Do wage theft laws in Ohio harm or help workers?
Do wage theft laws in Ohio harm or help workers?
Cleveland, Ohio -- Matthew J. Grassi got to savor victory for only a few minutes.
The Ohio Department of Commerce had just awarded him $1,701 in a wage theft claim against his former employer. Then the investigator told him, “It is going to really be difficult for you to see this money.”
A decade later, Grassi has “never seen a dime.” His former employer never responded to the state’s request for payment. The state says the debt probably can’t be collected.
Grassi was a victim of wage theft, a term commonly used to describe failure to pay workers fully for their labor. In Ohio, his story may not be that uncommon.
Ohio ranked second among the 10 largest states for a common type of wage theft, minimum wage violations, according to a report last year by the Economic Policy Institute, a left-leaning think tank in Washington. It estimates that Ohioans annually lose $600 million to wage theft.
But the state generally denies claims of wage theft, according to a Plain Dealer analysis of 4,800 complaints filed from 2010 to 2017. Even when it approves claims, victims only have a 50-50 chance to collect what they are owed.
Experts say it stems from two problems: the below-average strength of Ohio’s laws against wage theft, and the state’s lax enforcement of them.
Officially, Ohio lets wage-theft victims collect three times their back wages, called treble damages. In practice, it often chooses to waive that penalty for first-time offenders.
“In Ohio, it is not a set policy that is geared toward protecting workers and advocating for their rights,” said Daniel J. Galvin, a Northwestern University professor who studied enforcement of the law across the states. “They’re in the business of employer assistance.”
If so, that policy has been bipartisan. The waiver of treble damages was started by Democratic Gov. Ted Strickland and maintained by Republican Gov. John Kasich. Commerce Department officials said the agency doesn’t favor employers over workers.
“The history, sophistication and financial health of a company all prove vital in the policy and legal decision of whether to pursue full damages, partial damages, or just wages,” said a department statement emailed to The Plain Dealer. “While we understand the role awarding damages plays in deterring violations, we also understand the role education plays when businesses aren’t fully informed about their obligations under the law.”
See also: 10 largest violators of wage theft laws in Ohio
Some business advocates argue with the very term “wage theft.” Jon Hyman, a local lawyer who represents employers, says not every employer cited for wage theft has willingly denied rightful wages.
“To me, wage theft is a loaded term,” he said. “It presumes an intent to steal.” For example, Hyman said a former client paid a human resource consultant to do an audit of employee classifications and followed the consultant’s advice.
A few years later, he said, the U.S. Labor Department, which also investigates wage theft, determined that many employees had been misclassified and had not received overtime pay to which they were entitled. The company ended up paying an undisclosed negotiated amount of unpaid overtime to the misclassified employees.
What is wage theft?
Wage theft is commonly defined to mean denial of pay that a worker is due. This can mean denying overtime pay, paying less than the legally mandated prevailing wage on projects, or paying less than the minimum wage.
Citations for wage theft tend to be issued to low-wage industries such as retail, food services and health care, including home care workers and nursing assistants.
Victims can file with either the state Commerce Department or the federal Labor Department’s Wage and Hour Division. Case specifics often determine which agency investigates; Ohio workers at businesses subject to the federal minimum wage must file with the Labor Department.
Victims can also sue and frequently file in U.S. District Court in Ohio.
‘A tiny fraction’
The Plain Dealer’s analysis focused on seven years of complaints to the state, because that is where most wage theft victims choose to file claims. About 4,800 claims were filed with the Commerce Department, 1,400 with the federal courts in Ohio, and 1,200 with the federal Labor Department.
Many experts say the problem is far greater than the number of complaints indicates. The Economic Policy Institute based its estimate of $600 million in lost wages on data from the U.S. Census Bureau’s monthly federal Current Population Survey.
“If our estimates are even close to being true, they suggest that what’s being reported to agencies in Ohio is a tiny fraction of the wage theft occurring, and that back wages collected are an even smaller fraction,” said David Cooper, an the Economic Policy Institute senior economic analyst who co-authored the report.
Northwestern’s Galvin said he also used Current Population Survey data for his analysis. He said they offer a more-complete picture than actual complaints, because complaints can be inhibited by lax enforcement or victims’ fear of retaliation from employers.
“Whatever you find with complaint data, it is going to be much, much worse than that,” he said.
The Commerce Department approved 31 percent of the claims. Stephen Clegg, who heads the Commerce Department’s Bureau of Wage and Hour Administration, said staff “address every complaint” filed. He said claims are denied for more than a “lack of merit.” Common reasons for denials include claims that are incomplete or are outside the department’s authority.
Even with approval, claimants have little chance of getting what is owed them — just like Grassi, who is still waiting for back wages, he said.
“It is still something that sticks with me,” said Grassi, now an agricultural journalist. “That was my only income at the time. Not getting that income was pretty rough.”
He was a college student when he went to work for the local Athletic Scholarship Corp. The company’s lawyer maintains the state didn’t require ASC to pay Grassi, though state records show otherwise.
In the PD analysis, the Commerce Department collected 10 percent, or about $359,000 total, of what wage victims were owed.
Between 2012 and 2017, the AG’s office and Commerce Department combined collected only about half as much as what the department said victims should receive. The AG’s office often attempts to collect on claims for a few years. It is likely that part of the combined total is for cases filed before the period of analysis.
Commerce Department records provided to The PD were sometimes incomplete. The department uses Lotus 1-2-3, a discontinued spreadsheet program. Because of the program’s limitations, officials said they couldn’t provide a database of the 4,800 cases. Instead, officials emailed PDFs of them. Spokeswoman Kerry Francis said plans are being made to update the system.
Northwestern’s Galvin said that for one 13-month period ending in early 2008, Ohio used a proven technique for driving down wage theft: It fully enforced the provision allowing for treble damages.
During that period, he said, “there was a statistically significant decline in the probability of violation.”
“Once the governor told the Department of Commerce not to penalize first-time violators, it went right back up to where it was before,” he said. “The only explanation is that the policy itself is a deterrent. For whatever reason, I can’t tell you why, employers stopped underpaying their low-wage workers as much as they had been during that 13-month period.”
Critics of Ohio’s enforcement efforts say the state’s workers also suffer because officials here rely on complaints rather than strategically targeted inspections, and because, since 2010, the inspection staff has been cut from 12 to six.
Commerce Department officials say the state didn’t need to replace inspectors lost to attrition because of “increased efficiencies.” Quality has not suffered, they say. “The number of investigators continues to remain adequate to meet our needs, and the time to resolve complaints has been cut in half over the last six years,” said Clegg.
Galvin said this is highly improbable.
“If they cut the number of investigators from 12 to six, then they cut the capacity to enforce and regulate in half,” he said. “I hear people make arguments that technology, smart strategies, etc. allow them to do more with less. That has never been proven to be the case.”
Ohio budgeted $1.1 million this year for wage and hour enforcement. Zach Schiller, research director at the liberal Policy Matters Ohio, called that “totally insufficient.” Schiller and others say the Commerce Department’s complaint-driven system, which relies on victims initiating complaints, may work against finding the most widespread wage theft violators. The Labor Department, particularly under the Obama administration, proactively targeted high-violation industries for enforcement as part of its strategic enforcement approach. For example, one enforcement effort targeted industries that misclassified employees as independent contractors.
However, Francis, the Commerce Department’s spokeswoman, said a complaint-driven system is adequate.
“When we become aware of a problem, we address it,” she said. “We don’t want to impede business by knocking on their doors and investigating their payroll records” without specific cause.
Plain Dealer Reporter Jo Ellen Corrigan contributed to this report.