Journal Express, Knoxville, IA

August 27, 2012

Report: Wage theft costs Iowans $600 million annually


DES MOINES — Authors of a new report from the Iowa Policy Project say wage theft in Iowa is a growing problem, and they believe it will continue to get worse.

Wage theft is a broad category that includes any time an employer breaks laws or contracts to illegally reduce pay to workers. Nonpayment and underpayment of wages, deduction violations and misclassification of workers (listing employees as independent contractors, for example) are all considered wage theft.

Colin Gordon, the report's lead author, said the impacts go well beyond just the employee who gets shortchanged.

 “Workers’ hard-earned wages are being stolen, the state is losing revenues, and good businesses are being put at a market disadvantage against shifty competitors,” he said

The report concludes the practice is, "abetted by weak and poorly enforced labor laws at the state and federal level." It cites a case with Ottumwa links as an example.

In 2010, employees at Joe's Italian Grill in Marshalltown accused owner Joe Dika of paying less than minimum wage and failing to pay overtime. One waitress reported being paid $263 for a total of 218 hours of work plus 12 hours of overtime.

Iowa does allow employers to pay less than minimum wage for employees who receive tips, but the $2.25 per hour paid in that case was well below the law's requirement of $4.35 per hour.

Dika has opened two restaurants in Ottumwa, Joe's Italian Grill and Joe's Family Restaurant.

The Marshalltown case matches up with the report's characterization of wage theft as a problem in the food service industry, one of four types of jobs the report said see wage theft more frequently than others. The remaining three are construction/day labor/landscaping, caregiving and domestic workers, and low-wage service employees.

The impact isn't limited to the employees whose pay comes up short. In many cases the violations also go unreported for payroll and tax purposes. That means the employee has less to spend with local businesses and the government is not receiving the tax revenue required.

The report's authors estimate Iowa loses $60 million in revenue annually due to wage theft. The workers lose $600 million.

 “Stronger enforcement is key because right now, the chances of unscrupulous employers getting caught are slight — and so are the penalties when that happens,” Gordon said. “In a difficult economy, conditions make it more likely that employers will resort to wage violations, and fewer workers will risk their jobs to object.”