Every year, far too many Iowans experience “wage theft” when they are cheated out of wages they have earned. Some are not paid for all of the hours they actually worked; some are paid “off the books” at less than the legally mandated minimum wage; some earn tips they do not get to keep; some are not paid at the legally mandated rate for overtime; some leave a job or contract arrangement and never receive their final paycheck.
What is Wage Theft?
Wage theft occurs whenever a worker is robbed of legally owed wages because an employer breaks the law or a contract. Common forms of wage theft include:
• Nonpayment of wages: An employer fails to pay workers for some or all hours of work performed, or fails to pay workers in a timely fashion.
• Underpayment of wages: An employer pays workers less than they were promised or less than they are legally owed under state or federal minimum wage or overtime statutes.
• Tipped job violations: An employer pays tipped employees less than the legally mandated minimum wage for tipped jobs, forces tips to be “shared” with managers or steals workers’ tips.
• Deduction violations: An employer diminishes workers’ pay by making unauthorized or illegal deductions from paychecks
• Misclassification of employees: An employer falsely labels an employee as an “independent contractor” in order to avoid obligations to pay minimum wage and overtime (along with a host of other employment laws, and unemployment insurance, workers’ compensation, and income tax payments). The “independent contractor” exemption is not meant to apply to those providing services under the direction and control of others; one example of misclassification would be to call a cashier a “salaried manager” to avoid the overtime provisions of federal law.
Annually, wage theft deprives low-wage Iowa workers of an estimated $600 million, deprives state and local government of revenue, and puts law-abiding businesses at a competitive disadvantage. A new report for the Iowa Policy Project estimates the impact of wage theft in Iowa, assesses the current state of public policy and enforcement systems intended to prevent wage theft, and surveys effective models for addressing the problem so that communities, state agencies, and policymakers in Iowa can begin to address it.
Posted by Jennifer Sherer
Director, University of Iowa Labor Center
President, Iowa Policy Project board of directors