Low-wage workers pay the price of nickel-and-diming by employers


The continuing push for higher minimum wages across the country has much to recommend it, but the campaign shouldn’t keep us from recognizing a truly insidious practice that impoverishes low-wage workers all the more. It’s known as wage theft.

Wage theft, as documented in surveys, regulatory actions and lawsuits from around the country, takes many forms: Forcing hourly employees off the clock by putting them to work before they can clock in or after they clock out. Manipulating their time cards to cheat them of overtime pay. Preventing them from taking legally mandated breaks or shaving down their lunch hours. Disciplining or firing them for filing lawful complaints.

Nickel-and-diming pays well, for the employer.

A study published in 2010 by a network of employment rights organizations calculated that employment and labor law violations cost low-wage workers in New York, Chicago and Los Angeles alone an estimated $56.4 million a week. In Los Angeles, where the survey was conducted by UCLA’s Institute for Research on Labor and Employment, the respondents lost an average of 12.5% of their pay — $2,070 annually out of average pay of $16,500.


“Companies can save a great deal of money by cutting labor costs,” says Michael Rubin, a San Francisco labor lawyer who last month filed three lawsuits against McDonald’s Corp. and its franchisees, alleging a raft of labor law violations at the chain’s fast-food restaurants. “When you own a hundred restaurants, even small amounts add up quickly.”

The fast-food chain’s response to the lawsuits: “McDonald’s and our independent owner-operators are each committed to undertaking a comprehensive investigation of the allegations and will take any necessary actions as they apply to our respective organizations.” The company didn’t respond to a request for an update on its investigation.

The creativity of workplace managers to squeeze dollars from their lowest-paid employees is almost unlimited.

According to a lawsuit filed against Wal-Mart and several of its contractors running its warehouses in Riverside County, the warehouses scrapped their hourly-pay system in 2001 in favor of a piece-rate system in which all the workers on a shift shared a set rate for every trailer they either completely loaded or unloaded.

If they didn’t finish the job, they got nothing. For non-loading tasks such as sweeping, they got paid nothing. Their ability to double-check the managers’ calculations about how many workers were on each shift was nonexistent. The suit that Rubin filed on behalf of several workers seeks more than $100 million, including more than $60 million in back wages from Wal-Mart and the contractors.

Wal-Mart maintains that it’s not the owner of the warehouses and thus isn’t responsible, but U.S. District Judge Christina A. Snyder rejected its motion to dismiss the case in January. A motion to certify the lawsuit as a class action covering 1,800 workers is pending.


One common scam is to classify low-wage workers as “independent contractors” to evade wage and hour rules. In 2009, then-California Atty. Gen. Jerry Brown obtained a $14-million judgment against two cleaning companies for cheating 300 janitors out of wages and overtime this way.

“These workers aren’t running their own businesses,” scoffs Catherine Ruckelshaus, general counsel at the National Employment Law Project. “They’re not making capital investments or calling their own shots on when they work. The idea is for them not to be protected by any rules at all.”

Most wage theft techniques are less elaborate, if no less demoralizing.

“I’ve gotten fed up and tired of being treated horribly,” says Rhonesha Victor, 24, who has seen it all during her two years working at an Oakland KFC while attending a local community college full time. She’s been denied legally required break time, had her hours cut and cheated of overtime.

One week she worked 48 hours without a day off, but her pay stub showed only 38. When she complained to her manager, he applied the missing 10 hours to her check the following week — but without the eight hours of overtime she was due.

Harman Management Corp., which operates KFC’s franchises in Oakland, said its policy is to “strictly comply with all federal, state and local wage and hour laws,” according to an email from its chief executive, Jim Olson. “Any error in payment brought to our attention is immediately addressed.”

These practices can happen anywhere employers think they can get away with them — at the cash register of a fast-food restaurant or the corridors of an office building at night or under the lights of a National Football League stadium, as a number of Oakland Raiders cheerleaders have alleged in a lawsuit being followed by my colleague Robin Abcarian.


But they’re concentrated in labor-intensive industries in which employees are low-paid, often from other countries and, in many cases, predominantly female. Trouble spots are agriculture, retail, fast food, hotel housekeeping, janitorial services and construction.

Are the authorities up to the task of policing these violations? For the most part, no. Auditing tens of thousands of contractors and businesses would be a superhuman task even for well-funded regulators, much less our chronically underfunded labor agencies.

That’s unfortunate, because in many states, including California, the penalties for violating labor laws are high enough to be a deterrent — if the violators are caught.

After California raised the penalties for willfully misclassifying workers as independent contractors in 2011 to a maximum of $25,000 per violation, one prominent law firm warned businesses that the possible assessments could reach millions of dollars and advised them to take a very close look at their cadres of independent contractors.

The alternative is the civil lawsuit, like the ones brought by Rubin against McDonald’s and Wal-Mart.

Under California’s private attorney general act, individual workers can sue employers for labor law violations on behalf of themselves and other workers; if they prevail, their attorney fees are paid by the employer and they split the penalties with the state, which gets 75%.


Like government enforcement, these cases depend on complaints from workers themselves. That’s always an obstacle, especially during economic slumps when low-wage workers are especially worried about their jobs.

“When they’re vulnerable, no enforcement is going on,” Ruckelshaus says. But as the economy has slowly improved, Rubin says, workers are becoming more willing to step forward.

Despite that, some employers and managers still try to make their numbers by squeezing their lowest-paid workers for a few extra cents. Big companies like Wal-Mart continue to hide behind webs of contractors and subcontractors to pretend they’re not responsible, but there can hardly be any doubt that it’s their relentless demand for cost-cutting and high productivity that drives this behavior.

Until they’re penalized for demands that result in cheating the workers on the shop floor, it will continue. And workers like Victor will continue to be correct in observing, “It’s not right to work hard and be treated this way.”

Michael Hiltzik’s column appears Sundays and Wednesdays. Read his blog, the Economy Hub, at, reach him at, check out and follow @hiltzikm on Twitter.