Wage Theft Prevention and Wage Recovery Act

Wage theft occurs when an employer does not pay an employee for work that the employee has performed, depriving the worker of wages and earnings to which the worker is legally entitled. This theft occurs in many forms, including by employers violating minimum wage requirements, failing to pay overtime compensation, requiring off-the-clock work, failing to provide final payments, misclassifying employees as being exempt from overtime compensation or as independent contractors rather than as employees, and improperly withholding tips.

Wage theft poses a serious and growing problem across industries for working individuals of the United States. Wage theft is widespread and is estimated to cost workers more than $50,000,000,000 per year. In certain industries, compliance with Federal wage and hour laws is less than 50 percent.

Wage theft is closely associated with employment discrimination, with women, immigrants, and racial and ethnic minorities being disproportionately affected. Women are significantly more likely to experience minimum wage violations than men, foreign-born workers are nearly 2 times as likely to experience minimum wage violations as their counterparts born in the United States, and African Americans are 3 times more likely to experience minimum wage violations than their White counterparts.

Wage theft is closely associated with unsafe working conditions.

Wage theft—

Low-wage workers are at the greatest risk of suffering from wage theft. One report found that in the 10 most populous States, nearly 20 percent of low-wage workers reported being paid less than the minimum wage: amounting to more than $8,000,000,000 lost for more than 2,000,000 workers. Temporary workers experience these same challenges, with nearly 25 percent of them reporting wage theft.

In 2021, State and Federal authorities as well as private attorneys recovered at least $3,240,000,000 in wage theft enforcement actions.

Nationwide, between 2021 and 2023, State officials recovered more than $200,000,000 for workers due to wage theft.

Barriers to addressing wage theft continue to exist decades after the enactment of the Fair Labor Standards Act of 1938 (29 U.S.C. 201 et seq.). These barriers have resulted, in significant part, because enforcement of such Act has not worked as Congress originally intended and because many of the provisions of such Act do not include sufficient penalties to discourage violations. Improvements to enforcement and amendments to such Act are necessary to ensure that such Act provides effective protection to individuals subject to wage theft.

The lack of a Federal right for employees to receive full compensation at the agreed upon wage rate for all work performed by the employee has resulted in workers being able to recover only the applicable minimum wage, or the overtime rate if applicable, when employers engage in wage theft.

The lack of a Federal requirement to provide employees with paystubs indicating how their pay is calculated or to allow employees to inspect their employers’ payroll records significantly impedes efforts to identify and challenge wage theft.

The lack of a Federal requirement to pay employees their final payments in a timely manner upon termination of the employment relationship between the employer and employee has led to unreasonable, and sometimes indefinite, delays in compensation after an employment relationship ends.

While the Fair Labor Standards Act of 1938 and regulations promulgated by the Secretary of Labor, as in effect on the day before the date of enactment of this Act, require employers to compensate employees at the minimum wage rate and to provide overtime compensation when appropriate, the lack of civil penalties for most violations of these requirements has dampened their effectiveness.

While the Fair Labor Standards Act of 1938 and regulations promulgated by the Secretary of Labor, as in effect on the day before the date of enactment of this Act, provide employees who are subject to wage theft with the right to unpaid minimum wages or unpaid overtime compensation plus an additional equal amount as liquidated damages, this low level of damages has proved insufficient to deter employers from stealing the wages of their employees.

While the Fair Labor Standards Act of 1938 and regulations promulgated by the Secretary of Labor, as in effect on the day before the date of enactment of this Act, require employers to keep records of employees’ pay, the lack of remedies beyond injunctive relief for this requirement diminishes the effectiveness of the requirement.

While the Fair Labor Standards Act of 1938 and regulations promulgated by the Secretary of Labor, as in effect on the day before the date of enactment of this Act, provide for limited criminal penalties when employers violate the provisions of such Act, the Secretary of Labor rarely resorts to these penalties, causing them to serve as a hollow threat.

The statute of limitations under section 6 of the Portal-to-Portal Act of 1947 (29 U.S.C. 255), as in effect on the day before the date of enactment of this Act, precludes employees from commencing a claim for wage theft more than 2 years after the cause of action accrued, or more than 3 years after the cause of action accrued if the claim is with respect to a willful violation by the employer. Additionally, the statute of limitations is not automatically suspended while the Secretary of Labor investigates a complaint. These strict confines of the statute of limitations sometimes result in employees being deprived of their ability to institute a private lawsuit against their employer in order to recover their stolen wages.

Section 16(b) of the Fair Labor Standards Act of 1938 (29 U.S.C. 216(b)), as in effect on the day before the date of enactment of this Act, requires employees to affirmatively “opt-in” in order to be a party plaintiff in a collective action brought by another aggrieved employee seeking to recover stolen wages in court. This provision limits the ability of employees to unite and pursue private lawsuits against employers.

Under the penalty structure of the Fair Labor Standards Act of 1938, as in effect on the day before the date of enactment of this Act, many employers who are caught violating such Act continue to violate the Act. A Department of Labor investigation found that one-third of employers who had previously engaged in wage theft continued to do so.

The Government Accountability Office and the Department of Labor have recognized that when employers are assessed civil penalties, they are more likely to comply with the law in the future and other employers in the same region—regardless of industry—are also more likely to comply with the law.

States that have enacted legislation to address wage theft by increasing the damages to which employees are entitled following violations of wage and hour laws have positively impacted the workers in such States. However, many States have not enacted such legislation and, worse still, some States do not have any laws protecting workers from wage theft or even agencies to enforce workers’ rights to compensation for work. This discrepancy in State laws has resulted in a fragmentation of workers’ rights across the United States, with some workers having a measure of protection from wage theft and other workers being left extremely vulnerable to wage theft.

Effective enforcement of wage and hour laws is critical to increasing compliance. Given the limited resources available for enforcement, enhanced strategic enforcement of Federal wage and hour laws is crucial.

For enhanced strategic enforcement to be effective, government regulators must work with community stakeholders who have direct knowledge of ongoing violations of Federal wage and hour requirements and who are in a position to prevent such violations.

Partnerships between regulators, workers, nonprofit organizations, and businesses can increase compliance by educating workers about their rights, collecting evidence, reporting violations, identifying noncompliant employers, and modeling good practices.

The Comptroller General of the United States has recommended that the Department of Labor identify ways to leverage its resources to better combat wage theft by improving services provided through partnerships.

strengthening the penalties for engaging in wage theft;

giving workers the right to receive, in a timely manner, full compensation for the work they perform, certain disclosures, regular paystubs, and final payments;

providing workers with improved tools to recover their stolen wages in court; and

making assistance available to enhance enforcement of and compliance with Federal wage and hour laws through—