations Board (NLRB) that says companies cannot require workers to sign away their right to bring class action arbitrations and lawsuits.

 The NLRB’s  administrative decision in January  served as a theoretical  counterpoint to an earlier 5-to-4  decision by the U.S. Supreme Court in AT&T Mobility v. Concepcion.

 The Concepcion case involved alleged false advertising by AT&T and a $30 claim by a California plaintiff, who sought to prosecute the case as  class  arbitration . As the  dissent noted in Concepcion: “What rational lawyer would have signed on to represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claim?”

 The Supreme Court majority held that the Federal Arbitration Act of 1925 preempts state laws that prohibit contracts from disallowing class action lawsuits  – which means that contracts can exclude class action arbitration. 

 The NLRB ruling involved national homebuilder D.R. Horton’s practice, begun in 2006, of forcing all employees to agree as a condition of employment, not to pursue class or collective litigation of claims in any forum –  arbitral or judicial.  In its ruling, the NLRB said it has long held –  “with uniform judicial approval” –  that the National Labor Relations Act “protects employees’ ability to join together to pursue workplace grievances, including through litigation.”  

According to Thompson Reuters’ journalist Nate Raymond,  courts generally are rejecting the NLRB decision, some on the grounds that the  Federal Arbitration Act controls, and others cite the Supreme Court’s Concepcion decision. For example, in recent months:

  •  U.S. District Judge Gene Pratter in Philadelphia agreed with Tenet Healthcare and confirmed an arbitrator’s finding that a nurse could not bring classwide wage-and-hour claims in arbitration. The nurse’s lawyer had cited D.R. Horton in arguing that the arbitrator had erred.
  •  U.S. District Judge D.P. Marhsall in Little Rock, Arkansas, on Aug. 1, 2012 concluded that the FAA trumped the NLRA. and compelled individual arbitration in a putative class action of guards suing Securitas Services Inc.   Marshall said that accepting the NLRB’s reasoning would mean favoring litigation over arbitration, in contrast to the federal policy of favoring arbitration.
  •  Employees at Waffle House Inc. cited D.R. Horton in an effort to convince U.S. District JudgeCarlos Murguia of Kansas City, Kansas, to not compel individual arbitration. They lost. “Although Concepcion may not speak directly to the issue before the court,” the judge wrote, “it does illustrate a guiding principle: arbitration agreements are enforceable even when they prohibit the use of a class action.”

 Thomas Reuter News Service reports that  judges in New York, California, Pennsylvania, Florida and Georgia have refused to allow employee class actions to move forward on the basis of the NLRB’s holding, in cases against Jenny Craig, Citigroup, P.F. Chang’s and UBS, among others.

The Concepcion decision likely will have a devestating impact upon workers who are cheated by unscrupulous employers out of overtime pay or hourly wages.

“Class claims frequently offer the only vehicle for consumers or employees to challenge unlawful actions that cause limited damages to each individual while often reaping millions for business,” law professor Ann C. Hodges writes in an American Constitutional Society blog analysis of D.R. Horton. “… In the workplace, Fair Labor Standards Act cases seeking minimum wage or overtime payments are most likely to be abandoned on this basis and Horton involved such a claim, alleging that the nonunion employer misclassified employees as exempt from overtime pay.”

The Progressive States Network (PSN) in a recent report entitled, Where Theft is Legal: Mapping Wage Theft Laws in the 50 States, estimates that more than 60 percent of low-wage workers suffer wage violations each week. On average, the PSN reports, low-wage workers lose $51 per week to wage theft, or $2,634 per year. For low-wage workers, that amounts to 15% of their annual income, at average earnings of $17,616 per year.

Federal judges are appointed for life (in good behavior) and earn annual salaries of $174,000..

* See earlier reporting by this blog on federal court judges’ hostility to employment discrmination lawsuits.

Resolved … Don’t Be Evil

The vast majority of workplace bullies don’t think of themselves that way. They justify or make excuses about their behavior. However, I suspect that many workplace bullies – at least those who are not actual psychopaths or sociopaths – do know on some level that what they are doing is wrong.

Every manager should consider the following:

  • How would you feel if your mother, child or partner was treated the way you treat your target? Not so good? Then what you are doing is wrong.
  • Are you flattering yourself?  Are you really a perfectionist trying to get the best out of your workforce or are you a petty tyrant satisfying a personal need for power and control?  If the latter, your actions are damaging both the target and your employer.
  •  There is a fine line between workplace abuse and other forms of abuse, including intimate partner abuse, child abuse and elder abuse. Especially for those in a supervisory position, when you zero in on a subordinate target, visualize a small child who is about to be smacked.
  •  Yes, some employees deserve to be disciplined and/ or fired but there is a difference between exercising legitimate supervisory authority and bullying. No employee ever deserves to be treated disrespectfully or bullied.
  • If you are an employer who is using bullying strategically to avoid a legal obligation – such as paying workers compensation – you are taking a serious risk. Sometimes targets of bullying do not simply fade into obscurity. They hire lawyers and sue.  And whether they win or lose, you will pay.
  •  Bullies are “ fortunate” to work in the United States, which unlike many other industrialized countries for decades has ignored  overwhelming research that workplace bullying causes potentially severe mental and physical damages to targets. But times are changing. Educated employers do not tolerate bullying because they know that they ultimately pick up the tab in terms of needless turnover, absenteeism, higher health costs, litigation, etc.
  • If you are a Human Resources “professional” and you turn a blind eye when a worker complains to you about being bullied – or make things worse for the target – you are part of the problem.  You are acting unethically and doing a great disservice to your employer.

New research is showing that workplace bullies are often their own worst enemies.  American is growing less tolerant of this kind of management style.  It’s one thing if a manager gets an isolated complaint but it can quickly end a promising  career when there are multiple bullying complaints. For all of the above reasons and many more, I propose the following resolution for workplace bullies in 2012:

  DON’T BE EVIL!