From 2010 when Miami Dade County first passed an ordinance prohibiting wage theft, the popularization of the term has reframed the non-payment of wage debate across the country. The focus in the early days of wage-theft enforcement was on undocumented workers not being paid, but over the past decade state and federal enforcement agencies have dramatically increased the resources dedicated to investigating and prosecuting wage theft cases to help all categories of workers recover their lawful wages.

The Massachusetts Attorney General’s Fair Labor Division (FLD) has undertaken a significant effort to identify and prevent wage theft. That effort has included outreach to the legal community and monthly wage-theft seminars to educate people on wage theft and available legal remedies. The recently elected Attorney General, Andrea Campbell, has pointed out in interviews that wage theft will be a priority of her term in office.

This article will help AIM members familiarize themselves with wage-theft enforcement and advise on steps they can take to minimize their risk of a non-payment of wage claim.

What is wage theft?

Wage theft occurs when an employer doesn’t pay an employee the benefits to which she or he is entitled under the law.  The term may include wages, meal breaks, overtime pay, and any other ‘benefit’ that the employee has earned but not received.

Wage theft does not require an intentional act on the part of the employer. Sloppy record-keeping or poor judgment on the part of a manager regarding an employee’s work time is sufficient to trigger a complaint under the law. Massachusetts treats the failure to pay wages as a civil matter rather than a criminal matter.

From 2017 to 2020, according to one estimate, at least $3 billion in unpaid wages was recovered across the country through the efforts of the US Department of Labor, state wage-and-hour divisions and private rights of action. The industries involved run the gamut from home health care to construction to hospitality.

It is important to remember that non-exempt (hourly) employees must be paid for every minute of time they work in Massachusetts.

EXAMPLES OF WAGE THEFT

Some of the more common examples include minimum-wage and overtime violations. But the list is much longer than that and includes the examples below:

• Withholding an employee’s final paycheck after the employee leaves the job.
• Making illegal deductions from an employee’s paycheck.
• Withholding tips.
• Asking employees to work off the clock or after they punched out.
• Cutting employees’ meal break short or asking them to work through the break.
• Making employees pay for work-related purchases without reimbursement.
• Misclassifying employees to not be counted as employees (i.e., independent contractors).

Avoiding Problems

Steps an employer may take to avoid being the subject of a wage theft enforcement action include:

• To avoid a minimum-wage violation, be sure you know the minimum wage in every jurisdiction you operate. In Massachusetts, it is currently $15 an hour but many states have different rates. To get more information on minimum wage throughout the country, please visit this website.
• Pay all eligible employees their proper overtime rate (1.5 times their hourly rate) for all hours worked more than 40 hours in a work week. Remember that wage-and-hour laws treat each work week as a separate period of time so even if you pay an employee biweekly you may not average out the hours over two work weeks in order to avoid paying overtime for one of the weeks. The law is available here.
• Massachusetts has two rules regarding payment of a final paycheck. If the employee is terminated the employer must pay the employee his or her final paycheck, including all wages earned but not yet paid and accrued but unused vacation time, through that day. If the employee voluntarily resigns the employee may be paid the next regularly scheduled payday. The law is available here.
• Massachusetts law requires employees to receive their paycheck within six days of the close of the pay period. Employers may not withhold the final paycheck to compel employees to return company equipment. An employer may make deductions in limited contexts, for example, if there is a definite amount the employee owes such as advanced vacation time or a loan. In those cases, the employer may recoup some or all the money provided the employee receives at least minimum wage for every hour worked during the final week of employment. That means the employer may have to work out a separate agreement regarding the repayment of an outstanding debt or bring the employee to Small Claims Court in order to recoup any remaining balance or company equipment.
• Be sure that employees stay on the clock for all the time they are scheduled to work. Massachusetts recognizes timeclock rounding for the purpose of allowing employees to either punch in or out slightly before or after their scheduled worked time “provided that this manner of computing working time averages out over a reasonable period of time so that an employee is fully compensated for all the time he or she actually worked.”
• All employees in Massachusetts must be paid within six days of the end of the pay period. While usually not an issue, it may occasionally become a problem when an employer ends its work week on Saturday, adopts the following Friday as payday and a holiday falls on Friday, causing the company to delay payroll until the day after the holiday (i.e., seven days).
• Under Massachusetts law, an employer may not charge an employee for uniforms. The Massachusetts regulation states that “[a]n employee or prospective employee who is required to purchase or rent a uniform shall be reimbursed for the actual purchase or rental cost of the uniform.” This regulation also means that an employer may not attempt to recoup the value of uniforms from the employee’s paycheck.
• Massachusetts has one of the strictest independent contractors laws the United States. The three-prong test makes it extremely difficult for an employer to classify someone as an independent contractor if that person is working on your property performing labor similar to what other employees are doing at your company.

Remedies

Employers in Massachusetts may face wage-theft charges from three different directions. They include the U.S. Department of Labor, the Massachusetts Fair Labor Division (FLD) and private right-of-actions claims. In cases where employees/individuals bring a private right-of-action claim in court, they must first file a claim with the FLD.  If the FLD elects not to pursue the case, it will provide the individual with a private right of action letter.

If the individual prevails with a private claim, the individual will be entitled to three times the unpaid wages (i.e. treble damages) from the employer. Because there are no exceptions to the treble-damages rule, employers must ensure that they pay the correct wage rate to an individual within the timeframe provided by law. If an employee questions the amount on her or his pay stub, investigate it as quickly as possible and make any necessary corrections as soon as it is determined that an error was made.

Final thoughts

The phrase “wage theft” is a successful rebranding of terms such as non-payment of wages or wage-and-hour violations. Whatever it’s called, the risk for Massachusetts employers may be significant if they are found to have violated the wage-and-hour laws. Employers can and should take steps to minimize that risk by performing an internal pay practices audit to ensure their compliance with the requirements listed above.

AIM members with questions about this or other human resources topics may contact the AIM Employer Hotline at 1-800-470-6277.