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Claims of Wage Theft on the Rise

On August 31, 2014, the New York Times published a lengthy article describing an increase in claims of wage theft by employees with California painted as being at the center of the rise in claims. The article claims that more employers are being accused of violating minimum wage and overtime laws across many industries, including warehouse workers, fast food employees, delivery drivers, janitors, etc…In fact, the Oakland Raiderettes sued the Oakland Raiders football team over wage theft (amongst other claims), a case which the two sides recently settled for a hefty $1.25 million.

There are a number of factors that contribute to wage theft, not the least of which is economics. Companies are faced with ever more fierce competition, disruptive technologies that necessitate a reduction in costs, and shareholders and owners clamoring for more profits. One way for companies to reduce overhead to address these concerns is to reduce labor costs. While some dispute the number of purported violations by companies, California saw fit to undertake a campaign in April of this year to alert residents of wage theft and how to respond to it. Employers need to be especially aware of the increased focus in the media and government ranks of wage theft claims since liability for violating the applicable statues can be significant.

The "standard" "wage theft" claim arises when an employer fails to pay an employee minimum wage or fails to pay overtime. Minimum wage in California is currently $9.00/hr., but goes up to $10.00/hr. in January 2016. Overtime in California is generally anything over 40-hours a week, over 8-hours a day, although there are further more esoteric exceptions.

Another way companies are trying to cut back is to classify workers as independent contractors rather than employees — this saves an employer a considerable amount of money on taxes, insurance and benefits costs. It can also lead to liability issues though if an employee is misclassified ad an independent contractor. For example, the United States Court of Appeal for the Ninth Circuit ruled in August that – as a matter of law – FedEx had committed wage theft by insisting that its drivers were independent contractors when they were actually employees under California law.

The court found that the FedEx Operating Agreement that each driver signed wherein the driver admitted that they were an independent contractor was not controlling on the issue. The court used evidence such as the operating agreement's requirement that the drivers work between 9.5 and 11 hours per day as a basis to show that FedEx retained control over the drivers' actions, and therefore the drivers were more akin to employees. FedEx plans to appeal the decision, since it could result in millions and millions of dollars in unpaid overtime and penalties authorized by statute.

Not paying overtime or misclassifying an employee can result in significant liabilities against an employer, including reimbursement for unpaid overtime and waiting penalties. An employee is also potentially able to recover attorney's fees in collecting the withheld wages. In certain situations an employer can even be liable for civil penalties or even liquidated damages. Often times these penalties can subsume the amount of overtime that was owed.

If you are concerned about potentially misclassifying your employees or potential outstanding unpaid overtime violations, please contact out office, we have attorneys experienced in employment law to assist you and make your business in avoiding liability. or 510-832-7770.