Elizabeth Ford

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Article

Abstract

Wage theft is rampant in the US. It occurs so frequently because employers have much more power than workers. Worse, our main tool for preventing and remedying wage theft – charging government agencies with enforcing the law -- has largely failed to mitigate this power differential. Enforcement agencies, overburdened by the magnitude of the wage theft crisis, often settle cases for nothing more than wages owed. The agency, acting as broker for the payment of the wages owed, voluntarily foregoes both interest and statutory penalties. This is a bad deal for workers, but not just because they do not get the benefit of the interest or penalties. Instead of making workers who have experienced wage theft whole, the enforcement agencies systematically broker no-interest loans from low wage workers to their employers. The system, as it functions now, essentially transfers wealth from low wage workers to their employers. This is not the result of malicious intent: when forced to choose between recovering wages-only or waiting another six months for a still-uncertain recovery, workers themselves will choose the former. This article proposes an elegant solution that will switch this paradigm: Wage Recovery Funds. A WRF is a pool of funds housed at a government agency or community organization. Employees who are victims of wage theft could approach the WRF; if the WRF accepts the case, it would make the worker whole upfront – before the employer has paid - and then take assignment of the worker’s claim. The WRF would then pursue wages, interest, and penalties. Money recovered from employers would then be returned to the fund, to support the next case. Beyond aggregating interest and penalties for support of future workers, a Wage Recovery Fund would change the risk paradigm, placing the risk of delayed recovery on an entity that can more easily afford it, and eliminating the workers’ immediate need for lost wages as a source of employer leverage in settlement.

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A podcast accompanies this article: Wage Recovery Funds.

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