More than 2 million American workers lose a combined $8 billion in wages each year due to theft by employers, according to research by the Economic Policy Institute (EPI).
The study focused on 10 states with the highest populations, including Texas, but researchers say the total impact is likely closer to $15 billion when factoring other states into the equation.
How do companies steal money from their employees?
Wage theft can take many forms when employers fail to pay workers their legally entitled compensation, including:
- Not paying workers the minimum wage
- Failing to pay overtime to nonexempt workers
- Denying workers meal breaks
- Asking or demanding that employees do not report time worked before or after their regular shifts
- Confiscating tips
- Not paying tipped workers the difference between tips and the minimum wage
- Misclassifying some workers as independent contractors
- Illegal deductions from paychecks
- Not distributing pay stubs outlining deductions
Minimum wage workers are hit the hardest
The EPI study concludes, on average, workers earning the minimum wage are cheated out of $64 each week – amounting to a $3,300 hit for those working year-round. Overall, these workers lose nearly one-quarter of their earnings, receiving average annual wages of $10,500. In Texas, workers are hit harder as those working minimum wage jobs are cheated out of nearly 30% of their pay.
Wage theft is an equal opportunity violation
While the study says younger workers, immigrants and people of color are more likely to report being underpaid, the majority of people hit by wage theft are native-born U.S. citizens under age 25. Nearly half are white and half work full-time jobs, while a quarter of them have children.
Basic protections are outlined in 1938 law
The Federal Labor Standards Act (FLSA) mandates basic protections for workers with regards to pay and hours worked. The law was updated in 1966 and 2015 to extend protections, but the EPI concludes the law has not kept pace with changes to the economy and employment practices.
Additionally, the report says employers have adopted procedures, such as hiring contractors for various functions that were previously done by in-house workers, which skirt employment laws and weaken protections for those workers.