New Trump Administration Policy Does Not Fine or Penalize Employers for Wage Theft

By Sahid Fawaz

The current administration is trying a pilot program against wage theft that has many people shaking their heads in disbelief. reports:

“Imagine a robber enters a bank, demands the contents of the safe, flees with bags of cash, and once caught, has to do one thing: return the stolen money and promise not to do it again. No penalty, no prosecution, no additional deterrent. More people would likely think, “Why not try? If I get caught, the worst that could happen is I would give the money back.”

The federal labor department this month announced a nationwide pilot program which is pretty close to this scenario. Under the Payroll Audit Independent Determination (PAID) program, the U.S. Department of Labor would enable employers who have underpaid their hard-working employees to simply pay back those wages owed, while avoiding any penalties and damages. It’s a cute acronym for a very bad idea.

Under federal law and most state labor laws, the penalty for wage theft is not just making employees whole by putting the wages back into workers’ pockets, but additional damages and penalties. These additional costs deter employers from breaking the law, and acknowledge the hardship that workers face when they are unpaid or underpaid, particularly minimum wage and other low-wage workers like janitors, caretakers, carwash workers, construction and garment workers. Waiving penalties eliminates any deterrent impact, and giving up damages is unfair to workers.

The Labor Department’s website notes that employers can avail themselves of PAID only once for the same violations, but why should employers be able to violate workers’ rights once without penalty? And more importantly, what provisions will exist for monitoring employers to ensure that they comply with the law in the future? The program requires the employer to provide ‘a certification that the employer will adjust its practices to avoid the same potential violations in the future’ — a laughably insufficient measure. There seems to be no plan beyond the honor system.

The program is aimed at well-intentioned employers who inadvertently violate the law, but the right approach for them is compliance assistance and education, not a pass on violations. The California Labor Commissioner’s Office, for example, has a self-audit program: employers who discover their own violations can come forward, get assistance with auditing their payroll, and pay wages owed and damages; they receive a discount on penalties to the State. This way, workers are made whole, employers are incentivized to comply to get a clean slate, but they, not their workers, cover the cost of their mistake.

Myriad studies have demonstrated the extent of the wage theft, like a recent report by the Economic Policy Institute which found that 2.4 million workers lose $8 billion annually in the ten most populous states because of minimum wage violations alone, without accounting for overtime or other laws. This doesn’t happen because of honest employers who make a calculation error or can’t make payroll for one pay period.”

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