Behind the counter at a convenience store in Princess Anne, Md., Elvira Orellana worked 72 hours a week, making sandwiches, cleaning the kitchen and ordering the ingredients to prepare oxtail, curry chicken and cheese steaks.
Her employer paid her $648 a week – $324 less than she was owed under laws that require that workers earn time and a half for clocking more than 40 hours a week. When she complained, Orellana said, her boss threatened to cut her wages and then fired her.
Orellana’s case, which she won in federal court, illustrates a problem that historically has been more pronounced in the wake of recessions. Since the most recent downturn, worker advocates and law enforcement officials say, a growing number of employers have violated wage and labor laws enacted 75 years ago in response to worker mistreatment prevalent during the Depression.
Employers in this floundering economy have increasingly denied workers benefits and mandatory overtime pay, according to worker advocates. Some have doctored time sheets and even failed to pay minimum wage. The practice is widespread in low-wage jobs such as waiting tables or cleaning hotel rooms but has been bleeding into middle-class professions, they say.
And studies show that victims can lose up to 20 percent of their earnings due to what those advocates call “wage theft.”
Lawsuits alleging wage and labor law violations have skyrocketed, and state and federal officials have beefed up scrutiny. The U.S. Department of Labor has hired 300 more investigators.
The business community has opposed some legislative measures but contends that it supports strong enforcement of the laws because by underpaying employees, scofflaws introduce false competition into the market. Business groups also say recession and its lingering effects left many employers, especially mom-and-pop operations, cutting back while struggling to stay in business.
Tallying the extent of wage law violations is difficult. Many workers are grateful to have work in a tight job market and too scared to speak up, said Catherine Ruckelshaus, legal co-director of the National Employment Law Project.
Speaking up can be “job suicide,” Ruckelshaus said. “There are 10 people waiting in line to take your job. Oftentimes, workers grin and bear it.”
Orellana, a native of El Salvador, said she didn’t speak up for months, wary of someone taking advantage of her as an immigrant. But then she learned about her rights by asking questions of a fellow churchgoer with connections to the Baltimore-based Legal Aid Bureau, which eventually represented her.
“I felt completely desperate,” Orellana, 41, said through a translator. She recalled that a friend encouraged her to fight. “She told me not to be quiet, to learn to defend myself, to keep going forward, to not be afraid.”
The Salisbury, Md., woman won an $18,000 civil judgment for unpaid overtime in U.S. District Court, but the judge found that she had failed to prove a claim of retaliation.
Representatives of her former employer, Cienna Properties LLC, did not respond to requests for comment.
Aggrieved workers can take their cases either to law enforcement or to civil court.
The number of lawsuits alleging employer violations of the Fair Labor Standards Act has more than tripled in the past decade, according to an annual study released by Seyfarth Shaw, a law firm that specializes in labor and employment law. More than 7,000 lawsuits were filed from March 2011 to March 2012, up from 2,035 for the same period in 2002.
Meanwhile, U.S. Labor Department investigators collected more than $280 million in back wages last year, nearly $100 million more than investigators recovered four years earlier as the recession was getting under way.
The U.S. Labor Department has launched an initiative to crack down on businesses that wrongly classify employees as independent contractors to avoid paying overtime and benefits, and has signed an agreement with the Internal Revenue Service to share information to stop worker misclassification.
But Ruckelshaus, of the National Employment Law Project, said more needs to be done. If current laws were better enforced, employers would be forced to hire more workers and the jobless rate would fall, she said.
Workers should not be forced to “shoulder the burden of a weak economy without extra pay,” Ruckelshaus wrote in a recent column for her organization’s blog that was also featured on the AFL-CIO website.
The home health and hospitality industries as well as construction and retail are “rife with wage-theft violations,” Ruckelshaus said. The same industries are harbingers of an economic recovery, so employment law violations can stall the economy’s ability to recover, she said.
Misclassifying workers as independent contractors can save employers up to 30 percent on payroll costs, said Sally Dworak-Fisher, an attorney with the Public Justice Center who leads its Workplace Justice Project. The practice also costs the government in lost taxes.
Independent contractors are generally exempt from wage and labor laws. Employers who rely on such contractors can save on the cost of paying workers’ compensation and contributing to unemployment insurance in addition to avoiding paying overtime and benefits.
“That’s one prevalent form of modern-day wage theft – just call everybody an LLC,” Dworak-Fisher said.
Dworak-Fisher said businesses are also using staffing agencies and labor brokers to “lease” workers as independent contractors. The idea is that employers hire those workers for sustained periods without giving them a commitment by providing benefits and job security. It’s typical on construction sites and in hotels, she said.