As employees join the “Fight for 15” and attempt to raise the minimum wage, many workers across the country are fighting just to collect last week’s paycheck. Now, following the example of other cities, counties, and states, Philadelphia is changing the way it operates to make it easier for employees to collect the money they have earned and to deter employers from engaging in a practice known as wage theft.
Wage theft occurs when an employer does not pay an employee correctly. It takes many forms: failure to pay employees for hours they have worked, payment that is less than the minimum wage, failure to pay employees their proper overtime rate, and more. A recent report from Temple University’s Sheller Center for Social Justice estimates that in any given workweek, Pennsylvania employees lose between $19 and $32 million dollars due to wage theft. In the Philadelphia area alone, tens of thousands of wage theft cases occur every week. To address this reality, the Philadelphia City Council unanimously approved an ordinance that will increase the city’s capacity to enforce the state and federal wage laws that are designed to protect employees from wage theft.
The ordinance makes two important changes to Philadelphia’s current regulatory scheme. First, the ordinance creates a Wage Theft Coordinator position within the city government. The Coordinator will receive, review, and adjudicate new wage theft complaints. While adjudicating, the Coordinator will examine the evidence—which could include records of hours worked and rates of pay—and determine if an employer has violated any wage laws. If the employer is found guilty and refuses to comply with the judgment, the Coordinator will have the authority to take further action by filing a complaint in court.
Philadelphia residents can also always file complaints with the U.S. Department of Labor (DOL), the federal agency that enforces federal wage laws. However, Councilman William Greenlee, the sponsor of the new Philadelphia ordinance, reportedly believes that a Philadelphia Wage Theft Coordinator will process complaints more quickly than the federal government will.
Second, the Philadelphia ordinance creates stronger consequences for employers who are found guilty of wage theft. In addition to requiring employers to pay wages and penalty fees, the ordinance allows the city to suspend, revoke, or deny any city-issued licenses or permits for employers who have violated federal or state wage laws within the three most recent years.
Illinois’s Cook County Board of Commissioners passed a similar ordinance earlier this year that also aims to deter wage theft by increasing the costs for businesses that violate wage laws. In addition to revoking licenses, the county’s ordinance prohibits employers who have violated wage laws from receiving property tax abatements and future county contracts for up to five years from the date of the judgment. When applying for these programs, employers must sign an affidavit certifying that they have not broken federal or state wage laws.
Of course, stronger ordinances and laws do not necessarily mean that employees will ever actually get their wages. In California, for example, a 2013 study revealed that from 2008 to 2011, only 17% of the employees who won wage theft cases actually received any money. Often, employers exploited legal loopholes by winding down their businesses and creating new companies that are insulated from the previous company’s wage theft liabilities.
Recognizing that employers can escape wage theft consequences, California lawmakers increased their labor department’s enforcement powers over wage theft judgments in order to mitigate loopholes and ensure that employees receive payment. Last month, they passed a law that authorizes that department to place liens against an employer’s properties and to require employers who commit wage theft to post bonds.
The new Philadelphia ordinance does not include authorizations like these. And even with increased enforcement, wage theft may continue if employees do not know their rights under wage laws. The Temple University report explains that some employees are not aware of key government agencies and policies (or even that a minimum wage exists). Without enough knowledge among deserving employees, some legitimate complaints may go unfiled.
For this reason, the Philadelphia ordinance imposes a notice requirement on employers to inform employees of their rights under the new ordinance. The employer must provide this information in English and any other language spoken by at least 5% of the employer’s work force.