Overtime Crimes: Employer Wage Theft Amounts to $50 Billion a Year

An overwhelmingly large percentage of workers eligible for overtime pay are intentionally denied earned overtime wages by unscrupulous employers who are rarely punished and steal with impunity. This was the conclusion reached by the Economic Policy Institute, a Washington D.C.-based research and policy institute, and published in a report this past fall.

To place this in perspective, as the report further notes, all wage theft, including the intentional non-payment of minimum wage and overtime pay, resulted in approximately $50 billion in lost wages in 2012, while burglaries, robberies, larcenies, and all other categories of theft across the country resulted in only $14 billion in loss. Despite this, in 2012, the US Labor Department recovered only $1 billion of the $50 billion in unpaid wages, a small portion of the total wages lost.

So how do these businesses get away with such a staggering fraud? Under the Fair Labor Standards Act (the “FLSA”), workers must receive overtime pay for all hours worked over 40 in a workweek unless they fall within certain exception categories known as exemptions. Contrary to popular opinion, an employer cannot avoid paying overtime simply by paying an employee a salary. In fact, many salaried employees are eligible for overtime pay.

Ultimately the question of whether or not an employee is overtime eligible (or “nonexempt” from the FLSA) is determined based on an analysis of the duties performed week to week and whether or not the majority of the duties performed are exempt or nonexempt. Employers are responsible for classifying their employees as either “nonexempt” or “exempt” based on whether or not their job duties match those necessary to qualify for an exemption. In New York and most states, employers are responsible for providing wage notices to their employees indicating the wage rates they will receive and if they are “exempt” or “nonexempt” from the FLSA.

Often, however, employers will intentionally misclassify certain categories of workers as exempt from the FLSA and the NYLL in order to justify not paying out large amounts in overtime pay. Scores of workers in New York and across the country are being exploited for this very reason.  Certain types of employees, such as IT help desk and desktop support employees, retail-level assistant managers, sales professionals, administrative assistants, financial advisors, clerks, interns, trade clearance or operations specialist, junior bookkeepers, line or prep chefs, messengers, call center professionals, and junior professionals or administrators in the insurance, financial, or accounting professions are routinely misclassified. As a result, management across an entire industry may be wrongly justifying the denial of overtime for certain types of employees.

And what happens if one of those employers is caught? The company is likely to offer a settlement, but only if they know that a litigation or DOL audit threat is credible and imminent.

Hardly a just result, but for millions of underpaid employees who have struggled to keep their heads above water, litigation—or the threat of it—is the only possibility for recouping lost wages. Fortunately, New York affords employees six years worth of damages (unpaid back wages), a greater protection than federal law, which allows for three years worth of damages.