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Wage theft often goes unpunished despite state systems meant to combat it

Investigation exposes impact of wage theft
First-of-its-kind CBS News investigation exposes impact of wage theft on workers across America 42:03

This is an updated version of a story first published on Jan. 24, 2023.

If someone steals money from their employer, they could be guilty of a serious crime. But what if an employer takes money from their employee's paychecks? 

There's a good chance they'll get away with it, a CBS News investigation found. 

Whether it's paying less than minimum wage, withholding tips or pressuring staff to work off the clock, so-called wage theft siphons billions from Americans' paychecks. Through extensive data analysis and interviews with local, state and federal officials, along with victims of wage theft across the country, CBS News found the systems designed to protect those workers often fail. 

CBS found that even when they win their cases, inconsistent enforcement and a patchwork of local, state and federal regulations means many victims are never paid a dime, while others are left waiting months or even years for a resolution. 

Wages unpaid

Asael Espinosa spent many nights for the last 10 years on the road, delivering pizzas so people in his Chicago neighborhood can put food on their tables. But he's struggled to put food on his own family's table.

Instead of earning an hourly wage, Espinosa makes just $4 for every order he delivers. That means on slow nights without an order, he isn't paid a dime.

CBS News rode with Espinosa in late November as he made his deliveries.

"In the course of almost an hour, I have only made two deliveries," Espinosa said. "That's $8. So, if you think about it, I may not even be earning minimum wage."

As the sole breadwinner in the family, Espinosa has struggled financially.

"We only have two children and the youngest is in high school and the other is going to school," he said.  "Everything I do, I do for them. I want them to have a better future."

Espinosa says with only a $4 per delivery pay structure, he relies on tips to fill the gap. But those tips are unreliable, and sometimes he comes up short.

With the assistance of Arise Chicago — a local nonprofit that helps wage theft victims — Espinosa filed a lawsuit in late 2022 to recover some of the money he says he's owed.

In response to their suit, Espinosa's employer, Naty's Pizza, filed a motion to dismiss the case, claiming in part that he and other employees were independent contractors who also drove for gig delivery services such as Uber Eats. The motion also claimed Espinosa was allowed to set his own hours and could refuse a delivery if he wished.

Espinosa's attorneys and the team at Arise Chicago disagree. They said Naty's incorrectly classified Espinosa and other delivery drivers as independent contractors yet treated them as hourly employees — a form of wage theft.

In their response filed in court in early January, Espinosa's attorneys said he'd "never worked for any app-based business including Lyft, Uber, or Uber Eats," and say that, despite classifying him as an independent contractor, Naty's required him to work a regular schedule and do "side work" such as cleaning bathrooms, stocking shelves and taking out trash — all unpaid.

"They're showing up for a certain shift," said Jose Uribe, workplace justice campaigns organizer at Arise Chicago. "They're only doing deliveries for that pizzeria. They're not independently incorporated or running their own businesses. They're not coming and going freely. So, what you'll see is that delivery drivers will queue in line and sit at the restaurant waiting for these deliveries. And all that time they are sitting there is unpaid time, but they're required to be there standing by, waiting for orders to come in."

An attorney for the owner of Naty's declined to comment other than to refer to the motion to dismiss. The judge in the case ruled in favor of Naty's. The workers and their lawyers are appealing and at the same time pursuing a settlement with the employer. 

In late June, U.S. Senators Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio, both Democrats, sent letters to nearly two dozen companies that they say appear to have stolen wages from low-wage workers by not paying overtime and misclassifying their job descriptions as "managers."  Many of those companies, among the nation's most recognized fast food and service companies, were named in a report from the National Bureau of Economic Research as having the highest proportion of positions used to strategically avoid paying workers overtime.  

Wage theft can take many forms: paying less than minimum wage, not paying overtime, not giving tips to workers who are supposed to receive them, or misclassifying workers as independent contractors while treating them like hourly employees.

That's part of why wage theft is so "systemic," said Shelly Rusicka, Arise Chicago's development director.

"It's not a one-time purse snatching or one-time home robbery," Rusicka said. "This is every single day. Usually that worker goes into that factory or goes into the restaurant, [and] every day their tips are stolen or every day they're not paid overtime. So, it adds up and up and up and over time till it becomes billions of dollars."

Wage theft leaves some workers with "less than minimum wage" 03:56

All forms of wage theft are against Illinois law — and the laws of nearly every other state, along with the federal government. Yet many employers still commit wage theft, often because they face few consequences when they get caught, according to Uribe.

"Often what we see with people who come to us with wage theft cases is 'I feel like my employer did this because they were confident they could get away with it,'" Uribe said.

Little accountability

That confidence is well founded. Most wage theft is never reported in the first place, according to Rusicka.

"Sadly, it's people who have the least political power [who are victims of wage theft]," Rusicka said. "If you're poor, you might have to work three jobs and you don't have time to do anything else, basically, besides work and try and take care of your family the best you can. If you don't speak the language, you might be afraid to go and talk to the government."

According to one estimate from the nonprofit think tank Economic Policy Institute, reported and unreported wage theft could amount to as much as $50 billion per year owed to workers.

That number dwarfs criminal offenses such as robbery, which accounted for just under $500 million in losses in 2019, according to FBI data. Burglary accounted for about $3 billion in losses that same year, and motor vehicle theft made up about $6 billion.

Even when wage theft is reported, employers often manage to avoid paying back the wages they owe, according to the data obtained by CBS News.

CBS News submitted public records requests to nearly every state labor department in the country and built a database of more than 650,000 total complaints. Of those cases, state agencies ruled in favor of claimants only about half of the time.

Even when workers won their claims, more than a third of those successful cases — totaling nearly a billion dollars — showed no money was ever recovered.

That's a scenario Texas construction worker Oscar Torres knows all too well. In the last four years, the Texas Workforce Commission has ruled in his favor in four separate wage theft cases, but he still hasn't seen a dime.

In his most recent claim, Torres said his employer — a small remodeling company — didn't pay him for 10 full days of work.

Torres said every time he wins a case, the companies that owe him "just disappear" and the state can't recover any of his money.

A spokesperson for the Texas Workforce Commission confirmed Torres' story to CBS News Dallas-Ft. Worth, acknowledging he was awarded money in all four cases, but none has been paid.  

Waiting more than a year

To make matters worse, state wage theft cases often take months or even years to be decided. The median case among those CBS News analyzed lasted more than six months. Many dragged on for a year or more.

In California, Maria Arroyo has been waiting far longer than that.

A single mom with three kids, Arroyo said her employer, an Oakland, California, fast food restaurant, paid her less than minimum wage and denied her overtime pay and sick leave.

"I was working there for a long time, and I wasn't even making the same money that the new guys were making at that point," Arroyo told CBS News Bay Area reporter Max Darrow.

With the help of a local legal aid organization, Arroyo filed a complaint with the state labor commission in 2019. She says she's still waiting for a resolution.

"I feel like they're ignoring me, and they're not interested in my case," Arroyo said.

The same year Arroyo filed her complaint, Antonio Dominguez-Alcala's own wage theft case was just wrapping up — or so he thought.

Along with more than 60 other employees at a Culver City, California, car wash, Dominguez-Alcala alleged his employer committed a range of wage theft violations, including not giving employees required time off and overtime.

Dominguez-Alcala told CBS News Los Angeles reporter Ross Palombo he was paid only tips and "wouldn't get rest breaks, meal breaks [or] overtime."

The state agreed, awarding the workers more than $2.3 million — the largest in the state's history. But Dominguez-Alcala said his case is still in limbo, tied up in an appeal process that has dragged on for years.

Delays like those can discourage victims from filing wage theft claims in the first place, according to Uribe.

"It's not something that generates trust in the public, you know?" Uribe said. "So if you file a complaint and you're waiting eight months to get a determination on your complaint, you as a worker, having gone through that process, are not tremendously likely to go to someone else and say 'Hey, you know, I wasn't paid for my wages, you know, I went to a group like Arise Chicago and they filed charges with the Illinois Department of Labor. And in eight months, I got my money.'"

"It destabilizes everything around you"

Whether they're paid after eight months, a year, or never at all, the consequences for workers are the same: they're out a paycheck and struggle to make ends meet.

The average amount owed in the cases CBS News analyzed was just under $1,000. That's enough, according to Uribe, to cause genuine financial hardship for victims.

"A lot of people are living paycheck to paycheck," Uribe said. "So, if you're if you're missing $1,000, I mean, what do you say to … your landlord, to the grocery store, to the bank, to the utility company. You can't just tell them, 'My employer didn't pay me and so I'm not going to pay you.'"

For minimum-wage workers, wage theft can be "a lot of money," advocate says 02:53

Many wage theft claimants were owed far more: in nearly 30,000 of the cases CBS News analyzed, state labor agencies found $10,000 or more was owed.

Amid rising inflation, that can mean increased strain on workers' pocketbooks. Espinosa said that, as a pizza delivery driver, recent spikes in gas prices have only worsened his financial situation.

"[Gas] went up a lot in price," Espinosa said. "We talked to the owner and asked for more money for gas, or that the delivery price should go up because … it was actually very little. We couldn't survive with that."

Torres said losing wages "destabilizes everything around you."

"I've fallen behind on rent," he said. "I've had to cut back on food expenses. It limits the ability to go out or even pay rent or gas to be able to go to another job to get the income that I need."

Stronger enforcement powers

In California, wage theft claimants had the longest wait times of any state whose data CBS News analyzed: 439 days. Less than half of the cases resulted in a payment.

That dysfunction led Santa Clara County officials to take matters into their own hands.

There, restaurant workers — among the most vulnerable to wage theft, according to U.S. Department of Labor data — now benefit from a promising solution: an enforcement program that goes after businesses who are found to have committed wage theft but won't pay up.

Beginning in 2019, Santa Clara County launched its own Office of Labor Standards Enforcement, and the county began revoking the food permits for restaurants that don't comply with wage and hour laws.

"A core part of the county's responsibility is ensuring that restaurants operate in a safe and lawful way," said Greta Hansen, the county's chief operating officer. "Other food service providers operate in a safe and lawful way, and so we leverage that authority to ensure those businesses are also complying with any wage judgments against them."

When a restaurant has a wage theft judgment against it but won't pay employees, the Office of Labor Standards reaches out.

"Ultimately, if a business really won't pay its workers the final wages they've been determined to owe, then we can take action on their food permit," Hansen said.

Hansen said the program has seen immediate success; even the threat of losing their licenses motivates businesses to pay up.

"We've been very fortunate because we've had a 100% success rate so far in actually getting businesses we've reached out to comply without taking that step [of revoking licenses]," Hansen said. "And that can mean immediately paying a judgment that they had not paid previously]."

New Jersey has a similar policy. There, a business license can be suspended if an employer won't pay a wage theft determination by the New Jersey Department of Labor.

A spokesperson said the state has issued 57 "stop-work orders" since 2019.

Other states take a less aggressive approach.

In Texas, Ed Serna, the head of the Texas Workforce Commission, said threatening to shut down businesses isn't always the right strategy.

"We have to be cautious about overstepping what we are doing, that we become too engaged in sort of the tactics of 'we are going to shut you down if you don't do 'X.'' That leads to an environment for both employers and employees that is just not very conducive to positive growth," Serna told CBS News Dallas-Ft. Worth reporter Brian New.

While he acknowledged the system there could be improved, Serna said he thinks his agency has the tools it needs, adding that his focus "is to try and help Texans — Texans who are individuals or Texans who are businesses."

A patchwork of protections

Other local governments have their own ways of addressing wage theft, as do most states. The federal government also has its own wage theft claims process.

Depending on where someone lives, they might have more or fewer ways to fight for what they're owed.

In big cities like New York, Los Angles and Chicago, victims of wage theft can report it to the city, the state and even the federal government. But in some states, such as Alabama and Florida, where there is no state-level process for filing a wage theft claim at all, workers have fewer options.

U.S. Secretary of Labor Marty Walsh, the top labor enforcer in the country, said states that lack any wage theft process at all are "just wrong."

Labor Secretary Marty Walsh apologizes for long wait times in wage theft cases 07:09

"When you're in different states, you shouldn't handle it different ways," Walsh said in an interview with CBS News. "And if you happen to live in the state of Illinois, you happen to live in the state of California [or] live in the state of Massachusetts, you might have some great wage laws on the books that help you recoup money. But if you live in some of these other states that aren't as top of the priority list, that's unfortunate because a lot of those states that that, you know, don't put wage theft as a top priority. Those are the states that people are really being abused in losing their wages."

Faced with state claim processes that often don't get results, many organizations such as Arise Chicago have stepped in to fill in the gaps, connecting victims of wage theft with attorneys who will take their cases to court.

Rusicka said Arise Chicago has led more than 250 campaigns involving wage theft and other workplace issues such as sexual harassment and health and safety violations. 78 of those cases involved lawsuits, Rusicka said.

This patchwork of systems can make it even harder for victims to recover lost wages, especially if they are immigrants or are undocumented, said Uribe.

"If you're not familiar with what the laws and the protections that exist, if you are someone who is new to this country or believes that their [immigration] status will be an issue ... you're probably going to leave that alone," Uribe said.

Often, employers threaten to report workers who complain of wage theft to immigration, which is exactly what Alejandro Perez Gonzalez said happened when he spoke up.

"Aside from non-payment, [my boss] intimidated us, calling immigration, wanting us to be sent back to Guatemala," Perez Gonzalez told CBS News Miami reporter Joan Murray.

Like so many other victims of wage theft who win their cases, Perez Gonzalez's employer was ordered to pay $5,900 three years ago but hasn't been paid a cent, according to documents obtained by CBS News Miami.

Is wage theft a crime?

Part of the problem, according to Uribe, is that "you can't go to the police and file a police report for stolen wages."

"When we're talking about wage theft, this is largely considered a statutory violation," Uribe said. "And for whatever reason, it does receive completely different treatment than if, say, you accosted someone on the street and took their wallet. And the truth is that in almost all aspects, it's the exact same. The primary difference is that it's more insidious, right? Because here you have an employer-employee relationship, you have an imbalance of power."

Many of the activists and experts CBS News interviewed made that same distinction: though it involves a form of theft, wage theft usually isn't treated as a criminal offense.

"[Wage theft victims] are afraid to come forward because they might think that they don't have any other opportunities," Walsh said. "But that is theft, that is stealing, that is a crime."

Several states do have laws that make wage theft a crime.

In California, the state Labor Commissioner's office referred 13 wage theft-related cases for criminal prosecutions, according to a report by the nonprofit news organization CalMatters, who partnered with CBS Sacramento to publish a local wage theft investigation in late 2022.

Other states have similar laws, though prosecutions of wage theft are rare.

In Illinois, employers who willfully refuse to pay wages can be guilty of a misdemeanor — a charge that can be upgraded to a low-level felony for repeat offenders. But a review of data from the Chicago-area prosecutor's office by CBS News shows only a single prosecution under that statute since 2010.

In 2019, Minnesota enacted a law that strengthened protections for wage theft victims. That law made wage theft a crime which can carry a sentence of as much as 20 years in prison for the most serious cases.

A spokesperson for the Minnesota Attorney General's office said there's been only a handful of cases prosecuted since the law took effect.

Also in 2019, New Jersey passed its own Wage Theft Act, which subjects employers to 10 to 100 days of jail time if they refuse to pay their employees.

A spokesperson for the New Jersey Department of Labor said the agency has never used that power because most companies willingly resolve their cases to avoid the risk of fines or prosecution.

CBS News obtained data on more than 25,000 cases handled by the New Jersey Department of Labor dating back to 2010. Most — about 80%— show wages were repaid.

That still leaves more than 5,000 cases in which victims weren't paid. None of those employers was criminally prosecuted, the spokesperson confirmed, adding in an email that employers can fail to pay for non-criminal reasons, such as filing for bankruptcy.

In Texas, Serna said the state labor agency can refer wage theft cases for prosecution, but most of the time prosecutors decline to pursue cases.

"A lot of the times the [prosecutors] aren't inclined to want to do that because it's not a big enough deal for them," Serna said.

More than 327,000 people were arrested for property theft in the U.S. in 2021, according to FBI data.

Even when they are prosecuted, the penalties for wage theft are often much less severe than those for shoplifting or burglary.

For example, in Illinois, willful wage theft violations up to $5,000 are class B misdemeanors — punishable by up to six months in jail. Repeat offenders can be convicted of low-level felonies that carry a sentence of as much as three years in prison.

In contrast, any theft of property worth more than just $500 in the state is a felony with a sentence of up to five years.  

If wage theft was treated the same as property theft, many of the cases CBS News analyzed could've been felonies.

CBS News compared the amounts owed for each case to the felony theft threshold in each state it obtained data for — the amount at which a misdemeanor theft becomes a felony — in each state. Of the more than 650,000 cases CBS News analyzed, it appears that more than a quarter could have been charged as felonies.

"We have to extract serious penalties"

The federal department Walsh runs faces similar challenges to the state systems whose data CBS News analyzed — in particular, long wait times for cases, which Walsh apologized for in an interview with CBS News.

Officials told CBS News the Department of Labor doesn't have the resources to pursue every single claim submitted, and Walsh said his agency has been "shortchanged on budget money" over the years.

"This has been one of my major focuses with Congress: to staff up," Walsh said. "Because if you get shortchanged dollars, Democrat or Republican — it doesn't matter who you are. And really, we should be doing more as far as trying to reclaim this [money]."

Staffing has been an ongoing issue for the Department of Labor. A recent budget document said the Department lost about 14% of its staff between 2016 and 2020, "limiting [the department's] ability to perform inspections and conduct investigations."

Walsh apologized for long wait times and urged victims who are awaiting federal wage theft claims to "hang in there."  

"Our job is to [investigate cases] as quickly as we can to recoup the wages and the money that you're owed," Walsh said. "And we're going to continue to fight for you every single day, and just know that we're fighting for you. And, you know, I'll apologize for it, for the long longevity of a case."

Rep. Rosa DeLauro, a Connecticut Democrat, is trying to fix those long wait times in the federal system. In October 2022, she proposed new federal legislation that would increase penalties, mandate better record keeping and increase funding for the U.S. Department of Labor.

"[Companies] have to be accountable," DeLauro said. "And we have to extract serious penalties if they are stealing money that is legally owed to a worker."

"If you worked, you need to be paid for that work," DeLauro said. "People today live paycheck to paycheck. It's not a soundbite, it is a reality. So, imagine, people pride themselves in their work. They go to work, they work hard. They try to do what they're asked to do, and then to deny them the wages that they are owed. And it's not [just] them. It's their families as well who suffer from this. That's why the legislation is so critical, and it is so important."

The department has other solutions it hopes will help prevent wage theft from happening in the first place. It created an app for workers to track their time sheets themselves and catch discrepancies in their pay, and also has a searchable database where workers can see if they're owed any back wages awarded by the federal department of labor. 

Meanwhile, workers like Asael Espinosa in Chicago have no choice but to keep fighting.

"It doesn't matter how long it takes," Espinosa said. We will keep fighting. And we will continue until the end, until we win this."

More coverage from CBS Local Stations:

CBS News Sacramento reporter Julie Watts, CBS News Texas reporter Brian New, CBS News Los Angeles reporter Ross Palombo, and CBS News Miami reporter Joan Murray also contributed to this report.

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