The House Education and Labor Committee advanced a bill to raise penalties on employers that violate wage requirements under the Fair Labor Standards Act (FLSA). The Democrat-sponsored measure moved forward after a 27-19 party-line vote on May 18. The bill now goes to the full House for consideration.
The Wage Theft Prevention and Wage Recovery Act would increase civil monetary penalties for wage and hour violations and require employers to regularly provide workers with pay stubs detailing how their wages are calculated. It also would limit the use of mandatory arbitration to resolve pay disputes.
"It is unacceptable that dishonest employers can steal workers' wages with little to no consequence," tweeted Rep. Bobby Scott, D-Va., who chairs the education and labor committee. "Each year, our most vulnerable workers are cheated out of billions of dollars. This bill would take critical steps to help workers receive the full pay they've earned."
Sen. Sherrod Brown, D-Ohio, introduced a companion measure in the Senate, also on May 18.
Targeting Wage Theft
In a committee fact sheet, the bill's supporters said that "dishonest employers are able to steal worker pay in violation of the FLSA without the worry of significant consequences," because:
- The FLSA does not require detailed pay stubs or record keeping, which are critical for workers to confirm pay accuracy and, if necessary, establish a legal claim for stolen wages.
- The FLSA's civil penalties and liquidated damages are not a deterrent.
- Mandatory arbitration agreements and collective-action waivers shield employers from accountability under the FLSA.
The measure, its backers said, would ensure workers' rights to be paid all legally owed wages and hold employers accountable for violating the FLSA by:
- Requiring detailed pay stubs be delivered to employees regularly, as well as providing workers with access to the record keeping necessary to hold employers accountable in court for violating the FLSA.
- Preventing employers from exploiting mandatory arbitration and collective-action waivers and protecting an employee's ability to pursue remedies for stolen wages under the FLSA.
- Increasing civil monetary penalties and liquidated damages to deter wage theft and make certain that unscrupulous employers do not profit by stealing from their employees.
Opposed by Business Group
The U.S. Chamber of Commerce, in a letter to members of the House Education and Labor Committee, explained its opposition to the measure.
"Increasing the financial consequences for [wage] violations makes a great headline, but the actual impact on low-wage workers will not be to their advantage," wrote Neil L. Bradley, the chamber's executive vice president, chief policy officer and head of strategic advocacy. "Employers faced with such massive damages and penalties will most likely choose to challenge the citations and allegations and pursue a litigation approach. Payment of back wages would be delayed by years."
The result, he said, would be to "promote expensive class-action litigation that does little to help businesses and employees by precluding the enforcement of predispute arbitration clauses. Such litigation serves principally to benefit the attorneys who file class-action lawsuits."
As for the bill's requirements regarding pay disclosures and pay stubs, he wrote that "while sounding benign and well-meaning, [these provisions] are redundant with rights covered under state law. Adding federal requirements would add complexity and confusion without actually improving worker protections."
Current FLSA Penalties Are Plentiful
"Ensuring compliance with wage and hour laws should be a top priority for every HR department, as the potential penalties for violations can escalate rapidly" under the present law, said Ted Hollis, an Indianapolis-based labor and employment partner at Quarles & Brady.
The FLSA includes "penalty damages equal to lost wages and possible civil monetary or criminal penalties for egregious offenses, and retaliation claims that can result in an award of compensatory or punitive damages," he pointed out.
The FLSA, Hollis added, is also a fee-shifting statute, "so a company found liable for a violation will be required to pay the employee's attorney fees. And, unlike most federal anti-discrimination laws, the FLSA provides for individual liability."
FLSA class actions can multiply damages exponentially in cases of a violation, he said, and state wage and hour laws often add additional penalties.
"Being attentive to wage and hour compliance up front can save a company from a host of these woes later," Hollis advised.