5 Reasons Why Employee Claims of Wage Theft are on the Rise

Wage and Hour Lawsuits Citing Wage Theft Continue to Skyrocket

The New York Times recently reported on the mass influx of wage and hour lawsuits, specifically, claims of wage theft. Wage theft is defined as “accusations of employers violating minimum wage and overtime laws, erasing work hours and wrongfully taking employees’ tips”. High profile class action wage and hour cases increasingly make headlines across the nation, as was recently the case with Schneider Trucking, who was slapped with a $21 million legal settlement because of wage theft claims. McDonalds, Starbucks and Walmart also took some notable wage and hour lawsuit hits, garnering mass amounts of press for their huge employee payouts.

So the question remains, why are more and more employees making claims of wage theft? There are many theories as to why there is a continued rise in wage and hour cases, with blame falling on employers, employees and national business structure.

Here are 5 reasons why more employees are claiming wage theft:

1. More companies are committing wage theft. The simplest explanation as to why claims of wage theft are increasing is because more companies are actually stealing pay from their employees. Some federal and state officials speculate that companies are “motivated by fierce competition or a desire for higher profits” and in response, flout wage and hour laws. “I’m amazed at how petty and abusive some of these practices are,” New York’s Attorney General, Eric T. Schneiderman said of companies who he has prosecuted.
2. Government officials want labor union support. In contrast to number 1, some business groups disagree that companies are committing wage theft and propose that they, in fact, have “become more scrupulous in complying with wage laws…in response to the much publicized lawsuits.” Instead, they  insist that government officials are “drumming up a flurry of wage enforcement actions” in an attempt to rally support from their union allies.
3. Reaction to change in the nation’s business structure. David Weil, the Director of the Federal Labor Departments’ wage and hour division, proposes that wage theft is actually increasing due to the restructuring of how  United States businesses are arranged. More than ever, business structures are utilizing franchise operators, subcontractors and temp agencies which “lead to employers being squeezed on costs and more cutting corners”. These structural practices keep decisions away from the corporate parent and allow companies to deny involvement or knowledge of any wage and hour infractions conducted on the franchise or subcontractor level.
4. To assist unions in adding pressure to raise wages. Business advocates allege that there may be a hidden agenda in place for the rise in wage and hour lawsuits. They cite cases such as the class action lawsuits filed against Schneider and McDonalds, being filed at the same time that unions are lobbying for increased wages. They postulate that the added pressure of a class action lawsuit would push their demands through. “This is a classic special-interest campaign by labor unions,” said Stephen J. Caldeira, President of the International Franchise Association.
5. The potential payout for employees is HIGH. Some government officials and attorneys don’t believe that companies are having increased wage theft. In fact, they think exactly the opposite. Lee Schreter, Co-Chairwoman of the Wage and Hour Practice Group at Littler Mendelson, said wage theft was not increasing, and that many companies had become more vigilant about compliance. However, this hasn’t prevented lawyers from filing wage theft complaints. Ms. Shreter assesses that it is due specifically to employees and law firms seeing the potential for gigantic payouts. “These are opportunistic lawsuits,” she said.

So how do employers protect themselves against these wage theft cases? EPAY understands the compliance and lawsuit risks employers face regarding wage and hour lawsuits. That’s why we have partnered with Seyfarth Shaw, a leading wage and hour law firm, to stay on top of labor laws and help protect our customers from these risks.

Our time and attendance system keeps detailed paper trails of all employee hours worked and paid out. These records have saved our customers thousands of dollars and kept them out of court. Check out our recent case study with Capital Building Services Group to see how we saved them from potential class action wage and hour lawsuits.

Want to learn more ways to prevent wage and hour lawsuits? Check out our Compliance Corner or contact us!