The Virginia Interfaith Center for Public Policy has added wage theft to its list of top priorities for 2017. Our Executive Director Kim Bob is author of “Wage Theft in America: Why Millions of Working Americans Are Not Getting Paid
—And What We Can Do About It,” the leading book on wage and worker justice. We believe the faith community can play an important role in this issue, as all the major religions have much to say regarding the treatment of the poor and the rights of workers.
Worker Centers are places where workers of all types can come and receive support on pay issues. There are two in Northern Virginia, and VICPP is working to add one in Richmond.
Background: Wage theft is the illegal underpayment or nonpayment of a worker’s wages. Wage theft occurs when unethical employers break either federal or state laws by not paying the minimum wage, not paying the overtime premium for hours worked over 40, stealing workers’ tips, not paying for all hours worked, calling workers independent contractors when they are really employees (thereby not paying the employer side of payroll taxes, workers compensation insurance, unemployment insurance and overtime), taking illegal deductions from workers’ pay, and giving workers paychecks that bounce. Wage theft is common in many sectors that pay low wages, such as agriculture (farmworkers), poultry plants, restaurants, retail stores, car washes, landscaping and construction but also occurs with middle and lower wage earners.
Although there have been no comprehensive studies on wage theft in Virginia, national studies indicate that one out of four low-wage workers is not being paid the minimum wage and three-fourths of low-wage workers who work more than 40 hours a week are not being paid all their overtime premiums. Several hundred thousand workers are probably being cheated of wages by unethical employers not paying minimum wage or overtime. A Virginia Employment Commission (VEC) audit of one percent of Virginia employers found 5,639 workers were misclassified in 2010 resulting in underpayment of their wages. Based on findings in other states, Virginia could have on the order of 40,000 misclassifying employers and 214,000 misclassified workers.
Wage theft hurts workers and their families, ethical employers who are put at a competitive disadvantage by unscrupulous employers, taxpayers (who pay more because some employers aren’t paying their share) and all Virginians because wage theft undermines economic growth. Wage theft is particularly bad in Virginia because so few workers are represented by unions, which ensure that workers are paid fairly. The state’s Misclassification Taskforce has not functioned since put in place in 2014 after a couple of meetings. The state wage payment law is very weak. In the Virginia Department of Labor and Industry, there are only four state enforcement people to enforce the weak law. Finally, workers and most Virginians don’t understand the laws protecting workers. The only positive developments have been creation of new worker centers in the state to help these workers but more are needed for a state of our size.
VICPP’s position: All religions believe that “thou shalt not steal,” and that employers should pay workers their wages in a timely basis. VICPP believes that Virginia should do a better job stopping and deterring wage theft. During 2017, VICPP will hold wage theft hearings around the state and draft a new payment of wages bill for consideration in 2018. VICPP will also support the expansion of worker centers and encourage the Misclassification Taskforce to function. One simple way to improve the state wage payment law is to allow a “private right of
action,” enabling an employee to take a case to court to enforce his or her rights (with or without an attorney). Most states allow this private right of action, but Virginia does not. Under the current wage payment law, an employee can only bring a claim to the Virginia Department of Labor and Industry (DOLI) and cannot go to Court or hire a lawyer to assist them at DOLI. The private right of action is particularly important when DOLI only has four enforcement staff.
VICPP seeks to jump-start state’s worker misclassification enforcement plan
RICHMOND – Executive Director Kim Bobo and members of the Virginia Interfaith Center for Public Policy’s (VICPP) Task Force on Wage Theft met Nov. 15 with two representatives of the state’s Department of Commerce to talk about worker misclassification. The misclassification of employees as “independent contractors” undermines business that follow the law, deprives the Commonwealth of millions of dollars in tax revenue and prevents workers from receiving proper benefits and legal protections.
Bobo estimates that half of all wage theft cases in Virginia are due to worker misclassification.
In 2014, Governor Terry McAuliffe signed an executive order creating an Interagency Task Force on Worker Misclassification. That followed a 2011 directive from the General Assembly to study this issue, and a 2012 study report recommending the Governor convene such a task force. Then in December of 2014, a workplan was instituted with strategies for enforcement and for legislative changes that need to be made. Unfortunately, none of that work has ever been started.
The issue affects an estimated 250,000 workers in Virginia. By not paying workers’ compensation insurance, unemployment insurance, payroll taxes, or complying with minimum wage and overtime laws, employers lower their cost of doing business by up to 40%. The cost to the state in lost revenue was estimated at $28 million in 2011.
Secretary of Commerce and Trade Maurice Jones was chairing the governor’s Task Force, but when he resigned his position in mid-summer, the work of the group came to a halt. Todd Haymore is the new Secretary of Commerce and Trade.
The VICPP group sat down with Elizabeth Creamer, advisor for Workforce Development, and Jeff Brown, Secretary of Workforce Services, to get an update on the status of the work plan and suggest future steps.
“The Task Force has not met for more than a year,” Creamer admitted. “I just got this assignment last week and need to know the full story. Secretary Haymore and I recognize we need to quickly reactivate the task force and carry out the workplan.”
When pressed, Creamer said that she was “not willing to say it’s completely fallen apart. Everyone agrees it needs to be reactivated. It’s an executive order, and we take those seriously.”
Jason Wheeler of the carpenters’ union told of one labor broker in Central Virginia who is using 600 workers who are misclassified, and most of them undocumented immigrants. “Multiple state offices have been informed with no action,” Wheeler said. “If you wanted to cut the head off the snake, this guy would be a great place to start.”
Employees like these don’t know they’re misclassified until they get laid off and file for unemployment. Or they get a huge tax bill because their employer hasn’t been taking the taxes out of their checks.
“Workers will not complain because they’re terrified of losing their job,” added Dr. Ann Hodges, a professor of employment law at the University of Richmond Law School.
“If you make an example of a few big employers and it costs them a few million,” Bobo said, “then it becomes a deterrent.”
Matt Yonka of the Building Trades Union pointed out that the laws are already on the books, but just not enforced. “Perhaps there is some confusion as to whose jurisdiction that it falls under. That was something the governor’s Task Force was designed for that purpose, it was my understanding.”
“You have to have joint targeted investigations in sectors that are bad and jointly go after the folks and publicize it,” Bobo said.
Others participating in the meeting included Laura Goren, Research Director at The Commonwealth Institute, Meg Long, a law student at the University of Richmond, and Phil Storey of the Legal Aid Justice Center.
VICPP plans for the coming year include public hearings on wage theft issues across the state and the possible development of workers’ centers.
“It’s such a disappointment here in Virginia,” Bobo said, “but such an opportunity.”
Center’s Wage Theft Task Force meets with Secretary Haymore, other state officials
RICHMOND – Members from the Virginia Interfaith Center for Public Policy’s Wage Theft Task Force met Jan. 6 with Secretary of Commerce and Trade Todd Haymore, Deputy Secretary of Commerce and Trade Hayes Framme, Workforce Development advisor Elizabeth Creamer and Commissioners Ellen Marie Hess of the Virginia Employment Commission and Ray Davenport of the Department of Labor and Industry.
This meeting was a follow-up to a previous meeting to encourage the work of Governor Terry McAuliffe’s Interagency Task Force on Worker Misclassification, created by the Governor by executive order in 2014. Unfortunately, little was done by the panel in 2015 or 2016.
The misclassification of employees as “independent contractors” undermines business that follow the law, deprives the Commonwealth of millions of dollars in tax revenue and prevents workers from receiving proper wages and legal protections. The issue affects an estimated 250,000 workers in Virginia. By not paying workers’ compensation insurance, unemployment insurance, payroll taxes, or complying with minimum wage and overtime laws, employers lower their cost of doing business by up to 40 percent. The cost to the state in lost revenue was estimated at $28 million in 2011 when a study on the issue was done.
“We do intend to re-convene the Task Force,” said Haymore at the outset of the meeting. “It’s not completely fair to say that it’s not doing any work. Let’s say it has not done as much as it could have done.”
Creamer added that recent meetings with the Governor have happened on this issue.
Sec. Haymore said that he was primarily there to listen, as this was not an issue that he has much background with.
Hess said that from the Employment Commission’s standpoint, workers often don’t even know they’ve been misclassified until they file a claim for unemployment.
“We know that construction, restaurants and other hospitality trades are the prime locations for misclassification,” Hess said. “We do investigate and audit. But the penalty from the VEC is just $75! If that’s all you have to pay, that’s literally less than the cost of doing business. It’s hardly going to stop anybody.”
Haymore asked how much of this practice is malicious and how much is employers simply being misinformed.
“There are a lot of companies out there that are trying to take advantage of workers, and that is malicious intent to me,” said Jason Wheeler, with the Carpenters’ Union. “Almost all construction companies use what are called ‘labor brokers,’ and it’s their very business model. Workers don’t know they have been classified as independent contractors until they get a huge tax bill.”
“We (in the Labor Department) have been told that ‘if you change this you’ll be changing the way the entire construction industry works.’” said Davenport. “Those who play by the rules are being undercut.”
Hess agreed. “Accountants are being told ‘this is the way to avoid the Affordable Care Act.’ Educate the public and you educate the victims.”
“Good enforcement deters bad behavior,” said Kim Bobo, executive Director for the Virginia Interfaith Center. “It is so commonplace… “everyone does it,” but it’s still breaking the law.”
“Workers are afraid that if they complain they will lose their jobs and get black-balled by the industry,” she added. “If we had all the (state) agencies working together and we can publicize it so then employers know it might happen to them, then it becomes a much bigger deal.”
The Virginia Interfaith Center has made wage theft as one of its top priorities for 2017. Worker misclassification is one of the most common forms of wage theft.
For information on the Virginia Interfaith Center for Public Policy, visit www.virginiainterfaithcenter.org.
ALL FAITHS BELIEVE IN JUSTICE