Wage theft has been the recent focus of new legislation across the US. Wage theft occurs when employers withhold, underpay, or misrepresent employee wages. Making employees work off the clock, failing to distribute gratuities or pay earned commissions, and not paying the proper wage for work or overtime are all forms of wage theft.
To combat this problem, states such as Minnesota, Colorado and New York have recently passed or put forth bills increasing penalties for wage theft and making prosecution easier. Some of these new laws have far-reaching effects that could impact a number of employers and workers—even those who have never committed wage theft.
Minnesota’s Wage Theft Law
Minnesota just poured over $3 million into the fight against wage theft. In June, the state added more claims investigators, gave the state’s Department of Labor and Industry more power to research and respond to claims, and increased civil penalties for wage theft. On August 1, 2019, new criminal penalties will also go into effect.
Minnesota is amending the state’s statute defining criminal theft (§609.52) to include wage theft and add specific penalties. Employers who are found guilty of wage theft in excess of $500 are subject to large fines and even jail time. The larger the theft, the stiffer the penalty—and wages stolen within a six-month period can be added together. For the most egregious offenses, employers could face up to 20 years in prison.
|
Amount of Wages Stolen |
Criminal Penalty |
| $500 – $1,000 | up to $3,000 fine and/or up to 1 year in prison |
| $1,000 – $5,000 | up to $10,000 fine and/or up to 5 years in prison |
| $5,000 – $35,000 | up to $20,000 fine and/or up to 10 years in prison |
| $35,000+ | up to $100,000 fine and/or up to 20 years in prison |
While criminal penalties are only for employers found guilty of wage theft, note that employers under investigation can also receive civil fines for poor record-keeping practices. Civil penalties (which have already gone into effect) include the following fines:
- Failure to submit, deliver or maintain records: up to $1,000
- Repeated failure to submit, deliver or maintain records: up to $5,000 per instance
- Retaliation against employees: $700-$3,000
So who is considered an employer? In addition to the business itself, the law says an employer can be “any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee.” This language mirrors that of the Fair Labor Standards Act’s definition of an employer. Essentially, it’s not just the business that “counts” as the employer, but potentially anyone who has authority over an employee’s work conditions, such as owners, managers, supervisors or HR.
Colorado’s Wage Theft Law
In Colorado, wage theft bill HB 19-1267 was just signed into law and goes into effect January 1, 2020. Like Minnesota’s new law, Colorado is redefining theft to include wage theft and allow for criminal penalties.
Instead of creating new penalties, however, the Colorado penalties that already apply to theft now apply to wage theft as well. Whether a theft is considered a petty offense, misdemeanor or felony depends on the value of what was stolen. This means that if unpaid wages are over $2,000, an employer could face felony charges. Colorado uses the Fair Labor Standards Act definition of “employer,” so anyone in a position of authority over employees and their wages could potentially be subject to these penalties.
New York’s Proposed Employee Wage Lien Bill
New York’s Employee Wage bill hasn’t been signed into law as of yet, but this bill has the widest potential range of impact yet. If signed by Governor Cuomo, the bill would allow those who have filed a wage theft claim to then file a lien against an employer’s real or personal property located within the state.
Note that the employers wouldn’t need to be found guilty of wage theft. Once a wage claim is filed, it’s possible to place a lien for the value of the claim on an employer’s property. In other words, just an allegation of wage theft could result in a lien. And, because New York also uses the Fair Labor Standards Act definition of “employer,” those in power over the employee—from owners to supervisors—could be considered “employers.”
The effects of the bill are not just far-reaching—they’re also long-lasting. Claims can be made up to three years after the end of employment. If not foreclosed, liens can last for a full year (and may be extended by a court order).
What Can Employers Do Now?
If you have a business in one of the above states—maybe a Colorado LLC or New York corporation—there are several steps you can take to avoid becoming the target of a wage theft claim.
- Conduct a self-audit of policies and procedures related to wages, including record creation and storage, contracts, payroll, and employee handbooks and guides.
- Communicate expectations to anyone involved with payroll or scheduling, such as HR and managers.
- Encourage employees to report payroll errors and communicate payroll concerns to management.
Even if your business is outside of Minnesota, Colorado or New York, taking the steps above can help ensure your company is following best practices.
Running a business isn’t easy—but Northwest can help. We offer expert registered agent service in all 50 states and the District of Columbia. We offer many other services and resources as well, from annual report compliance to free legal forms.