Big win for labor in Chicago City council passes "wage theft" law that threatens license of violating companies. Will other cities follow?

By a unanimous vote on Thursday, Chicago’s City Council passed one of the strongest “wage theft” laws in the United States. The move was hailed by labor activists, who’ve long complained that wage theft -- not paying workers what they’re legally owed -- is one of the easiest crimes to get away with.

“Now the bosses are going to know that the workers have rights, too,” said Maria Garcia, a member of the labor group Arise Chicago, which spearheaded the campaign to pass the law. Interviewed in Spanish, Garcia said she’d experienced wage theft at both of the past two restaurants where she’d worked.

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“Wage theft” encompasses a range of offenses. Garcia said that in her case, it had included unpaid overtime and hourly rates below the minimum wage. The term was popularized by labor activists seeking to stir moral outrage at the all-too common issue: “Wage theft” suggests that refusing to pay wages that workers have earned is a form of robbery, rather than a mere accounting dispute. Recent years have seen increasing traction for campaigns to strengthen wage theft penalties and remedies. Those efforts have also inspired a counter-attack: Last year, Florida Republicans and big businesses pushed a bill that would have overridden local wage theft measures. “We believe the existing court system is the best place for these claims,” a spokesperson for the Florida Retail Federation told the Huffington Post.

There’s serious money at stake. In 2008, the National Employment Law Project and a group of advocates and academics talked to around 4,000 low-wage workers in Chicago, New York City and Los Angeles. Two-thirds (68 percent) of the workers reported experiencing some form of wage theft in the past week. Researchers calculated that out of an already-low average $339 in weekly income, low-wage workers each lose an average of $51 weekly in wages they earned but never received. That adds up to over $56 million per week among workers in the country’s three largest cities.

Under Chicago’s new law, companies convicted of wage theft could have their business licenses revoked. Chicago Mayor Rahm Emanuel, no close pal of labor, signed on as a sponsor and has pledged to sign it (some of the same groups that have been collaborating with the mayor’s office on the wage theft bill have meanwhile been organizing furiously against the city’s decision to bring in a different janitorial contractor at O’Hare airport, which could eliminate 300 union jobs).

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The major showdown over the new law occurred in committee hearings prior to Thursday’s vote. Adam Kader, the Workers Center Director for Arise Chicago, said supporters mobilized a “major show of force” from workers and community activists. Kader said opponents brought “a significant show of force by all of the major industry lobbyists in the state of Illinois.” But after agreeing to a change in the bill’s language, specifying that businesses could have their licenses revoked only after willful or egregious violations, labor was able to win over the council’s holdouts -- though not the business lobbyists. (According to the Chicago Tribune, Alderwoman Emma Mitts, who chairs the relevant committee, last week said she was hearing from business leaders concerned that they would be unfairly punished for honest mistakes in how they calculated their workers’ pay.)

“In low-wage industries,” said Kader, “it’s standard practice to be practicing wage theft.” Now, he said, “there’s another force that they have to reckon with, which is the threat of losing their license.” Advocates say Chicago is now the second, and the largest, U.S. city with such a law on the books. San Francisco was the first.

Of course, on paper, refusing to pay workers the wages you owe them is illegal everywhere. So why does the problem persist? Part of the answer is anemic enforcement. A 2012 report from the Progressive States Network noted that the ratio of federal Department of Labor enforcement agents to U.S. workers has fallen from one for every 11,000 in 1941, to one for every 141,000 today. When state labor agents are factored in, the authors found “less than 15 percent of the total enforcement coverage workers enjoyed decades ago.”

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Since the New Deal-era passage of the New Deal’s Fair Labor Standards Act, they wrote, “enforcement capacity has diminished to the point where there are essentially no cops on the beat.”

The same PSN report graded states on how well their laws punish wage theft, protect worker whistleblowers, and promote accountability and transparency on the issue. New York scored highest, with a C+. Massachusetts earned a solid C, Illinois and three other states received Ds, and the rest of the country scored “F+” or worse. And even when companies get caught breaking the law, it often doesn’t cost them the chance to get hired by the government, let alone put them in danger of getting shut down. The Government Accountability Office found that the federal government awarded over $6 billion in fiscal year 2009 contracts to companies that had been cited for violating federal labor law.

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But even more than poor enforcement, wage theft is a symptom of power asymmetry at work. The same 2008 study that found that low-wage workers lose 15 percent of their income to wage theft also found that when they spoke up about the issue, or tried to organize their co-workers, 43 percent were illegally punished for it, either with a threatened pay cut or a call to immigration. While tougher laws offer stronger weapons against abusive employers, workers who are organized are far better positioned to wield them.

“It’s easier to get the political win than to enforce the law,” said Kate Bronfenbrenner, the director of labor education and research at Cornell University.

Groups like Arise Chicago are out to make such enforcement possible for low-wage, non-union workers. In fact, the rise in activism around wage theft is in part a consequence of the dramatic proliferation of non-union labor groups around the country. While union membership is declining (by one estimate, down to 6.6 percent of the private sector), the number of “workers’ centers” and other alternative labor groups has exploded in past 20 years. Like Arise, such groups sometimes partner with unions to try to win collective bargaining rights where possible. But they also use the law, media and organizing in an effort to build leverage and improve conditions for workers who haven’t been able to win union recognition.

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How much of a difference Chicago’s new law makes, said Bronfenbrenner, will depend on how well organized workers are to enforce it. Kader agrees. “This ordinance is a victory only insofar as it expands our ability to organize,” he said. “On its own it’s really not going to do much.” But where workers are willing to take collective action, said Kader, the new law offers an additional tool “to punish bad businesses,” and send a strong message to scofflaw employers: “No longer can they simply ride out a Department of Labor complaint which is not going anywhere.”

Kader said the rise of wage theft campaigns “could be a sign of strength in the workers’ center movement,” but “it could also be a sign of weakness in the broader labor movement.” With unionization out of reach for many workers, he said, “we’ve had to look at, what are ways beyond a union contract, what are other ways to lift up standards?”