MAKING WAGE THEFT COSTLY: DISTRICT ATTORNEYS AND ATTORNEYS GENERAL ENFORCING WAGE AND HOUR LAW.

• Author: Damelio, Anthony

Introducation 110 I. U.S. Inspectorate's Failure to Enforce Labor Laws 113 A. What Is Wage Theft? 113 B. The Broken U.S. Inspectorate 115 II. Changing the Equation: Making Wage Theft More Expensive 123 A. Raising Noncompliance Costs: Increasing the Likelihood of Getting Caught 124 B. Raising Noncompliance Costs: Increasing Penalties 129 C. How DAs and AGs Have Increased Enforcement of Labor Laws 132 III. Prosecutors Enforcing Labor Laws: Critiques and Best Practices 137 A. Critiques of DAs and AGs Enforcing Labor Laws 137 B. Best Practice: Collaboration with Worker Groups 144 C. Best Practice: Targeting Particular Industries and Employer Tactics 146 Conclusion 148 INTRODUCTION

Wage theft is a simple idea: an employer steals an employee's wages. (1) In the early 2000s, advocates in the United States first deployed this term to frame employers' failure to comply with wage and hour laws not merely as noncompliance, but as real theft, akin to what attorneys general (AGs) and district attorneys (DAs) prosecute every day. (2) Historically, though, wage theft in the United States has been addressed exclusively by government agencies charged with enforcing these labor laws (3)--typically departments of labor--or by workers bringing civil actions. (4) These traditional enforcement tools, however, have failed to contain the wage theft epidemic, (5) which costs workers and society around $15 billion each year. (6) So how can workers find relief?

In the United States and most other countries, a labor inspectorate is the primary mechanism to ensure employer compliance with labor laws. (7) Labor inspectorates struggle to do just that, particularly in low-wage industries. (8) This "enforcement gap" is well-documented: for decades, scholars have analyzed different inspectorate regimes throughout the world, identified failures and best practices, and proposed ways to reorganize inspectorates to better enforce the law. (9) By building on their work, this Note focuses explicitly on how the U.S. enforcement system has failed to address the epidemic of wage theft, particularly for low-wage workers.

To analyze the United States's enforcement gap, this Note will review some of the scholarly proposals to restructure inspectorate operations. It does not seek to solve the particular challenges that the U.S. inspection regime faces or even to address them in a comprehensive way. Rather, by acknowledging both the immensity of requisite reforms and the foreseeable political inability of achieving them, this Note advocates for a specific intervention in certain circumstances to enforce bad actor employers who steal from their workers.

Analysis of inspectorates shows that, absent profound policy change, the U.S. inspectorate lacks the most punitive enforcement techniques that other countries' inspectors use to compel compliance --large monetary fines, license suspension or revocation, or jail time. (10) In the U.S. system, however, other enforcement agents do hold these tools, namely AGs and DAs. (11) In recent years, these law enforcement lawyers have begun to prosecute bad-actor employers who steal from and otherwise exploit and endanger their workers, recovering millions of dollars in stolen wages for workers and exacting large fines from employers. (12) This Note argues that this work should be expanded under specific conditions that safeguard workers' interests and ensure more effective prosecutions.

Some worker advocates have recognized the utility of this intervention from a complementary perspective: in the current enforcement gap, responsible criminal law enforcement is a helpful intervention; prosecutors are one of many actors who can hold law-breaking employers accountable. (13) This Note will argue, however, that the intervention of DAs and AGs is necessary, not merely complementary, in the current U.S. system. Because U.S. inspectors do not possess the punitive tools required to enforce employers who willfully break the law, they cannot effectively hold accountable bad actor employers who steal from their employees, absent profound policy change. To fill this structural enforcement gap, DAs and AGs should enter the breach. This Note will describe not only the benefits and drawbacks of encouraging DAs and AGs to enforce labor laws but also the ideal or necessary circumstances for law enforcement lawyers to wield these powers in favor of workers, particularly undocumented workers.

Part I outlines what wage theft is and why the U.S. inspectorate is unable to curtail it. By examining employers' economic motivations for complying with wage and hour law, Part II reviews two primary ways to increase compliance: raising the likelihood of getting caught and increasing the penalties for unlawful behavior. Because this Note does not propose sweeping federal policy changes, (14) Part II will identify one of the interventions (15) that is working to address low-wage worker exploitation: DAs and AGs using their criminal enforcement powers to hold accountable bad-actor employers. Part III will both review the challenges this model faces and propose best practices to safeguard the rights of workers and ensure more successful outcomes for these cases.

1. U.S. INSPECTORATE'S FAILURE TO ENFORCE LABOR LAWS

   1. What Is Wage Theft?

      While labor law violations come in many flavors--that often exist together in workplaces (16)--this Note focuses on wage theft as a lens to analyze enforcement failures and opportunities. Wage theft can take many forms, but it consists of more than an inadvertent payroll mistake. (17) Broadly speaking, employers steal workers' wages by: "(1) paying less than the minimum, promised, or overtime wage; (2) taking unauthorized deductions from a worker's pay; or (3) failing to pay for all hours worked." (18) Even if workers know their rights, employers sometimes use sophisticated techniques to fool employees including: "time-shaving," where managers alter time cards by small amounts on different days; requiring workers to clock out and keep working or to arrive early to start working before clocking in; or compelling workers to do preparatory tasks off the clock, like sharpening knives or changing into protective gear. (14) Employers also intentionally misclassify workers as independent contractors to avoid minimum wage and overtime regulations, mandatory employer benefit contributions, tax payments, and more. (20)

      Wage theft costs U.S. workers billions of dollars per year. A 2017 study estimated that in the ten most populous U.S. states, workers lose around $8 billion to wages stolen by employers. (21) Extrapolating these numbers across all 50 states, the total wages stolen from workers each year exceeds $15 billion in the United States. (22) By way of comparison, all other property theft in 2017 amounted to $16.4 billion. (23) The collateral consequences of wage theft extend throughout society, increasing workers' and families' reliance on public assistance programs and costing the government--federal, state, and local--millions of dollars in lost tax revenue each year. (24) Critically, the impact of wage theft falls most heavily on low-wage workers (25) who already face significant economic and workplace struggles. (26) Despite recent scholarly interest in wage theft, very little is known about the full extent of the problem. (27)

      Why do employers fail to comply with wage and hour laws? Quite simply, noncompliance pays: the economic incentives of noncompliance are much too large compared with the likelihood of inspection and expected punishment. (28) David Weil's study of the Los Angeles apparel industry found that--factoring in the likelihood of inspection and median civil penalty if caught--an employer in 2002 stood to make roughly $11,000 more per worker annually by choosing noncompliance over compliance. (29) If enforcement actions occur at all in the United States, they typically only secure a portion of back wages owed. (30) While more inspections would change the equation, insofar as unscrupulous employers would have a higher likelihood of being discovered, the level of available punishment remains insufficient to outweigh the employer's cost savings. (31)

   2. The Broken U.S. Inspectorate

      Labor laws traditionally are enforced by labor inspectors who deploy a range of tools to ensure compliance with the law. How inspectors do and should work is a topic of significant scholarly analysis. Setting aside questions of resources--how much money a government allocates to this work--countries have configured and equipped their inspectorates in two general ways: compliance or deterrence.- (12) In countries that follow a compliance approach, inspectors have broad purview over the labor code and tend to deploy pedagogical strategies that encourage or educate employers, as opposed to punishing them. (13) By contrast, in the United States and other countries that adhere to a deterrence or "command-and-control" framework, labor inspectors primarily use punitive tools, like fines, to dissuade employers from breaking the law. (14) While legal scholars debate the comparative effectiveness of compliance and deterrence approaches, these two models are premised on fundamentally different assumptions about the causes of labor violations. (35) Under compliance theory, employers may be ignorant or incompetent but generally do not intentionally contravene the law. (36) In contrast, deterrence theory is based on the idea that a substantial proportion of employers who violate labor laws, including wage and hour law, have determined they are better off by not complying. (37) To effectively deter law-breaking employers, inspectors must raise the risk of being caught and/or increase the penalties for breaking the law. (38)

      Apart from using primarily punitive tools, U.S. inspectors are specialists who enforce a narrow portion of the labor code, as opposed to generalists who inspect for violations across the labor code. (39) The U.S...