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Where Theft is LegalMapping Wage Theft Laws in the 50 States

June 2012

Tim Judson & Cristina Francisco-McGuire

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This report would not have been possible without the contributions of many individuals, organizations, and sup-porters. First and foremost, we thank the workers centers, labor unions, advocacy groups, researchers, legisla-tors, and enforcement agency staff who have been on the front lines combating wage theft and devising policiesand strategies to turn the tide on this monumental problem.

For their invaluable contributions to this report, we would like to thank our legal interns, Kyle Antonelli andGarrett Kaske; our policy intern, Robert Olsen; and our legal analyst, Ryan Nelson. They were true partners,not only in the work of researching laws in all fty states; they contributed immensely to working through the

complex methodological and policy questions needed to sort through and analyze it all.

We also thank the state agency staff who responded to our exploratory survey at the outset of this project, andwhose responses were indispensable in helping us rene the scope and approach of this report and in providingsome valuable direction in navigating state laws. We likewise thank the National Employment Law Project forreviewing a draft of our report and for their advice and insights.

This project would not have been possible without the support of our funders, in particular the Public Welfare

Foundation and the Ford Foundation. We are immensely grateful to them for enabling us to do this work ahopefully valuable contribution to helping workers across the nation achieve justice.

Acknowledgments

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Introduction: Mapping Wage Theft Laws in the 50 States 1

State Wage Theft Rankings 7

Accessing Justice 11

Transparency and Accountability 13Securing Justice 15

Misclassication 17

Wage Theft 3.0 20

Endnotes 23

Table of Contents

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The role of workers rights and workplace protections in the economic recovery has been hotly debated in statelegislatures since 2010. Conservative leaders argue that labor regulations are a strangulating force on economicgrowth, making it too costly for employers to invest in job creation. Labor advocates and progressives arguethat hard economic times are the worst time to roll back these protections, and that they are crucial to economicgrowth and stability.

These debates have played out most visibly in ghts over legislative proposals targeting the rights of govern-ment workers and unions. A central theme in conservatives cases is an assumption that trends in the privatesector mirror free market economic reality, a world where institutions that empower workers simply andunsustainably distort costs: if private sector wages are falling, thats just what the market will bear; if workersdont have pensions, its because theyre too expensive and no longer relevant. Many conservatives argue, asWisconsin Governor Scott Walker articulated, that the public sector is out of balance and needs to be broughtback in line with the private sector, where pensions, healthcare coverage, and union representation have beenon the decline for decades.

By surveying the effectiveness of laws meant to protect workers against violations by unscrupulous employers

in all 50 states, this report reveals a very different picture of the actual imbalance between private sector andpublic sector employment standards. Since the private sector workforce is virtually non-union and concentratedin lower-wage sectors, the conditions such working people face are increasingly the foundation on which theAmerican standard of living rests. Laws to guarantee an employees right to be paid what she or he is legallyowed form a bulwark against the type of mass exploitation we are mortied by in other countries, and which are

only a couple of generations distant in our own nations history.

Our research shows that states wage theft laws are grossly inadequate, contributing to a rising trend in

workplace violations that affects millions of people throughout the country. The growth of this and otherforms of the underground economy also have a serious impact on state revenues, amounting to billions of dol-lars per year in tax and payroll fraud.

Several states are acting to address these problems by strengthening their laws against unscrupulous employers.Our recent report, Cracking Down on Wage Theft, highlights some of these states, most particularly New York,which passed a law in 2010 that greatly enhanced the ability of workers to recover nearly $3 billion per yearstolen wages and for the state to recoup hundreds of millions in lost revenue simply by enforcing the law.However, the improvements that states like Massachusetts, Illinois, and New Mexico have recently made comeagainst a backdrop of virtual lawlessness. Our comprehensive survey of state laws across three categoriesessential to addressing the problemAccessing Justice, Transparency and Accountability, and SecuringJusticereveals that 44 of the 50 states (plus Washington, DC) do not receive passing grades on combat-ing the wage theft epidemic. Even the highest-ranked states New York and Massachusetts receive barelypassing grades and have just begun to develop truly effective policies for cracking down on wage theft, while

the vast majority of states have few, if any, protections at all.

These grades - which measure only statutes and not rules and regulations - are just one indication of overallstrength of the states wage theft enforcement. State agencies have, in most cases, extended rules and regula-tions further than what is provided for by statute, but the extent to which they can do so is both legally andpragmatically shaped by the statutes.

Wage Theft: A Dening National Trend

The backdrop for this report is an economic landscape that shows signs of a tectonic shift away from Americas

Introduction: Mapping Wage Theft Laws in the 50 States

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vision as a land of opportunity. Working familiesthroughout the country continue to experience aperilous decline in their economic security, and notjust in terms of persistently high jobless rates andrecord levels of long-term unemployment. Incomesfor the 99% remain stagnant, while those of theelite 1% have risen to record highs a picture thatis even worse for those in lower-wage brackets.1

The federal minimum wage has remained the samefor three years,2 declining in value by nearly $.50/hour when accounting for ination. At the sametime, low-wage employment has risen signicant-ly,3 exposing more workers to unethical and oftenillegal labor practices that proliferate in lower-wage sectors like retail and food service. Still morend themselves in precarious circumstances, with

disproportionate numbers of people working tem-porary jobs with no stability4 and/or being limitedto part-time employment because they cant nd a

full-time job.5

Wage theft, or the systemic non-payment of wages,is a problem affecting millions of workers acrossthe country. Over 60% of low-wage workers sufferwage violations each week. As a result, they lose15% of their earnings each year, on average. Thevast majority of these workers are over the age oftwenty-ve, and most are supporting at least one

child.6

Employers who engage in wage theft are not juststealing from hard-working families. By not payingworkers what they are owed, dishonest businessesnot only place law-abiding employers at a competi-tive disadvantage, they slow down the economicrecovery by depressing the consumer spendingneeded to fuel economic growth and by defraud-ing states and taxpayers to the tune of millions ofdollars.

An Overview of the ProblemWage theft has emerged as a major economicjustice issue in the last decade. A rising wave ofconcern among workers has led to a rapid increasein the number of grassroots advocacy organiza-tions focused on the issue. Over 100 worker centersformed between 2000-2006, and dozens of researchreports have been published to assess and analyzethe problem.7

This rising tide of advocacy and research hasshined light on a disturbing reality: seventy yearsafter enactment of the nations rst wage law, the

Fair Labor Standards Act of 1938, enforcementcapacity has diminished to the point where thereare essentially no cops on the beat. The U.S. De-partment of Labor (USDOL) now has only oneenforcement agent for every 141,000 workers,

down from one per 11,000 workers in 1941.8

Alltogether, state labor agencies have slightly lesscapacity than USDOL,9 resulting in less than 15%of the total enforcement coverage workers enjoyeddecades ago. State revenue shortfalls and accompa-nying state agency layoffs since the recession havelargely exacerbated this problem.10

Along with a sharp decrease in union membershipand an increase in low-wage and informal employ-ment, sharply declining enforcement capacity has

had a signicant yet predictable effect: a majorincrease in wage-and-hour violations, to the pointthat wage theft is virtually ubiquitous in certainindustries. In 2008, the National Employment LawProject (NELP) and a team of advocates, policygroups, and academic research centers undertooka survey of workers in three large cities to docu-ment the extent of wage theft. What they found wasshocking:

64% of low-wage workers experience wagetheft each week

26% are paid under the legal minimumwage

76% of workers owed overtime go unpaidor underpaid

On average, low-wage workers lose $51 perweek to wage theft, or $2,634 per year

For low-wage workers, that amounts to 15% oftheir annual income, at average earnings of $17,616

per year.

11

Worker groups and legal advocates have developedstrategies to tackle the problem in earnest since thelate 1990s. By organizing workers and buildingcommunity-based campaigns around workplacejustice cases, grassroots advocates began raisingthe prole of wage theft and other labor viola-tions. In states like Illinois and New York, theyhave built broader coalitions with legal advocates,labor unions, policy groups, and public ofcials. In

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some places, the work of advocates with state labordepartments and attorneys general has resulted intargeted enforcement strategies and policy develop-ment. In 2011, NELP produced Winning Wage Jus-tice,12 for the rst time assembling a comprehensiveguide to model policies, practices, and advocacystrategies for ghting wage theft.

Despite advances in advocacy, organizing, and insome places, enforcement, existing wage paymentstatutes have proved too modest and incomplete tobe an effective deterrent against what has becomea pervasive and entrenched problem. For instance,some states levy no nes at all for wage theft, whilemost others invoke penalties smaller than a speed-ing ticket. When employers stand to gain thou-sands of dollars from every worker they underpay,such penalties are clearly inadequate to addressthe crime. In recent years, worker advocates have

turned to strengthening state laws to better enableworkers to obtain justice.

While a small handful of states have gradually en-hanced wage payment laws, our ndings show that,until the enactment of New Yorks Wage Theft Pro-tection Act (WTPA) in 2010, only Massachusettshad developed a relatively strong, comprehensivelaw that embodied most of what are recognized asmodel policies. The most promising trend has beenthat of states (and in some cases, cities) enacting

increasingly comprehensive reforms that make ma-jor advances in wage-and-hour enforcement pos-sible. We hope that this report will fuel that trendby allowing advocates and policymakers in thestates to see clearly in which categories their ownlaws fall short, and point to ways in which they canbe improved.

NOTE: We have been intentionally general in

highlighting the areas of strength and weak-

ness in each states laws. Because wage laws have

interrelated parts and are structured differentlyfrom state to state, in most cases legislation mustbe crafted uniquely. We encourage those who areinterested in developing legislation to contact us orthe National Employment Law Project for assis-tance.

Purpose of this Report

The wage theft epidemic is drawing more attentionthan ever, thanks to a growing body of literaturedocumenting the far-reaching impact that law-breaking employers have on working families andlocal economies. Recent reports that explore theissue on a broad scale include:

National Employment Law Projects(NELP) groundbreaking 2009 study,Bro-ken Laws, Unprotected Workers, the rst toexpose the alarming degree to which wagetheft violations are truly widespread andsystematic in core sectors of the economy.

As mentioned previously, NELPs WinningWage Justice report, published in January2011.

The National State Attorneys GeneralProgram at Columbia Law SchoolsEn-forcement of State Wage and Hour Laws: ASurvey of State Regulators, an analysis ofstate-level wage and hour enforcement re-leased in April 2011 that nds major dispar-ities in how states approach enforcement.

Policy Matters Ohios report on state en-forcement capacity,Investigating WageTheft: A Survey of the States.13

Scores of reports have also scrutinized specicindustries in which wage theft runs particularlyrampant, conrming that violations of the law areboth purposeful and routine:

Seton Hall Law School Center for SocialJustices January 2011 report, All Workand No Pay, surveys day laborers acrossNew Jersey workers who are especiallyvulnerable to wage theft due to the under-ground nature of the industry and the fact

that workers, a large number of whom areundocumented, do not know their rights andare reluctant to use legal recourse.

Change to Win and NELPs 2011 study,The Big Rig, nds that the sweeping mis-classication of port truck drivers not only

helps drive prots in the industry, but isalso linked to safety violations, as well asserious environmental and public healthconsequences in the areas surrounding the

nations ports.

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However, before state legislators, advocates, andstate agencies can act, they need an understand-ing of what is already on the books and where theholes lie no easy task considering that a myriadof laws are part of a comprehensive wage theftregime, yet are not necessarily housed in the samesection of state code.

This report identies the wage theft laws in allfty states and gauges their strength, allowing

stakeholders to better determine and prioritize thepolicies in their states that need improvement. Inaddition, we evaluate states on the overall potencyof their statutes and then grade and rank them ac-cordingly, revealing which states and regions arenational leaders in combating wage theft.

That said, state laws are but one major pillar in theoverall enforcement regime, with agency regula-

tions, rules, policies, and enforcement practices re-sulting from and adding to those laws. To conduct acomprehensive survey of the entirety of each stateslegal regime would be a monumental (and probablyimpractical task). In light of that, the evaluation ofwage theft statutes in this report should be viewedas a bellwether or proxy for the overall robustnessof state laws. Most of the states that rank highesthere are generally acknowledged as having thestrongest wage enforcement regimes; those thatrate lowest have virtually no laws that would afford

an agency the authority to do much more than iscited here.

As an organization focused on the legislativebranch of government, Progressive States Networksees the vital role that statutory law plays, not onlyby dening the legal landscape, but by infusing thepopular will into how laws are implemented andenforced. The prevalence of legislative approachesto strengthening wage theft laws in recent yearsspeaks to the essential conclusion of this report:

the nations laws need an overhaul to provide theauthority, protections, and tools for the innovative,sustained, and aggressive enforcement programs togain the upper hand on this problem.

Methodology

Progressive States Network began a comprehen-sive, statutory review of all 50 states by developinga 13-question survey (see Appendix B) based on

Though we have limited our analysis to statestatutes, we point out in various sections of

this report that statutes are simply one part

of a comprehensive wage theft regime that

spans federal to local law as well as any

number of enforcement agencies at various

levels of government. While statutes are

important, the combination of statutes and

regulations is what truly determines how

effective the legal regime for enforcement

actually is.

Nowhere is this more evident than in Cali-

fornia, which, under our rankings, was one

of the lower-ranked states in the denitions

section for lacking denitions for em-

ployer and employee under wage and

hour laws an unexpected aberration given

their exemplary rankings in other wage

theft categories. This is due to the states

long-standing practice of implementing the

wage-and-hour law via wage orders ad-

ministrative regulations issued by the state

Industrial Welfare Commission. In Califor-

nia, even more than other states like New

York, wage orders are the primary means by

which wages and hours are regulated.

The 17 wage orders each correspond to a

specic industry or occupation and provide

the range of denitions missing from Cali-

fornias statutes. Though workers would

arguably be better off if the denitions wereensconced in the relative permanence of the

law, the denitions in the wage orders are

well-established in wage-and-hour jurispru-

dence in California. Unless it were done to

extend coverage to workers historically ex-

cluded from minimum wage and wage theft

laws, incorporating denitions into statutes

would not be the most important issue to ad-

dress in California.

Statutes vs. Regulations:

an Illustrative Case in

California

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We also weighed the three broad categories againsteach other to not only reect the degree to which

each policy area is an essential component of acomprehensive wage theft regime, but to providea check against any one category dominating astates total score. Grades were determined throughuse of a standard academic grading system: 90%and above = A; 80% and above = B; etc. Plus and

minus gradients were assigned for scores in the topand bottom three percentage points within eachletter-grade range. We utilized this grading systemrather than, for instance, grading on a curve, toemphasize how each states rating measures againstthe standards needed to protect workers, rather thanmeasuring states against one another. In the end,while this results in most states failing (only to dif-ferent degrees), it reects the reality of widespreadwage theft, and how far states need to go in orderto address it.

Misclassication of employees was kept separatefrom wage theft and given its own grade and rank-ing, in keeping with the unique aspects of misclas-sication within the overall scheme of wage theft.For example, workers who have been misclassied

as independent contractors are not covered by wageand hour laws, making any wage theft protectionswithin those laws inapplicable. The fact that inde-pendent contractors are not considered eligible forworkers compensation or unemployment insur-

ance further complicates their access to the mostbasic worker protections. Finally, in most statesthat have passed laws against misclassication,

the protections are narrowly applied to only one ortwo industries, much the opposite of wage paymentlaws. The divergence between these two areas oflaw made it sensible and appropriate to evaluatethem separately.

How are Wage Laws Enforced?

State laws are a critical pillar in a multi-layeredframework for combating wage theft, involvinggovernment enforcement, private litigation, anddirect workplace engagement. Federal, state, and insome cases local government laws lay the ground-work for and dene the scope of enforcement,

while regulations and policies set by governmentagencies implement, augment, and enhance thestatutory provisions.

model legislation and best practices used to combatwage theft and misclassication. The survey, which

was sent to a list of state Department of Laborcontacts found on the Interstate Labor StandardsAssociations website, gave us a sense of howenforcement agencies chose to interpret the law aswell as the degree to which relatively changeabledepartment regulations were followed.14 Once we

had established the policies that would be analyzedin the report, we began researching the relevantstatutes through state websites, Lexis Nexis, orJustia.

Only statutes are included in our analysis. Wechose not to evaluate administrative rules and regu-lations because they are dependent on the actionsof political appointees and, compared to statutes,can shift more frequently as a result. While regula-tions, rulemakings, and administrative orders can

all provide important protections to workers, thepolicies and standards we focus on here are eas-ily and appropriately legislated. We also recognizethat an important aspect of combating wage theftis the legal and political climate within whichemployment practices and worker advocacy takeplace. States in which elected ofcials have taken a

stance on the issue by enacting wage theft policiesstatutorily have established a signicant rst step:

harnessing political will in favor of workers.

We identied nine major aspects of wage theftpolicy, and grouped them into three broad catego-ries:

Accessing Justice (Denitions, Access to

Civil Litigation, Anti-Retaliation).

Transparency and Accountability (Noticeof Wages and Paydays, Employer Record-keeping, Paystubs, and Right to Inspect).

Securing Justice (Damages and Penalties).

Laws within each category were weighed accordingto ratios that we devised for each specic policy,

which are explained in more detail in subsequentappendices. In order to accurately represent therelative importance of each policy, they were givendifferent weighting factors for example, weweighed the ability to access civil litigation morethan the ability of state agencies to inspect employ-er property during a wage violation investigation.

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The Statutory Framework

The crucial federal statute is the Fair Labor Standards Act (FLSA), the national minimum wage law. FLSA setsthe absolute wage oor and provides for its enforcement. However, its application can be limited in the universe

of wage theft. FLSA only protects workers in relation to federal minimum wage and overtime standards. If aworkers wage is more than the FLSA minimum wage, or the states wage rate is higher, then FLSA is of littleuse. Similarly, federal class action laws can make it difcult for employees of smaller businesses to bring cases

collectively.

State laws are essentially the linchpin where wage theft is concerned. They can provide for still higher stan-dards: covering a wider range of workers, setting a higher minimum wage, enhancing penalties and damages,etc. Even more importantly, though, state laws are the primary vehicle for ensuring broader wage payment pro-tections. In fact, even where a state has no minimum wage, strong state wage payment laws can provide manyworkers with vital rights and protections they lack under federal law. The policies and standards outlined in thisreport point in that direction.

Similar to the state role, city or county ordinances may set higher standards than state laws, or ll in where the

state has failed to set standards. A few local governments have moved to do so, such as San Francisco, CA, andSeattle, WA. Those cities have recently enacted wage theft laws, in part to enforce minimum wage rates thatexceed the states. Miami-Dade County, Floridas wage theft ordinance lls in where the state totally abandoned

workers by abolishing its Labor Department in 2002.

That move now presents an even more serious problem: Floridas minimum wage exceeds the federal rate,leaving minimum wage workers with little protection. However, where the state giveth, it can also taketh away.Many states expressly prohibit local governments from regulating wage standards. And while Miami-Dadesordinance has been a great success, Florida advocates have had to ght preemption bills in the last two legisla-tive sessions.

Avenues for Enforcement

At each level, the law can be enforced by a government agency, through civil litigation, or by direct pressure onthe employer. The vast majority of enforcement occurs via government agencies, simply by virtue of their sizeand relative resources: worker organizations are mostly local and grassroots, lacking the reach and capacity toattack the problem widely; and many wage theft cases have limited appeal for private attorneys, particularly instates that do not provide for court costs and attorney fees.

A crucial issue not fully addressed in this report is the issue of agency enforcement capacity and practices.Except in cases like Floridas wholesale abolition of the Labor Department, agency capacity is largely drivenby factors external to wage theft statutes: revenue and budget constraints, on the one hand; and enforcementpractices and strategies, on the other. However, within those constraints, certain policies highlighted here canpartially address issues of capacity and enforcement practice. Opening more avenues and incentives for private

rights of action can partially make up for scant agency resources. Private attorneys general policies, such asCalifornias, can be most effective in this regard.

In addition, dedicating revenues from wage theft penalties to a special fund to support enforcement programs,as Illinois did in its Wage Theft Enforcement Act (2010), is another way to sustain and expand enforcementcapacity. We suspect that a combination of private attorneys general and dedicated funding through enforcementcould have a synergistic effect, though no state has implemented both policies. In addition, mandating inter-agency coordination around wage payment and misclassication can help states recover lost revenues moreefciently and enhance worker protections.

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State Wage Theft RankingsNo one policy is a cure-all for wage theft. Becauseof the patchwork of laws relating to wage theft inany given state, there is not much utility in extol-ling the strength of one law when deciencies inanother may depress intended outcomes. Theserealities are reected in the accompanying state

grades and rankings, where a number of states re-ceive fair grades in one category and failing gradesin another For example, North Dakota receives aC- and a spot in the top ten in Accessing Justice,but an F- and a ranking in the bottom ten in Trans-parency and Accountability. A holistic analysis of astates body of wage theft laws is therefore neededto determine the true effect of any states statuteson and practicality for workers who live there.

As it turns out, one of the most important ndings

of this report is that state wage theft laws, in gener-al, are almost universally inadequate. In our scoringsystem, the two highest-rating states, New York(with an overall grade of C+) and Massachusetts(with a grade of C), only receive 77% and 74%of the total possible points respectively, and it is asteep fall from there: Connecticut, Illinois, NorthCarolina, and California follow with grades of D,and the other 44 states and Washington, DC receiveFs. Further underscoring the deep drop-off, thetenth-ranked state receives only 52% of the total

points, and the bottom eleven states all receive 25% or less. Two states Alabama and Mississippi scored zero points.

This reects the ndings of NELPs 2008 reportBroken Laws, Unprotected Workers, which sur-veyed workers in Chicago, Los Angeles, and NewYork City, and found extremely high rates of wagetheft in states where the laws were still relativelystrong compared to other states. If laws affordworkers little opportunity to press claims indepen-

dently, little protection from retaliation, and littlenancial benet if they prevail, then violations

will still largely go unreported and unchallenged.Likewise, until the odds of being penalized are in-creased and the consequences of violations becomesubstantially greater than the nancial rewards of

wage theft, there will be little reason for dishonestemployers to change their behavior. Combined withthe meager capacity for agency-based enforcementdocumented in other reports, weak laws virtuallyguarantee impunity for unethical employers.

Overall Wage TheftGrades (Best/Worst)

5

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It is also important to note that, since theBroken Laws report was published, California, Illinois, and New Yorkhave all enacted laws that signicantly improved their wage theft statutes by addressing several areas of the

law rather than just one. Our recent report Cracking Down on Wage Theftdocuments how New Yorks WageTheft Prevention Act of 2010 has made that states law the strongest in the country by beeng up anti-retaliation

provisions, requirements for notication, and damages to workers, among other notable changes. 2010s IllinoisWage Theft Enforcement Act as well as Californias Wage Theft Prevention Act of 2011 also made sweepingchanges to their respective wage theft laws.

There is still signicant room for improvement in all of these states. In New York, provisions for penalties anddamages are still far below the new standards, whereas Massachusetts lacks several important notice and re-cord-keeping requirements. In California, penalties and damages remain relatively weak, and employee protec-tion relies too much on agency regulations. While comprehensive legislation to improve these areas should stillbe pursued, research to measure the impact of new laws in these states would also be valuable to help determinewhich policies and practices are most effective.

State Grades and Rankings: Good and Bad in a World of Ugly

The clearest story to emerge from this survey is that states are failing to effectively combat wage theft across the

board. The number of states receiving failing grades overall 44 is unsurprisingly similar to those receiv-ing failing grades within each category: 34 receive Fs for Accessing Justice, 42 receive Fs for Transparencyand Accountability, and 46 receive Fs for Securing Justice. The overall top ten and bottom ten rankings shownhere also tell some interesting stories in themselves.

F

C

D

F-

0

State Wage

Theft Grade

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All of the top ten states have one or moremajor areas of weakness. Massachusetts,for instance, has no Notice requirements,and North Carolina has no civil or criminalpenalties for wage violations. In addition,key provisions vary signicantly even across

state borders: #9 Wisconsin offers broadanti-retaliation protections to workers and

assisting employees alike, but does not re-quire employers to divulge critical informa-tion about wages or paydays; a similar storycan be found in #8 New Hampshire, whereemployers face signicant nes and pos-sible jail time but workers can recover littleif any liquidated damages. The only areawhere there is real consistency among thetop states is Retaliation: all ten states protectboth affected and assisting employees fromretaliation for reporting and pressing claims;

they only vary in regard to what other kindsof activities are protected, such as informingother employees of their rights or contactinga workers center or labor department withoutling a complaint.

At the bottom, Alabama and Mississippi arestill outliers, with essentially no protectionsfor workers who are victims of wage theft.Matters are not much better for workers inthe other bottom ten states: what modest

protections exist in those states are madefunctionally useless by the overwhelmingweaknesses in their laws. Most have one cat-egory in which they score 50%, but all scorezero in at least one category. South Carolina,for instance, has fairly good notice require-ments, but the state has no minimum wage orovertime laws, very few workers are coveredby the wage payment law, and there are noretaliation protections.

Within the failing range, 23 states (and DC) score between 35% and 50% of the total possible points.There is little consistency in the strengths and weaknesses of these states laws. For instance, #10 Ohio and#14 Delaware have very close wage theft scores, though in individual categories they diverge, with onestate scoring much higher than the other in nearly every policy category. On the other hand, #18 New Jer-sey and #19 New Mexico have nearly equal scores and rate fairly closely in most categories, but are widelydivergent in three areas (Denitions, Notice, and Damages). From state to state, the protections affordedemployees vary widely, though the end sum is that the overall policies in these states are weak.

Topic Points Weight

Total

Pts

% of

Score

Denitions 26 1.15 30 10

Retaliation 8 5.625 45 15

Access to Civil Litiga-

tion22 1.36 30 10

Notice 20 1.05 21 7

Record Keeping 11 2.18 24 8

Employee File &

Paystub5 4.8 24 8

Right to Inspect 2 10.2 20 7Damages 24 2.5 60 20

Penalties 36 1.25 45 15

TOTAL POINTS 299 100

Accessing Justi

35%

Securing Justice

35%

Transparency &

Accountability

30%

How the overall Wage Theftscore was calculated

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Relation to the Policy Categories

There is a surprising degree of variation betweenstates that rank in the top ten and bottom ten andthe rankings in the three policy categories: Access-ing Justice, Transparency and Accountability, andSecuring Justice. Only two of the top ten states(Connecticut and New York) also rate in the top

ten in all three categories. Reecting the relativestrength of its law, New York ranks rst or second

in all categories. Four of the top ten states rank ashighly in two categories, and the remaining four allrank in the top ten in just one category.

Likewise, among the bottom ten, only three statesrank as lowly in all three categories: Alabama, Mis-sissippi, and Tennessee. Four other states rate in thebottom ten in two categories: Georgia, Louisiana,South Carolina, and Virginia. This variation in thelower rankings is indicative of the poor overallquality of states wage theft laws: while the bot-tom ten states are those with the weakest overallpolicy, many states are just as weak or weaker inkey areas.

Geography vs. Minimum Wage

It would be tempting to look for regional correla-tions to wage theft laws, given the preponderanceof southern states in the bottom ten rankings. Statesin that region are well-known for their low rates ofunion membership, so-called Right to Work laws,and anti-labor climates, so it is unsurprising that somany southern states have poor wage theft laws.That is not the whole story, though. North Carolinahas the lowest rate of unionization in the country,15yet ranks fth overall. On the other hand, Montana

is well above the median in union representation (at#17 in 2011), yet is #40 in wage theft tied withits neighbor Wyoming, which has a substantiallylower level of union membership.

A more compelling story is the relationship be-tween states wage theft and minimum wage laws.State minimum wage laws can be broken down intofour categories:

No minimum wage law 5 states

Lower than the federal rate 4 states

Equal to the federal rate 23 states

Higher than the federal rate 18 states andDC

Four states with no minimum wage and two stateswith sub-federal wage rates are in the bottom ten.Mississippi and Alabama, which score zero points,also have no minimum wage law. Two of the other

states (#46 Louisiana and #36 Arkansas) round outthe bottom fteen.

There is no reason that states need to have a mini-mum wage in order to have perfectly adequate androbust wage theft laws. Requiring that people getpaid what they are owed for their labor does notrequire a set standard for what the minimum rateof pay should be; to the contrary, it is the minimumwage that is toothless without provisions for en-forcement.

This is obviously not the whole story, since threestates with minimum wages higher than the federalare also in the bottom fteen (#41 Montana, #37

Florida, and #38 Vermont), and #11 Minnesotasminimum wage is still more than $2 lower than thenational rate. The greatest aberration is Washing-ton, which has the highest state minimum wage inthe country ($9.04 in 2012) but, at #40, has amongthe weakest wage theft laws. Again, this reinforcesthe point that enacting strong policies against wage

theft does not presume having a minimum wageat all, much less an exceptionally high one. Infact, at the time of this writing, New Yorks mini-mum wage is still equal to the federal rate andsubstantially lower than the rate in Massachusetts($8.00), Connecticut ($8.25), and Illinois ($8.25).

The relevant factor seems to be whether the statesminimum wage has at least kept pace with the fed-eral rate. States that have a record of raising wagestandards tend to have stronger enforcement laws;

but even more strongly, states that do little to raisewage standards do little to protect workers fromwage theft. If anything, what may distinguish NorthCarolina from its other southern neighbors in termsof wage theft may be that it has a minimum wagerate equal to the federal rate.

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The factors that help determine whether a worker will choose to le a claim are often out of his or her hands.

For example, whether a worker can even le a claim with their state Department of Labor hinges entirely on

the classications of workers that the state chooses to exempt from wage-and-hour or wage payment law ifthe state even has those statutes on the books, which some do not. The strength of a states anti-retaliation lawsis also critical. Workers who cannot afford to be red or have their hours cut with no recourse under the law

are more likely to stay silent. Finally, the ability to pursue remedies outside of overburdened state enforcementagencies enables options such as class action lawsuits, which make it easier for aggrieved workers to recovertheir lost wages.

New York leads the country with its score of 99 outof 105 points in this category, while southern statescomprise the bulk of low-scoring states largely be-cause most of these states lack basic minimum wagelaws that provide a basis for enforcement.

Denitions of Employee, Employer,and Independent Contractor

Whether or not a worker can le a lawsuit to recoup

lost wages depends entirely on how the state denes

not only the term employee, but also employerand independent contractor. Denitions often vary

even between different parts of the law, and certainclassications of workers will not necessarily be af-forded the same protections between, say, wage-and-hour statutes and wage payment statutes.

To this end, the best denitions of employee andemployer are those that are as expansive as pos-sible. Whether or not states explicitly dene inde-pendent contractor or otherwise provide a test is alsoincluded in this category, and is a particularly impor-tant consideration. Subcontracting employers oftentry to shirk their responsibilities under wage-and-hourlaw by claiming that the temp agency or other inter-mediary is actually the sole employer responsible forwage payment.

It is in states best interest to promulgate good de-nitions. In addition to helping workers understandtheir rights, denitions also help employers run theirbusinesses free of the risk of unexpected lawsuits.Not having employee denitions at all is obviously

a bad practice, but it is one that is surprisingly com-mon especially with regard to wage payment law,since many states do not have one. However, statessuch as Colorado, Kansas, South Dakota, and WestVirginia have taken steps to cover more classica-tions of employees than the Fair Labor Standards Act(FLSA), while New Jersey is leading the country with

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a denition of employer that ascribes responsibility forviolations to ofcers of corporations, preventing them

escaping liability by blaming lower-level managers, orthrough use of shell companies or y-by-night businessentities.

Anti-Retaliation

Anti-retaliation statutes are one of the most vital aspectsof an effective body of laws to prevent wage theft. With-out protections against retaliation, few workers wouldtake advantage of wage theft laws since doing so can leadto discipline, demotion, decreased pay, or even termina-tion. Anti-retaliation laws also encourage workers to re-port wage violations an important consideration giventhe reality that, without worker complaints, enforcementagencies would not know about the majority of wagetheft cases. Ideally, anti-retaliation statutes safeguard not

only workers directly affected by a violation, but alsothird party workers who help them le claims and testify.

States should avoid enacting laws that only protect work-ers and/or third parties who are testifying or about totestify. Such laws ignore the reality of wage theft thatemployees can suffer retaliation long before they arecalled to testify in a case, whether it be for demandingpayment from their employer or informing another em-ployee of their rights. Retaliation is likely to occur whenemployers realize that employees are inquiring abouttheir rights or beginning the claim process.

Nearly 80% of states have basic anti-retaliation provi-sions that protect workers from retaliation when they takeaction against a wage theft violation, while about half ofstates go even further to shelter third party workers whoassist or testify in a case. Only nine states provide thebaseline level of protection for retaliation: California,Connecticut, Delaware, New York, North Carolina, NorthDakota, Oregon, Rhode Island, and Wisconsin.

Access to Civil Litigation

Statutes that allow workers to sue their employers or pur-sue similar civil actions to recover lost wages are ideal.When workers can only turn to the state department oflabor for recourse, the process takes much longer thanksto under-resourced agencies that lack capacity to handlewage claims. When lost wages can mean the differencebetween paying bills on time and accruing late fees, time-liness is essential. Allowing employees to band togetherand le a class action suit is also important. Not only do

class actions permit employees to share attorneys fees

among the group, but they also encourage workersto come forward who otherwise may feel that theamount of wages lost do not justify an individualaction to recover them.

Finally, the amount of time a worker has to takeaction after the initial violation is a signicantconsideration. Sometimes, workers will not attempt

to recover wages until after they have moved to adifferent place of work, due to fear of retaliation.In other instances, workers do not become aware oftheir rights until months or years after the incidenttook place. Having a statute of limitations that isve years or more lets workers obtain much-neededjustice and sends the message to employers thatillegal actions have consequences, even years afterthe fact. New York has the strongest civil litigationprovisions, though this is an area where nearly adozen states are strong.

Denitions of Employment

Denitions of Employ, Employee, and

Employer in wage-and-hour laws are

broad and cover close to all categories of

workers, including those excluded by FLSA.

Denition of Independent Contractor:

Presumption that a worker is an employee

unless the employer proves otherwise, using

the ABC Test (see page 19).

Anti-Retaliation

Covers affected employees as well as third-

party employees.

Covers all forms of discrimination, rangingfrom intimidation to discharge, in instanceswhen employees are inquiring about orspeaking about their rights under minimum

wage/overtime/payment of wages law

Includes a presumption of retaliation whenany form of discrimination occurs after a

worker has engaged in a protected activity..

Access to Civil Litigation

Employees can le a civil action in courtimmediately, without needing to exhaustadministrative remedies.

Class actions are permitted.

A statute of limitations of at least ve years.

Accessing Justice

Model Policies

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In addition to helping workers stay on the same page with their employers regarding wage rate, paydays, andother terms of employment, good transparency and accountability laws help keep employers honest. If there isdocumentation of what employers are paying their employees and when, as well as an understanding that thestate department of labor can inspect records during the course of an investigation, then there is more incentivefor businesses to follow the letter of the law. Though opponents argue that strong wage theft laws generally willexpose employers to frivolous claims, statutes that encourage a paper trail actually ensure that employers whoplay by the rules have nothing to fear.

It should be no surprise that New York leads thecountry in overall transparency and accountabilitylaws, given the strength of legislation passed in 2009that, in part, aimed specically to tighten the statestransparency laws to guard against unexpectedchanges in wage rate or payday.

Notice of Wage Rates and Paydays

Formal notice of wages and paydays is particularlycrucial to low-wage workers who live paycheckto paycheck and depend on an employers timeli-ness and reliability. In an ideal scenario, notice isgiven on an individual basis, at the time of hire:every worker should sign a contract that details theinformation pertaining to employment, includingbut not limited to wages and paydays. Employersshould also give workers at least two weeks notice

regarding any changes to wages or paydays, so thatemployees have a minimum amount of time to makeany necessary adjustments.

New York is the only state in the country that re-quires individualized written notice of wages andpaydays both at time of hire and with regard to anychanges. Other states merely give the option of aposted notice for either scenario, while over a dozenstates did not have any notication requirements at

all. States can also do more to lengthen the amount

of time given to a worker regarding changes towages or paydays, considering that only a handful ofstates require notice beyond seven days.

Record Keeping

Detailed records are crucial in order for aficted

workers to prove that wage theft has occurred. Thebest statutes mandate that businesses keep track of arange of information, including rate of pay, deduc-

tions, and daily/weekly hours. However, it is also

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important that records are kept long enough forworkers to be able to obtain the necessary informa-tion weeks, months, or years after they have left thejob. Ideally, the length of time required for recordkeeping would match the states statute of limita-tions for wage and hour or payment of wages laws.

While only seven states do not have any record

keeping laws in place, the laws on the books inthe majority of states can be improved mainly byrequiring employers to capture more informationabout pay rates and paydays a minimal additionto information employers must track to computepayroll accurately.

States can also establish a presumption that theemployer did not pay the required wages if recordkeeping requirements are not met. Though Arizonais the only state in the country with a law of thiskind, it is increasingly being recognized as a model

practice that is a boon to workers and enforcementefforts alike.

Access to Employment Contracts and

Pay Stubs

Even the best recordkeeping and notice require-ments are not fully effective unless they go hand-in-hand with laws that support employee access,the best way for workers to get the informationneeded to verify that they are being properly paid.Beyond simply giving formal notice of wages andpaydays once at the time of hire, employers shouldbe required to give such information and morewhenever a worker requests it, as well as providedetailed wage statements with each pay period.These safeguards go a long way toward ensuringthat workers can track crucial information fromweek to week and reconcile any discrepancies withinitial employment agreements.

Seventeen states have baseline paystub require-ments that require employers to give workersinformation regarding wages, hours worked, anddeductions with each pay period. Notably, Minne-sota goes beyond the basics to require that an em-ployers legal and dba (doing business as) nameare also included on payroll statements.

Right to Inspect

The ability of the state enforcement agency to entera workplace to inspect records, interview workers,

etc. pursuant to investigation of a wage claim is acritical component of any comprehensive body ofwage theft laws. Without unfettered access, it ismuch harder for the state to obtain the informationit needs to settle a wage dispute prolonging theprocess and delaying justice for low-wage workerswho need every paycheck to get by. Protecting theidentity of affected employees during such investi-

gations is also an essential consideration that helpsguard workers from retaliation and further eco-nomic hardship.

More than half of states allow the state enforce-ment agency such access to a workplace, but onlya handful Kentucky, Maine, Maryland, NewHampshire, Ohio, and Washington also maintaina workers anonymity during the process.

Notice Requires employers to give written notica-

tion of wage rates and paydays to employees

at the time of hire.

Requires employers to give written notice of

changes in wage rates or paydays to employ-

ees at least thirty days in advance.

Recordkeeping Requires employers to keep detailed payroll

records for at least ve years

If employers do not comply with

record-keeping requirements, there is a

rebuttable presumption in favor of the em-

ployee

Pay Stubs and Employment Policies

Employers must furnish employment agree-ments and policies upon employee request.

Requires employers to provide detailed

wage statements each pay period.

Right to Inspect Entitles the state enforcement agency to

enter a workplace at any time in order toinspect records, interview workers, and per-form other duties to investigate violations.

Protects the anonymity of all workers in-

volved in an investigation.

Transparency & AccountabilityModel Policies

5

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In order to clamp down on wage theft effectively, the law must incentivize workers to pursue claims, as wellas deter employers from violating the law. The third major component of strong wage theft laws encompassesthese two imperatives: the amount in damages workers are able to recover through ling a wage claim, and the

amount in penalties employers must pay. In some states, Damages and Penalties are conated because they canboth entail nancial consequences for the employer. In fact, they should be seen as distinct and serving different

purposes. That said, incentivizing workers to pursue claims and disincentivizing employers from breaking thelaw are synergistic. Massachusetts is the only state that addresses both adequately.

Damages

Damages are payments to the affected worker forlost wages, legal costs, and nancial and/or personalhardship caused by wage theft. All states that permitworkers to pursue wage claims allow them to recoverthe value of lost wages, but that in itself is ofteninsufcient to enable workers to pursue wage claims.

Recovery of court costs and attorney fees is crucial,since most low-wage workers cannot afford the costsof going to court a major disincentive to bringinga claim at all. Several states also require employersto pay workers an additional amount in interest onunpaid wages.

Most signicantly, enabling workers to recover

liquidated damages in addition to their lost wagesis of vital importance. The impact of wage theft onlow-wage workers is more severe because of how

little they earn. Losing a paycheck can have majornancial and personal repercussions: eviction fromones home, utilities being shut off, or a car repos-sessed. Many victims of wage theft are forced intorelying on payday lenders who charge exorbitant in-terest rates, pushing families into a crushing cycle ofdebt. Massachusetts sets the strongest example here,enabling employees to recover double-liquidateddamages, interest on unpaid wages, court costs andattorney fees.

Many states only enable workers to recover liquidat-ed damages when the employer has intentionally,knowingly, or willfully violated the law, whichwe note impedes the goal of making victims wholeby confusing Damages with Penalties.

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Penalties

Penalties are the civil and/or criminal consequencesto unethical employers for violating the law. Mostcommonly, penalties take the form of nes pay-able to the state. These nes are important for three

reasons:

To recognize that wage theft imposes costs

on society beyond its impact on individualworkers.

To enable the state to recover at least part ofthe cost of enforcing the law.

To act as a further disincentive to employ-ers by raising the nancial liability owing

from wage theft.

Many state laws also impose criminal penalties forwage violations, though prison sentences appear

to be seldom given in practice. In this category,we ranked states based on what the law says, sincethis appears to be a matter of prosecutorial discre-tion. Other types of penalties include barring wagethieves from doing business with the state, revok-ing business licenses (explained in further detail inthe Wage Theft 3.0 section), issuing stop workorders until the employer has complied with thelaw, or requiring violators to post bond to insureagainst future violations.

One particularly powerful provision adopted byCalifornia is a Private Attorneys General provi-sion, which enables workers to recover penaltieson behalf of the state through a civil action. Em-ployees are entitled to retain 25% of the penalties,while 75% is paid to the state. Such a provision isa powerful incentive to private attorneys to take onwage claimants cases.

Damages

Liquidated damages are equal to two times

the amount of wages owed.

Attorneys fees and court costs automati-cally awarded to workers who prevail in awage claim.

Employer liability for liquidated damages isnot based on whether violations are inten-

tional.

Penalties

Substantial civil and criminal penalties,such as nes (at least $5,000), jail time, and

debarment.

Securing Justice

Model Policies

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Misclassification

An especially pernicious aspect of the wage theftproblem is a form of payroll fraud called misclassi-cation. It can take many forms, including counting

cashiers as managers to discourage them fromunionizing, or hourly workers as salaried, exemptemployees to skirt minimum wage and overtime

laws. In its most serious and widespread form,employers classify employees as independentcontractors, enabling the employer to avoid a widearray of labor standards and taxes, including notjust wage payment and collective bargaining laws,but also workers compensation and unemploymentinsurance.

Doing so facilitates both wage theft and tax fraudon a massive scale. In certain industries, such asconstruction and transportation, misclassication

has become a standard business practice. Thatplaces law-abiding employers at a competitive dis-advantage and creates a snowball effect, forcingmore and more businesses to misclassify in order toremain in business.

The cost to state governments is enormous. Severalstates have studied the issue, and although thereis wide variety in the methods and scope of thosestudies, they all conclude that misclassicationis widespread and growing, and that the drain on

states coffers ranges from the tens to the hundredsof millions of dollars each year:

A California study found the number ofmisclassied workers grew by 54% be-tween 2005 and 2007 and recovered $170million in payroll taxes, nes, and fees.16

Audits in Illinois, Massachusetts, NewYork, Ohio, and Pennsylvania estimatebetween 250,000 and 700,000 misclassied

workers in each state.17

A 2012 report on New Yorks trucking in-dustry found that 18% of drivers are mis-classied, and that employers are shortingthe state $88 million per year in workerscompensation alone.18

Several states have begun addressing misclassica-tion in a variety of ways:

Establishing study committees and task

MissclassificationGrades (Best/Worst)

5

* These are the 10 lowest-ranking states with

some statutory provisions allowing workers

to contest misclassification. 18 states and DC

scored effectively zero: AL, AK, AZ, FL, GA, IA,

KY, LA, MI, MS, NC, NV, OH, OK, SC, VA, WV, WY

and DC.

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forces to determine the extent of the prob-lem, enforcement strategies, and policyoptions.

Creating inter-agency task forces to coor-dinate enforcement, audits, and/or processallegations.

And, most signicantly, enacting laws to

create enforcement mechanisms and stifferpenalties.

The former measures have played an important rolein developing consensus in state legislatures aroundpolicy changes and in helping state agencies de-velop ways of working together on a multi-facetedproblem. Last year, the U.S. Department of Laborinitiated a joint federal-state task force to crackdown on misclassication, which seventeen stateshave joined thus far.

Even more so than with wage theft, our researchshows that states lack the most basic laws to ad-dress the problem of misclassication. Without a

means for workers to challenge misclassication,their ability to bring wage claims and access otherrights, such as unemployment insurance, is sig-nicantly impaired. While it is generally possible

for workers to assert their status as employees in awage claim, unless state law includes strong provi-sions dening employment status and what con-

stitutes an independent contractor, the deck is stillstacked against the employee. In many states, theonly formal way for a misclassied worker to get

their rightful status recognized is by ling a claimfor workers compensation or unemployment insur-ance benets meaning they have to have been

either laid off or hurt on the job so severely thatthey are unable to work.

In other states, if an agency nds evidence of

misclassication, it can bring a fraud case through

which workers can become properly classied but there exists no procedure by which workers canchallenge misclassication themselves proactively.Such states also generally lack provisions to ensurethat the agencies responsible for administeringlabor standards, workers compensation, unemploy-ment insurance, and tax collection alert each otherto cases of misclassication so they can enforce the

law.

The real-world nexus between misclassication andwage theft is strong, particularly from an enforce-ment perspective. Worker advocates are attentive tomisclassication, and empowering workers to leclaims or bring actions on their own is a much sim-pler and less costly means of addressing the prob-lem than agency investigations alone. In evaluatingstates misclassication laws, we have measured

them according to these measures:

What industries and workers are covered bythe law.

Their denitions of employment and inde-pendent contractor.

Whether workers are permitted to le

claims.

Whether workers can recover damages.

The extent of penalties for violations.

We found that most states provide little to no en-forcement of misclassication:

18 states and the District of Columbiascored no points.

11 states have some provisions related tomisclassication, but no recourse for work-ers.

11 states only permit workers to reportclaims to the state agency.

9 of the 21 states where workers can le

reports or claims limit this protection tospecic industries.

Given the extreme unevenness of states laws onmisclassication particularly with regard toindustry-specic protections we chose to em-phasize laws that provide good statutory models forenforcement, even if they do not apply comprehen-

sively to all industries. Illinois and Massachusettshave by far the strongest misclassication laws.

Massachusetts law is comprehensive, across allindustries, and retains the strong civil action andliquidated damages provisions of its wage theftlaws.

Despite the fact that Illinoiss law is industry-specic, it rates slightly higher than Massachu-setts because it marries worker-friendly rights ofaction and damages, substantial penalties, strong

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anti-retaliation measures, and efcient interagencyenforcement. Not only does Illinois impose heftypenalties, but it contains a private attorney generalprovision, which entitles workers to enforce thelaw on behalf of the state and keep 10% of the nes

paid by the employer. This is a strong inducementfor private attorneys to take on the cases of low-wage workers.

Illinoiss statute also provides for the clearest andmost simple interagency enforcement scheme:reports are processed by their department of laborswage and hour division, through which workersare able to le wage claims simultaneously; whenthe Department veries a case of misclassication,

it must notify the Workers Compensation Board,Unemployment Insurance Division, and Tax Col-lection Departments who initiate their own enforce-ment actions.

Employment Status: As Easy as ABC

One essential best practice that stands out amongthe leading states on misclassication: the deni-tion of independent contractor. Rather than forceworkers to prove a negative (I am not an indepen-dent contractor), states have adopted a number ofdifferent tests or criteria for determining whethera person is an independent contractor or not, usu-ally as part of their workers compensation and

unemployment insurance laws. It is presumed that,if the person does not pass the test, then that personis an employee and not an independent contractor.Four tests are the most common:

ABC test (and its variants, the AC test andthe ABC plus 123) (see sidebar)

Common Law test

Economic Realities test

IRSs twenty-point testAmong states advancing misclassication laws, the

ABC test is far and away the preferred methodfor determining employment status. Of the sixteenstates with the strongest misclassication laws,

twelve use the ABC test or an enhanced version ofit. Three others use a modied or slightly scaledback version of the ABC, like the AC. What ismore, among these top states, ve have adopted a

different test than they used in 1998-99, when theIRS commissioned a major national survey of state

misclassication policies. Of those ve, four have

either adopted the ABC test or moved in that direc-tion with a hybrid or modied version of it.The ABC test is preferred for several reasons:

It is simple and straightforward in its terms.

It gets to the heart of the employer-employ-ee relationship.

Its application leaves little room for subjec-

tive interpretation.

The central principle under the ABC test is determin-

ing who is in control of the work being performed.

The test sets forth three criteria, which must all be

met in order for someone to be considered an inde-

pendent contractor and not an employee. In addition

to whether the person working is under the directionor control of the employer, it must also be established

that the work being done is not a part of the employ-

ers normal business operations and that the person

working operates as his/her own business or enter-

prise. Following are the three criteria, as normally

adopted:

Service performed by an individual shall be deemed

to be employment unless and until it is shown that:

Such individual has been and will continue to befree from control or direction over the perfor-

mance of such services, both under his contractof service and in fact; and

Such service is either outside the usual course

of the business for which such service is per-

formed or that such service is performed outside

of all the places of business of the enterprise for

which such service is performed; and

Such individual is customarily engaged in an

independently established trade, occupation,

profession or business.

Variations on the ABC test have been adopted in

some states, either by dropping one of the criteria (the

AC Test), adding additional criteria, or spelling out

conditions for satisfying criterion C (the ABC plus

123 Test). Though each state needs to consider its

own statutory needs and context, the essential frame-

work and criteria of the basic ABC Test is still seen as

the best model for addressing misclassication.

The ABC Test

A

B

C

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Wage Theft 3.0

Together, the policies that comprise the wage theftand misclassication scores represent a compre-hensive body of laws that protect and empowerworkers, establish a clear paper trail, and ensurethat unscrupulous employers are held account-able. However, several states are going beyond the

basics to enact innovative policies, which ensurethat their laws are always relevant and can addressproblems that arise as industries and other factorsshift. In particular, the following policies are worthhighlighting as emerging trends that are benecial

to workers:

Private Attorneys General

Earmarking Penalties to Fund Enforcement

Expanding the Scope of Retaliation Protec-

tion

Wage Liens

Revocation of Business Licenses or regis-tration

Shareholder Accountability

Private Attorneys General

Even when attorney fees and court costs are cov-ered, the small monetary value of most wageclaims may provide too little incentive for privateattorneys to take on workers cases. At the sametime, given the scale of the problem, most state en-forcement agencies do not have the capacity to takeon all the cases that may come their way. At thevery least, this capacity gap can create untenabledelays for workers in reclaiming stolen wages.

A crucial solution can be to deputize private at-

torneys and empower workers to assist in enforcingthe law through a Private Attorneys General policy.Already in place in California and under Illinoissmisclassication law, Private AG provisions en-able workers, through a civil action, to collect thecivil penalties an employer would owe to the state,with a portion being paid to the state. In practice,this creates a strong nancial incentive for moreattorneys to take on workers cases, and can be avaluable tool for increasing overall enforcementcapacity to crack down on wage theft.

In practice, ABC is preferred by both workeradvocates and wage-and-hour enforcement depart-ments as a way of dealing with misclassication.

Agencies that handle related issues seem to differon which test they prefer (e.g., for addressing mis-classication related to tax fraud or eligibility for

workers compensation). This may be for practicalreasons, such as the eligibility criteria for workers

comp coverage, or because of the way the tax lawand its enforcement procedures apply to employers.However, as a means of addressing misclassica-tion related to wage theft and other workplace stan-dards, reliance on the ABC test is the best practice.

Misclassifcation -

Topic Points

% of

Score

Denitions 10.5 23%

State Regulations 3 7%

Right to Contest 4 9%

Civil Action 5.5 12%

Litigation Costs 3 7%Damages 6 13%

Penalties 13 29%

How the Misclassificationscore was calculated

Accessing Justice

30%

Securing Justice

42%

Rights of Action

28%

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Earmarking Penalties to Fund

Enforcement

One simple way for states to cost-effectively in-crease enforcement capacity is to create a dedicatedfunding stream. Civil penalties collected in wageclaim cases are an excellent source, feeding thenes violators pay back into the system to investi-

gate and prosecute other violations. This can alsobe an important piece of the puzzle for bringingenforcement to scale with the problem. By strategi-cally targeting enforcement to known violators andindustries, enforcement agencies can build theircapacity to take on more difcult wage theft cases.

Arizona and Illinois have incorporated such a pro-vision into their wage theft laws, and can be lookedto as models for other states.

As noted above, Earmarking Penalties for Enforce-

ment can be a powerful companion to a PrivateAttorneys General policy. Private AG cases cangenerate additional revenue to expand agencyenforcement, without expending agency resources.This could be a valuable scal engine to bridge

the gap between existing agency capacity and thepotential for expansion. One pitfall to be watchfulof, particularly in lean scal years, is not to let the

presence of a dedicated penalties provision becomean excuse to cut funding to the agency. Sustainingan enhanced wage theft enforcement program can

reclaim substantial amounts of unpaid taxes, andshould be seen as an investment in the states s-cal health, as well as worker justice and economicstability.

Expanding the Scope of Retaliation

Protection

We analyzed retaliation laws according to a basicrubric in which workers are adequately protected.

However, states can go beyond the basics andimplement statutes that make it less daunting forworkers to come forward with complaints. A pre-sumption of employer retaliation is one way to dothis. The policy, which assumes that any adverseaction taken against a worker within a certain timeperiod after a complaint has been led is retaliatoryunless the employer can prove otherwise, is alreadya reality in Arizona, as well as in San Francisco andSanta Fe. Shifting the burden of proof from workerto employer ensures that employers can still make

necessary decisions about their workforce, as longas they can prove that such actions were for legiti-mate reasons.

States can also expand the types of complaints thatare covered under the law. For example, specifyingthat workers are protected from retaliation for oral,in addition to written, complaints is key, as well as

ensuring that protections kick in when third par-ties enter the picture whether third-party workerorganizations are ling a complaint on behalf of aworker or whether a third party is taking adverseaction against a worker.

Wage Liens

Liens are an effective means of ensuring thatemployers comply with judgments in wage claim

cases. Such statutes prevent the sale of propertylike houses or crops until the amount of the lien hasbeen paid by the property owner. Because of thepopularity of these laws across the states everystate has enacted laws enabling mechanics liens orsome variant thereof wage liens are a natural ad-dition that would meld well with existing statutes.

Like a crop lien, a wage lien would give a worker aclaim against property such as real estate and bankaccounts until a wage payment claim is resolved,

providing a nancial incentive for employers toboth abide by the law and pay lost wages whenthey do not.

Though several states, including New Hampshire,Texas, and Washington, have some form of wagelien statute on the books, Alaska currently has thebest law in the country. While other states require astate agency to le the wage lien, Alaska allows aworker to le a rst priority lien within 90 days of

any violation of wage payment law, with no cap ondamages or time limit.

Revocation of Business Licenses or

Registration

Like liens, tying the issuance of a business licenseor registration to a record clear of wage violationsis a powerful incentive that helps keep employershonest. Adding a condition requiring the paymentof all outstanding wages to the list of terms that

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must be met before licenses can be issued or renewed has the added bonus of sending a strong message to anentire industry: entrenched behavior must change.

A variety of licenses can be targeted, including liquor, contractor, and operating licenses. Though many suchcampaigns and recent successes San Francisco, most notably occur at the city level, it is possible for statecampaigns to thrive. For example, California has a law in place that requires garment manufacturers to discloseany delinquent wage judgments in an application for licenses or registration. If an applicant with an outstandingjudgment cannot prove his or her ability to pay the order, the application is rejected.

Shareholder Accountability

Even if a worker manages to go through the lengthy process and emerge victorious from a wage claim or suit,the battle is hardly over. Collecting on a wage judgment becomes nearly impossible when employers use a vari-ety of technically legal tactics to evade the law. In particular, the 21st-century economy has seen a rise in short-term, subcontracted work where workers are performing work for someone they have never met, rather than theemployment agent or subcontractor by whom they are actually paid. It is also common for employers to shutdown their business only to open later as a new entity. These are potent means of evading both workers andthe authorities. However, laws that ensure shareholder accountability are an effective way to bolster enforce-

ment efforts and ensure that workers are able to recoup their lost wages.

Miami-Dade County, Florida passed a historic wage theft ordinance in 2010, which includes a provision allow-ing employees to recover wages from the ofcers and owners of a corporation. It is the only law of its kind inthe country, and one that will help prevent scenarios in which workers cannot collect their rightful wages.

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Endnotes

1. Mike Konczal, Welcome to the One Percent Recovery Saturday, Truthout, March 10, 2012. http://truth-out.org/index.php?option=com_

k2&view=item&id=7186:welcome-to-the-one-percent-recovery

2. John Schmitt, New CEPR Issue Brief Shows Minimum Wage Has Room to Grow, Center for Economic and Policy Research, March 19, 2012.

http://www.cepr.net/index.php/blogs/cepr-blog/new-cepr-issue-brief-shows-minimum-wage-has-room-to-grow

3. A Year of Unbalanced Growth: Industries, Wages, and the First 12 Months of Job Growth,National Employment Law Center, February 2011.

http://www.nelp.org/page/-/Justice/2011/UnbalancedGrowthFeb2011.pdf?nocdn=1

4. Berry Joyce Nash, Betsy Romero, Flexible Workforce: The role of temporary employment in recession and recovery,Region Focus, First

Quarter, 2012, http://www.richmondfed.org/publications/research/region_focus/2011/q1/pdf/feature1.pdf

5. Bryce Cover , The Recovery Is Really Good at Creating Bad Jobs, Blog post, TheNation.com, May 2, 2012, Citing International Labor

Organization report, World of Work Report 2012: Better Jobs for a Better Economy, published April 26, 2012.

http://www.thenation.com/signup/167662?destination=blog/167662/recovery-really-good-creating-bad-jobs

http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_179453.pdf

6. Heidi Shierholz, Fix It And Forget It: Index the Minimum Wage to Growth in Average Wages,Economic Policy Institute, December 17, 2009.

http://epi.3cdn.net/91fd33f4e013307415_rum6iydua.pdf

7. Janice Fine, Worker Centers: Organizing Communities at the Edge of the Dream, (EPI/Cornell University Press, 2008).

8. Kim Bobo, Is the Department of Labor Effectively Enforcing Our Wage and Hour Laws?: Testimony of Kim Bobo, Executive Director of

Interfaith Worker Justice, before the Committee on Education and Labor, U.S. House of Representatives, July 15, 2008. http://web.archive.org/

web/20091022041853/http://www.iwj.org/template/page.cfm?id=124 United States Department of Labor. Statement of U.S. Secretary of Labor

Hilda L. Solis on GAO investigation regarding past Wage and Hour Division enforcement, March 25, 2009. http://www.dol.gov/opa/media/press/

esa/esa20090324.htm

9. Zack Schiller, Sarah DeCarlo, Investigating Wage Theft: A Survey of the States, Policy Matters Ohio, November 2010. http://www.

policymattersohio.org/wp-content/uploads/2011/10/InvestigatingWageTheft20101.pdf

10. Shrinking employment law enforcement funding raises risk of wage theft, Policy Matters Ohio, May 26, 2011. http://www.policymattersohio.

org/wp-content/uploads/2011/10/ShrinkingEmploymentWageTheftPR2011_051.pdf

11.Annette Bernhardt, et. al., Broken Laws, Unprotected Workers: Violations of Employment and Labor Laws in Americas Cities, Center for

Urban Economic Development, National Employment Law Project, and UCLA Institute for Research on Labor and Employment. http://nelp.3cdn.

net/1797b93dd1ccdf9e7d_sdm6bc50n.pdf

12. Winning Wage Justice: An Advocates Guide to State and City Policies to Fight Wage Theft,National Employment Law Project, January 2011.

http://nelp.3cdn.net/4fd24202008c596117_oxm6bglbn.pdf

13. Zack Schiller, Sarah DeCarlo, Investigating Wage Theft: A Survey of the States, Policy Matters Ohio, November 2010. http://www.

policymattersohio.org/wp-content/uploads/2011/10/InvestigatingWageTheft20101.pdf

14.Interstate Labor Standards Association, http://www.ilsa.net/contacts/contact.htm

15. Table 5. Union afliation of employed wage and salary workers by state, 2010-2011 annual averages, U.S. Bureau of Labor Statistics, January

27, 2012, http://www.bls.gov/news.release/union2.t05.htm

16. Annual Report: Fraud Deterrence and Detection Activities, A Report to the California Legislature,Employment Development Department, State

of California, June 2008, http://www.edd.ca.gov/pdf_pub_ctr/report2008.pdf

17. Independent Contractor Misclassication Imposes Huge Costs on Workers and Federal and State Treasuries, National Employment Law

Project, June 2010.

18. John Petro, The Road to Nowhere: How the Misclassication of Truck Drivers Hurts Workers, Job Quality, and New York State ,Drum Major

Institute, May 2012, http://www.drummajorinstitute.org/wp-content/uploads/2012/05/DMI-Report-The-Road-to-Nowhere-Misclassication.pdf

http://www.richmondfed.org/publications/research/region_focus/2011/q1/pdf/feature1.pdfhttp://www.richmondfed.org/publications/research/region_focus/2011/q1/pdf/feature1.pdfhttp://www.thenation.com/signup/167662?destination=blog/167662/recovery-really-good-creating-bad-jobshttp://www.thenation.com/signup/167662?destination=blog/167662/recovery-really-good-creating-bad-jobshttp://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_179453.pdfhttp://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_179453.pdfhttp://nelp.3cdn.net/4fd24202008c596117_oxm6bglbn.pdfhttp://nelp.3cdn.net/4fd24202008c596117_oxm6bglbn.pdfhttp://www.ilsa.net/contacts/contact.htmhttp://www.bls.gov/news.release/union2.t05.htmhttp://www.bls.gov/news.release/union2.t05.htmhttp://www.edd.ca.gov/pdf_pub_ctr/report2008.pdfhttp://www.edd.ca.gov/pdf_pub_ctr/report2008.pdfhttp://www.drummajorinstitute.org/wp-content/uploads/2012/05/DMI-Report-The-Road-to-Nowhere-Misclassification.pdfhttp://www.drummajorinstitute.org/wp-content/uploads/2012/05/DMI-Report-The-Road-to-Nowhere-Misclassification.pdfhttp://www.drummajorinstitute.org/wp-content/uploads/2012/05/DMI-Report-The-Road-to-Nowhere-Misclassification.pdfhttp://www.drummajorinstitute.org/wp-content/uploads/2012/05/DMI-Report-The-Road-to-Nowhere-Misclassification.pdfhttp://www.edd.ca.gov/pdf_pub_ctr/report2008.pdfhttp://www.bls.gov/news.release/union2.t05.htmhttp://www.ilsa.net/contacts/contact.htmhttp://nelp.3cdn.net/4fd24202008c596117_oxm6bglbn.pdfhttp://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_179453.pdfhttp://www.thenation.com/signup/167662?destination=blog/167662/recovery-really-good-creating-bad-jobshttp://www.richmondfed.org/publications/research/region_focus/2011/q1/pdf/feature1.pdf

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State Accessing JusticeTransparency &Accountabi li ty Securing Justice WT Score WageTheft blank Misclassifcation

Alabama No Score No Score No Score 0 No Show 0 No Score

Alaska D- F F 156 F+ 0 No Score

Arizona F+ F F 129 F 0 No Score

Arkansas F F F 103 F 0 F-

California D+ C- F+ 188 D 0 F+

Colorado F+ F F 126 F 0 F

Connecticut C- F+ D 194 D 0 F

Delaware C- D- F- 154 F+ 0 F+

District of Columbia F+ F F 125 F 0 No Score

Florida F No Score F 94 F 0 No Score

Georgia F- F F- 52 F- 0 No Score

Hawaii F+ D+ F 172 F+ 0 F-

Idaho F+ F F 119 F 0 No Score

Illinois B- F+ D- 193 D 0 B

Indiana F+ F F 133 F 0 F-

Iowa F+ F+ F 128 F 0 F-

Kansas F+ FF- 104

F0 F-

Kentucky F F F 125 F 0 No Score

Louisiana F- F F- 57 F- 0 No Score

Maine F D- F+ 146 F 0 F

Maryland F+ D+ F 152 F+ 0 D

Massachusetts B F A- 223 C 0 C

Michigan D- F F 146 F 0 No Score

Minnesota F+ D- F 157 F+ 0 F

Mississippi No Score No Score No Score 0 No Show 0 No Score

Missouri F+ F F 129 F 0 F-

Montana F F- F 73 F- 0 F-

Nebraska F- F- F- 66 F- 0 F-

Nevada F F+ F 115 F 0 No Score

New Hampshire D+ F+ F 169 F+ 0 F

New Jersey D+ F F 139 F 0 F

New Mexico F F F+ 138 F 0 F-

New York A C- C 237 C+ 0 F

North Carolina B- F D- 191 D 0 No Score

North Dakota C- F- F- 117 F 0 F-

Ohio D- F D- 162 F+ 0 No Score

Oklahoma F F F 131 F 0 No Score

Oregon C+ F F- 129 F 0 F-

Pennsylvania F+ F F 135 F 0 F

Rhode Island C- F F 156 F+ 0 F-

South Carolina F- F F- 68 F- 0 No Score

South Dakota F F- F- 91 F 0 F-

Tennessee F- F- F- 24 F- 0 F-

Texas F- F F- 60 F- 0 F-

Utah F F F- 109 F 0 F

Vermont F- F F 91 F 0 F

Virginia F- F- F- 54 F- 0 No Score

Washington F F+ F- 89 F 0 F

West Virginia F D- F- 114 F 0 No Score

Wisconsin C F F+ 169 F+ 0 F-

Wyoming F- F F- 68 F- 0 No Score

State Scores, Alphabetical

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State Accessing JusticeTransparency &Accountabi li ty Securing Justice WT Score WageTheft blank Misclassifcation

New York A C- C 237 C+ 0 F

Massachusetts B F A- 223 C 0 C

Connecticut C- F+ D 194 D 0 F

Illinois B- F+ D- 193 D 0 B

North Carolina B- F D- 191 D 0 No Score

California D+ C- F+ 188 D 0 F+

Hawaii F+ D+ F 172 F+ 0 F-

New Hampshire D+ F+ F 169 F+ 0 F

Wisconsin C F F+ 169 F+ 0 F-

Ohio D- F D- 162 F+ 0 No Score

Minnesota F+ D- F 157 F+ 0 F

Alaska D- F F 156 F+ 0 No Score

Rhode Island C- F F 156 F+ 0 F-

Delaware C- D- F- 154 F+ 0 F+

Maryland F+ D+ F 152 F+ 0 D

Maine F D- F+ 146 F 0 F

MichiganD-

F F146

F0

No ScoreNew Jersey D+ F F 139 F 0 F

New Mexico F F F+ 138 F 0 F-

Pennsylvania F+ F F 135 F 0 F

Indiana F+ F F 133 F 0 F-

Oklahoma F F F 131 F 0 No Score

Arizona F+ F F 129 F 0 No Score

Missouri F+ F F 129 F 0 F-

Oregon C+ F F- 129 F 0 F-

Iowa F+ F+ F 128 F 0 F-

Colorado F+ F F 126 F 0 F

District of Columbia F+ F F 125 F 0 No Score

Kentucky F F F 125 F 0 No Score

Idaho F+ F F 119 F 0 No Score

North Dakota C- F- F- 117 F 0 F-

Nevada F F+ F 115 F 0 No Score

West Virginia F D- F- 114 F 0 No Score

Utah F F F- 109 F 0 F

Kansas F+ F F- 104 F 0 F-

Arkansas F F F 103 F 0 F-

Florida F No Score F 94 F 0 No Score

South Dakota F F- F- 91 F 0 F-

Vermont F- F F 91 F 0 F

Washington F F+ F- 89 F 0 F

Montana F F- F 73 F- 0 F-

Wyoming F- F F- 68 F- 0 No Score

South Carolina F- F F- 68 F- 0 No Score

Nebraska F- F- F- 66 F- 0 F-

Texas F- F F- 60 F- 0 F-

Louisiana F- F F- 57 F- 0 No Score

Virginia F- F- F- 54 F- 0 No Score

Georgia F- F F- 52 F- 0 No Score

State Scores, by Wage Theft Ranking