The Very Real Scourge of Wage Theft Will big service industry corporations finally be held accountable for the money they cheat from their employees?
Will big service industry corporations finally be held accountable for the money they cheat from their employees?
Last week, the owner of a chain of Papa John’s was ordered to pay $800,000 in back pay to workers he’d shortchanged by rounding down to the nearest hour on their time cards and failing to pay overtime properly. “I didn’t realize if you work 10 hours per day, you are supposed to pay overtime for two hours,” the owner, Emmanuel Onuaguluchi, told the New York Post.
A couple hours of overtime there may not seem like a lot of money, but those amounts could mean everything to workers struggling to get by on minimum wage and, as the judgment shows, it all adds up over the years. This latest judgment is part of a big push by New York’s attorney general, Eric Schneiderman, who has also sued local McDonald’s and Domino’s franchises.
Cases of wage theft—or, at least, the cases officials are pursuing—have been up in California and across the country, too, according to The New York Times. Business interests told the Times that politicians like Schneider are just pursuing these cases to curry favor with unions, but the unions aren’t really behind the legal actions.
If restaurants and other companies in the service industry—where workers are paid by the hour, have hours that change from week-to-week, and are especially vulnerable to wage theft—are complaining that the wage theft cases are coming from people who, in general, want to be paid more, they’re right. The fight for higher minimum wages across the country has highlighted the problems low-wage workers face in their workplaces, and wage theft is one of the most common ways they’re denied even the measly current minimum wage of $7.25 an hour.
Wage theft is old, but before now workers might have been too scared to complain or go to an attorney on their own. “I think one reason why it’s coming up more now is that it’s tied to a real organizing campaign where fast food workers are demanding and protesting,” says Tsedeye Gebreselassie, a senior staff attorney for the National Employment Law Project, which is not directly involved in any of these cases.
By law, companies have to pay their employees minimum wage, and overtime pay should kick in once an employee works past an eight-hour shift in a day. Five years ago, in a survey funded by the Russell Sage Foundation and conducted by researchers from the National Employment Law Project, UCLA, Cornell University, and the University of Illinois, Chicago, a quarter of low-wage employees reported they hadn’t been paid the minimum wage in the prior week, and three-quarters said they were denied overtime.
As someone who has spent the past three years reporting from low-income communities across the country and grew up in working-class family in a poor part of Arkansas, I hear stories of wage theft all the time. Onuaguluchi’s view about overtime is common—I’ve known people who have worked in fast-food restaurants and routinely pulled several double shifts in a week, but as long as their hours did not total more than 80 in a two-week pay period their bosses did not pay overtime.
I’ve also heard of bosses who don’t pay correctly, and paychecks come with hours missing. Those mistakes are harder for workers to figure out than you would think because they need to keep records on exactly when they worked and how many hours it was, and compare it to what their paychecks say when they arrive a week or two later. But at the end of the day, these cases are relatively easy to prove because records of time sheets will show how many hours each employee worked and whether they were paid properly. Rounding down, as Onuaguluchi did, would be evident.
Many stories about wage theft, though, offer more insidious examples that are harder to fight. I know of people who’ve had to run errands on behalf of their workplaces before they even show up for work, and are expected to arrive every morning with said errand completed. I know people who’ve had to clock out for breaks they can’t take. Sometimes, workers are expected to have a certain amount of work done before they clock in at the official start of their shifts, or are asked to or expected to finish a task once they’re already gone, according to their time sheets. It would be harder to tackle cases like that in court because these practices might not be codified or routine, but the basic idea is that bosses at companies like this don’t rank their employees’ time as valuable.
In fairness, the direct bosses like Onuaguluchi are often squeezed themselves. While three-quarters of these kinds of stores are owned by franchisees who own multiple units and are often making quite a profit, their profits rely on running their operations as cheaply as possible. The small-business man or woman who owns one or two might struggle to pay their employees properly, although I have little sympathy for those who break the law. That’s because franchise fees are expensive: even a franchise fee considered relatively affordable, like 7/11, takes $31,000 to start up. McDonald’s requires $45,000 and that the owners have $300,000 in cash or other funds available to them.
Companies like these also require other licensing fees to be paid, and sometimes franchisees even pay rent because the parent company owns the physical location of the store.
So, people like Schneiderman have promised to go after Papa John’s, and other big companies that franchise stores as well. What Papa John’s and their ilk say is that they’re not responsible for the ways their franchisees pay people. Yet they intensely manage their brands, which often includes monitoring time sheets that franchisees send in, quality control tests that could influence hiring and firing decisions, and other fine-grained aspects of their operations. Even more directly, attorneys could argue that these companies charge their franchisees so much in fees that they know, or should know, that the only way for them to make a profit is to shortchange their employees.