New Administration and Pandemic Put Focus on Wage Theft

By Cristina Rouvalis February 19, 2021
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New Administration and Pandemic Put Focus on Wage Theft

​During good and bad economic times, workers have sued their employers for undercounting their hours, refusing to pay overtime or otherwise shortchanging their paychecks. 

Scrutiny for wage theft, as it is known, is more likely with the election of President Joe Biden and a labor-friendly mindset among the Democratic majority in Congress. The pandemic and remote work could boost claims as well.

"Millions of people are cheated every year," said Kim Bobo, a faith-based activist and author of Wage Theft: Why Millions of Working Americans Are Not Getting Paid—And What We Can Do About It (The New Press, 2014). In her research, she's found that wage theft is more pervasive in certain industries, such as drywall hanging, landscaping and restaurants.

Bobo said the U.S. Department of Labor (DOL) under President Biden has signaled it will be more vigilant than the Trump administration in enforcing the Fair Labor Standards Act (FLSA), making this enforcement a priority the way it was under the Obama administration.

"The new administration will likely target some of these sectors that are problematic and get big settlements," she said. "That will become an incentive to not break the law."

Peter Shapiro, a partner in the New York City office of Lewis Brisbois, agreed that the DOL is likely to become more proactive in protecting employees. "You may see changes in the rulings—who is exempt and who is not. There is a lot of wiggle room in who fits into the two main categories—executive and administrative employees—and the counters can change depending on the administration in D.C."

Companies typically don't have to pay overtime to employees classified as exempt who meet certain criteria (i.e., those who earn salaries of at least $35,568 annually or $684 per week and who fit into the executive or administrative exemptions). To be eligible for an executive exemption, the employee should have responsibilities such as managing an enterprise or department, supervising others, and hiring and firing. To be eligible for the administrative exemption, the employee's primary duty must be office or nonmanual work directly related to the employer's management or general business. 

Phyllis G. Hartman, SHRM-SCP, founder of PGHR Consulting Inc. near Pittsburgh, said she has worked with small and midsize companies that mistakenly believe that by giving an employee a title and a salary, they can make that worker exempt. In doing so, they may be liable for years of unpaid overtime pay. "They will say, 'Suzy has been a wonderful secretary for so many years, so we are going to give her a new title and make her exempt,' " Hartman said. "Suzy is happy because she is getting a salary like all the big guys. But the job is clearly not exempt under the FLSA. It doesn't fit with the law. I think there is going to be a lot more focus on this kind of thing under the new administration."

Assistant managers in the retail and fast-food industries have also sued over their exempt classification. "The claim is that their daily duties are predominantly customer-facing," Shapiro said. "They are manning the counter, filling the orders, helping to clean the restrooms, basically filling in doing whatever needs to be done." If an assistant manager spends more time on these duties than making managerial decisions, that could set them up to win a settlement or lawsuit for unpaid overtime.  

Even before Biden was elected, Shapiro advised his clients to be mindful of tracking hours and compensating fairly, especially in New York state, which has one of the most stringent wage laws in place. New York employers must give employees written notice of their wages when they are hired and at any time wages are changed. There are also strict requirements regarding the information that must be listed on every paycheck, including the phone number of the employer. "Be extremely vigilant about having good policies in place and making sure they are enforced," Shapiro said.

New Worries During Pandemic

The coronavirus pandemic creates new complications about tracking hours and fair compensation when supervisors can't see nonexempt employees entering and leaving the office, Hartman said. She has been warning employers to be accurate in tracking and recording their employees' hours, even when they are working from home. "You should always be careful of this, but you should be particularly careful of it now."

Hartman said that on a few rare occasions, she has heard of an employer trying to short an employee on wages, but most often, it's due to a lack of understanding of the law. "It's not their intent to steal."
Employees typically don't complain about wage theft during an economic downturn, but that doesn't mean they will remain silent once the economy improves and workers feel more secure about their jobs. "They might be saving that claim for a rainy day," Shapiro warned.

Bobo said companies also violate labor laws by classifying a full-time employee as an independent contractor—a category that makes the worker ineligible for advantages such as workers' compensation and requires them to pay double employment taxes. "A lot of churches pay their janitors or church musicians as independent contractors," even though these workers are full time and have no control over their schedule, Bobo said. "Employers mistakenly think it is their choice. It isn't."

Cristina Rouvalis is a freelance writer in Pittsburgh.

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