Bloomberg Law
Free Newsletter Sign Up
Bloomberg Law
Welcome
Go
Free Newsletter Sign Up

Wage Violations Targeted in Latest State Legislative Proposals

June 28, 2022, 9:30 AM

Massachusetts’ latest proposal to counter wage violations would emulate a heavily disputed California employment law by authorizing workers to sue employers on behalf of the state for wage payment violations, potentially letting them escape mandatory arbitration.

The bill is one of several ideas that Massachusetts and other states are considering in order to crack down on violations that are sometimes called wage theft, which is notoriously difficult to police.

But attorneys who represent large employers fear the states’ efforts—including a newly enacted Colorado law and New York legislation that stalled but could resurface next year—would bring heightened fines, increased litigation, liens on company property, liability for employers’ business partners, and even criminal charges for businesses or their owners.

“The political focus is on protecting low-wage workers,” said Alison H. Silveira, an employment lawyer at Seyfarth Shaw LLP in Boston. Massachusetts already has one of the country’s most aggressive wage theft laws, imposing damages of three times the unpaid wages, she said. And the latest proposal makes no exception for an error by employers or their payroll processors, even if they voluntarily correct it before a claim goes to court.

“Any good-faith mistake is punished the same way as someone who was trying to steal the wages of their workers,” Silveira said.

Supporters of the Massachusetts legislation, including Attorney General Maura Healey (D), say the added enforcement tools are needed to prevent employers from underpaying their workers and getting away with it. The bill would let the AG’s office seek court injunctions and issue stop-work orders on businesses suspected of ongoing wage violations.

The proposal (H 4681) also would let workers and whistleblowers bring public enforcement cases on behalf of the AG, potentially giving them an avenue to escape arbitration clauses and class-action waivers they signed in their employment contracts. The provision is similar to California’s Private Attorneys General Act, which employers have challenged in court—including in a case brought by Viking River Cruises Inc. that resulted in a US Supreme Court decision this month limiting how workers can use such lawsuits.

The Massachusetts bill is pending in the state House but has a long list of co-sponsors, giving it a strong chance of passage in the Democratic-majority legislature.

The state legislative action on wage theft comes at the same time that the US Department of Labor is facing difficulties in keeping and attracting enough investigative staff to enforce federal wage and hour laws.

Federal, State Efforts

Recovery of lost wages via federal enforcement outstripped state agency efforts, accounting for nearly $1.2 billion in recoveries versus $558 million recovered by state labor departments and attorneys general between 2017 and 2020, according to an Economic Policy Institute report. Class-action litigation topped them both, recovering about $1.5 billion in the same time frame, the EPI said, citing data from a Seyfarth Shaw litigation analysis.

But the total $3.2 billion recovered is thought to be a small fraction of the underpaid or stolen wages for all US workers during that period, according to the EPI report.

Challenges abound for states trying to enforce wage theft laws. That’s particularly true in the construction industry, where laborers—including many immigrants—often work short stints for subcontractors and sometimes receive payment in cash, said Colorado Sen. Sonya Jaquez Lewis (D), who co-sponsored the state’s recently passed legislation.

By the time a state agency or a court agrees with a worker’s complaint and orders the company to pay the wages owed, the business and its owners might have dissolved the corporate entity, shifted their financial assets elsewhere, or even moved out of state, she said.

“It’s not the majority of construction companies or contractors. It’s a few bad apples, but it’s spread out in enough areas that it adds up to $750 million in lost wages,” she said, citing a figure from the Colorado Fiscal Institute’s research on wage theft.

The new Colorado law—which Gov. Jared Polis (D) signed June 3—increases penalty amounts and creates potential criminal charges for employers that don’t promptly pay claimed wages, as well as for companies failing to answer information requests by the state labor department during a wage theft investigation.

“A lot of times these requests for information and documents are fairly broad and sweeping,” but employers will need to be selective about objecting to those requests, said Roger Trim, an employment lawyer with Ogletree, Deakins, Nash, Smoak & Stewart PC in Denver.

The Colorado law also gives the state labor department more authority to go after businesses that fail to pay back wages in line with state orders, letting the agency seek suspension of their business licenses. The new law caps penalties for each wage violation at $3,000, a nod to protecting large employers from excessive fines while focusing on helping low-wage workers.

Under the prior state wage theft law, “we gave them no real enforcement mechanisms, and that’s what this bill does,” Jaquez Lewis said. “We wanted to really aid the folks that might not have the money to hire a private attorney.”

New York Lien Proposal

New York state lawmakers this year also considered, but didn’t pass, a tougher new approach to enforcing wage payment laws: giving employees the power to place a lien on their employers’ property in the amount of unpaid wages owed.

The bill, A 766, passed the state Assembly but didn’t get a vote in the Senate, although a companion bill was sponsored by the chair of the Senate’s labor committee, Sen. Jessica Ramos (D).

The measure could pop up again, as the legislature has considered various bills to address wage theft in the last several years. It passed a similar employee lien proposal in 2019, but former Gov. Andrew Cuomo (D) vetoed it in early 2020, citing concerns about its constitutionality.

The measure “would provide a tremendous amount of leverage to employees,” employment lawyers at Littler Mendelson PC wrote in an analysis of the bill. “In effect, employees would be empowered to put liens on the property of their alleged employer (including both company property and individual property) by merely making an accusation of a wage and hour violation, rather than after a finding of liability.”

To contact the reporter on this story: Chris Marr in Atlanta at cmarr@bloomberglaw.com

To contact the editors responsible for this story: Laura D. Francis at lfrancis@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com