Employers across the state of North Carolina shortchanged their workers out of about $4.6 million in wages over the 12-month period that ended in June, according to a new report by an advocacy group.
The N.C. Department of Labor's Wage and Hour Bureau managed to recover $1.8 million of that amount, according to the N.C. Justice Center report. Of the $2.8 million owed to workers that wasn't collected, more than half - $1.5 million - was "uncollectable" because the employer declared bankruptcy. The report relied on data provided by the state.
"What is shocking is that, despite the fact that these numbers are high, (they) don't tell the whole story," said Sabine Schoenbach, a policy analyst with the Justice Center.
State investigations are triggered by complaints made by employees, which many workers are reluctant to do. A national study by the National Employment Law Project, Schoenbach noted, found that "retaliation is actually a huge issue in low-income industries. When people complain, the consequences are often dire."
Such so-called wage theft - a term that state regulators avoid - can occur in a variety of ways. They include: workers who are paid below the minimum wage; workers who aren't paid the overtime they are owed; workers who aren't paid at all or are only paid part of what they are owed; and workers who don't receive their final paycheck after they depart from a job.
In the state and across the nation, wage theft is more prevalent in low-wage industries such as retailing and restaurants, according to the Justice Center.
It's a growing problem in North Carolina. The amount of money employers short-changed employees rose by 21 percent in fiscal year 2011 compared to the previous year; the number of employees who were shortchanged rose 37 percent.
"A weak economy is the biggest contributing factor," said state Labor Department spokeswoman Dolores Quisenberry. "Many businesses are struggling to stay afloat and cannot meet payroll."
Last fiscal year, the state issued 1,421 citations to businesses that violated the state Wage and Hour Act. Some employers received multiple citations. The state recovered money owed to 2,594 workers, and was unable to collect money owed to 920 others.
Wage theft victimizes not only employees who are struggling to make ends meet, the report notes, but also hurts local businesses across the state that rely on consumer spending. It also puts a dent in local and state government revenue from income taxes and sales taxes .
Also, "it's difficult for employers who are trying to do the right thing to compete with employers who aren't following the law," Schoenbach said.
The Justice Center has been pushing for the legislature to give state regulators stronger enforcement powers to combat wage theft.
Although regulators have the authority to pursue claims in court if their initial attempts to collect money from an employer are unsuccessful, the amount of money at stake in many cases is so small that going that route is cost-prohibitive, said Harry Payne, senior counsel for policy and law at the N.C. Justice Center and a former state commissioner of labor.
In those instances the state notifies employees of their right to pursue a claim in small claims court, but "there are a lot of people who are uneasy about going to court," Payne said.
Another issue that comes to bear is that some employers "are in business one day and out of business the next" and can be difficult to locate, said Quisenberry.
And Sometimes employers make counter-claims that the worker stole or damaged property or borrowed money from the business, she said.
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