‘Wage Theft’ Prevails in Post-Recession Economy

Behind the counter at a convenience store in Princess Anne, MD, Elvira Orellana worked 72 hours a week, making sandwiches, cleaning the kitchen and ordering the ingredients to prepare oxtail, curry chicken and cheese steaks.

Her employer paid her $648 a week – $324 less than she was owed under laws that require that workers earn time-and-a-half for clocking more than 40 hours a week. When she complained, Orellana said, her boss threatened to cut her wages and then fired her.

Orellana’s case, which she won in federal court, illustrates a problem that historically has been more pronounced in the wake of recessions. Since the most recent downturn, worker advocates and law enforcement officials say, a growing number of employers have violated wage and labor laws enacted 75 years ago in response to worker mistreatment prevalent during the Depression.

Employers in this floundering economy have increasingly denied workers benefits and mandatory overtime pay, according to worker advocates. Some have doctored time sheets and even failed to pay minimum wage. The practice is widespread in low-wage jobs such as waiting tables or cleaning hotel rooms, but has also been bleeding into middle-class professions, they say.

And studies show that victims can lose up to 20 percent of their earnings due to what those advocates call “wage theft.”

Lawsuits alleging wage and labor law violations have skyrocketed, and state and federal officials have beefed up scrutiny. The U.S. Department of Labor has hired 300 more investigators.

The business community has opposed some legislative measures. But it contends that it supports strong enforcement of the laws because by underpaying employees scofflaws introduce false competition into the market. Business groups also say the recession and its lingering effects left many employers, especially mom-and-pop operations, cutting back while struggling to stay in business.

Tallying the extent of wage law violations is difficult. Many workers are grateful to have work in a tight job market and are too scared to speak up, said Catherine Ruckelshaus, legal co-director of the National Employment Law Project.

Speaking up can be “job suicide,” Ruckelshaus said. “There are 10 people waiting in line to take your job. Oftentimes, workers grin and bear it.”

Orellana, a native of El Salvador, said she didn’t speak up for months, wary of someone taking advantage of her as an immigrant. But then she learned about her rights by asking questions of a fellow churchgoer with connections to the Baltimore-based Legal Aid Bureau, which eventually represented her.

“I felt completely desperate,” Orellana, 41, said through a translator. She recalled that a friend encouraged her to fight. “She told me not to be quiet, to learn to defend myself, to keep going forward, to not be afraid.”

The Salisbury, MD, woman won an $18,000 civil judgment for unpaid overtime in U.S. District Court, but the judge found that she had failed to prove a claim of retaliation.

Representatives of her former employer, Cienna Properties LLC, did not respond to requests for comment.

Aggrieved workers can take their cases either to law enforcement or to civil court.

The number of lawsuits alleging employer violations of the Fair Labor Standards Act has more than tripled in the past decade, according to an annual study released by Seyfarth Shaw, a law firm that specializes in labor and employment law. More than 7,000 lawsuits were filed from March 2011 to March 2012, up from 2,035 for the same period in 2002.

Meanwhile, U.S. Labor Department investigators collected more than $280 million in back wages last year, nearly $100 million more than investigators recovered four years earlier as the recession was getting under way.

“We’re here to make sure the people in the states of Maryland, Northern Virginia and the District of Columbia are getting paid, getting paid properly, legally and on time – when it’s payday,” said Mark Lara, district director for the Baltimore office. “That’s an extremely important job, in my opinion, and my staff understands that.”

The U.S. Labor Department has launched an initiative to crack down on businesses that wrongly classify employees as independent contractors to avoid paying overtime and benefits, and has signed an agreement with the Internal Revenue Service to share information to stop worker misclassification.

But Ruckelshaus, of the National Employment Law Project, said more needs to be done. If current laws were better-enforced, employers would be forced to hire more workers and the jobless rate would fall, she said.