Portside

Across the country, millions of workers are being cheated out of the minimum wage or overtime pay they’ve earned. It’s an unlawful but not uncommon practice known as wage theft. The sorely insufficient funding for the U.S. Department of Labor’s enforcement divisions has long hamstrung its efforts to combat high rates of employer non-compliance.

The Department of Labor’s ranks have shrunk significantly due to the Trump Administration’s efforts to slash the federal budget, compounding the challenges created by policies designed to undermine the rights of workers. All this has further blunted the agency’s ability to enforce the laws designed to protect them. And now, the administration just abandoned one of the tools it has at its disposal for fighting wage theft, one that we had a hand in creating.

Fifteen years ago, we were part of a Department of Labor team that developed a strategy for promoting wage law compliance that didn’t depend on hiring more enforcement personnel. It was based on the rules set by the Fair Labor Standards Act, which mandates that when an employer commits wage theft, the worker is entitled to recover not just the underpayment but an equal amount in “liquidated damages,” with very limited exceptions. 

The law’s requirement of payment of double-back wages makes sound enforcement sense. It more fully compensates workers for costs they incurred on account of being underpaid, and it also incentivizes employer compliance by raising the stakes for breaking the law.

Look at it this way: If an employer who shorts his workers is only required to pay back what he owed them in the first place, he’s really getting an interest-free loan that the worker never agreed to. That’s hardly a recipe for encouraging compliance.

Still, before 2010, the Department of Labor had been resolving the vast majority of the violations it found by requiring employers to pay their workers back wages only. So we—both long-time government attorneys—and our team recognized that needed to change, and we conceived a different enforcement policy. Employers who engaged in wage theft were given a choice: be sued in court for double back pay, or resolve the case for that same amount without having to go to court. 

No employers were forced to pay double. They could go to court and challenge the Department of Labor’s claims. But if, recognizing they’d likely lose in court and that settlement outside of court was a better option, they’d need to pay the workers the double back wages the law says they owe.

The Labor Department began implementing this policy in 2010, with notable success. Over the past fifteen years, workers in scores of cases have received millions of dollars in back wages and liquidated damages, the department’s litigation resources have been spared, and U.S. district courts are less clogged than they would have been if these resolutions in lieu of litigation hadn’t happened.  

And yet, on June 27, Donald M. Harrison III, the acting administrator of the Department of Labor’s Wage and Hour Division, saw fit to prohibit staff from obtaining, in any out-of-court settlement, double back pay for workers victimized by wage theft. 

The clear impact of this directive will be that most workers who suffer wage theft will once again become unwilling interest-free lenders to their employers, and corner-cutting employers will have far less incentive to comply with the law. In other words, the new policy is a big setback for efficient, effective enforcement of worker protection laws.

Across the nation, workers will suffer as a result.    

This column was produced for Progressive Perspectives, a project of The Progressive magazine, and distributed by Tribune News Service.

Michael Felsen concluded a thirty-nine-year career with the U.S. Department of Labor in 2018, serving as New England regional solicitor from 2010-2018.

M. Patricia Smith was solicitor of labor from 2010-2017.