Don't Let Your Company Get Hit With Wage Theft Claims

By Mark Wilson, Esq. on September 04, 2014 | Last updated on March 21, 2019

Over the Labor Day Weekend, The New York Times published a front-page piece on the rise in "wage theft" claims.

As companies try to cut costs, some employees are being illegally encouraged -- or forced -- to alter their timesheets to reflect fewer hours worked. Such actions violate state and federal labor laws, and though some companies have engaged in the practice as a matter of course, believing that enforcement was scant, enforcement appears to be on the rise.

What should you know if you want to keep your company in compliance and out of court?

What Qualifies as Wage Theft?

Wage theft encompasses a broad category of activities that revolve around an employee being paid less than she earned. Some examples include:

  • Working off the clock, whether it's an explicit or implicit policy;
  • Misclassifying workers as independent contractors;
  • Altering timesheets to reflect fewer hours worked; and
  • Moving overtime hours to the next week (or day) to avoid paying overtime.

Basically, an employee has to be paid for each hour she works, when she works it. This means that an employee who works more than eight hours in a single day in California, for example, must be paid for that overtime work; it can't be shunted to the next day.

Wage and hour cases have featured prominently in recent headlines. Just last week, for example, the Ninth Circuit found FedEx liable for labor law violations for intentionally misclassifying truck drivers as independent contractors rather than employees.

Nudge, Wink

It's rare that employers put in writing policies that they know violate the law. Many of these violations take the form of informal agreements where employees agree to put down fewer hours than they worked, under threat of termination. Even though the economy has technically recovered, low-wage workers -- who are most at risk of having wages stolen -- are essentially fungible, meaning they have little to no bargaining power with their employer.

If your company employs managers who have oversight over employee schedules, make sure they're trained to understand the law. Of course, such training isn't just a fun little primer in labor law; it also places managers on notice that they'll be responsible for any wage and hour claims. Any savings in the bottom line will be quickly eaten -- and then some -- by back pay and punitive damages, depending on how egregious the violations were. It's best not to gamble that such practices won't be discovered.

Don't Be Negligent, Either

Willful blindness won't fare any better. As more and more companies staff positions using outside contractors, the principal company is increasingly losing the ability to say, "But we didn't know!" The lawsuits are coming, and the outrageousness of the claims, combined with their quantity, won't look good in front of a court.

Rather than plead ignorance, the time is nigh to take the initiative to conduct investigations into contractor pay practices to ensure they're in compliance with the law. Principals that use contractors are, in short order, going to be expected to know what their agents are doing.

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