Union Members Testify in Support of Bill to Hold Employers Accountable for Violating Wage & Hour Laws
PHOTO: John Leavitt Carpenters Union Locals 349 & 352 testifies on LDs 372 & 2184.
On Tuesday, the Maine AFL-CIO testified in support of two bills, LD 2184 and LD 372, "An Act to Increase Enforcement and Accountability for Wage and Hour Violations,” that would increase fines on employers that break labor wage and hour laws and simplify procedures so that companies who violate labor laws are held accountable.
Based on information provided by the Maine Center for Economic Policy, employers who the Maine Bureau of Labor Standards found to have violated wage and hour laws paid an average penalty of just $9.61 per violation. By far, the most common labor violation is wage theft, which costs workers hundreds of millions of dollars each year, according to the Economic Policy Institute. This happens across industries, but is concentrated in lower wage sectors of the economy. A 2014 study found that nationally nearly 90 percent of fast-food workers experienced some sort of wage theft on the job.
“Penalties of such a small amount cannot be justified as a sufficient deterrent for an employer tempted to cut corners by exploiting workers,” Adam Goode, the Maine AFL-CIO’s Legislative & Political Director, told the Labor and Housing Committee. “A $9.61 fine for withholding a working person’s pay is not an effective deterrent. Remedies should reflect the hardship that workers face when they are exploited through this horrible practice of withholding pay. Passing these updated rules will allow for better protections for workers.”
The two bills would also help reign in the rampant practice of worker misclassification, when employers misclassify workers as independent contractors to avoid paying taxes and benefits and deprive them of their fundamental right to organize. It's estimated that a typical construction worker, as an independent contractor, loses out on as much as $16,729 per year in income and job benefits compared with what they would have earned as an employee, according to a 2022 study by the Economic Policy Institute.
John Leavitt, Business Manager of Carpenters Union Locals 349 & 352, pointed out that Maine once had a state task force to address the problem of worker misclassification, but it was abolished by former Governor Paul LePage in 2011.
"I believe the state has been put in a situation where it is nearly impossible to enforce labor laws and when the fines are lower than the cost of doing business there is no incentive to play by the rules," Leavitt told the committee. "Ultimately the legitimate companies and taxpayers continue to carry the load, especially on publicly funded projects where the employees working in these buildings are paid by taxpayers where the tax funds were drained to pay for construction of their facility."
As an example, Leavit said that his union had discovered several labor violations committed by the company Wagner Drywall, which won the bid for a job on the York County Judicial Center. The company provided twelve carpenters who met prevailing wage requirements. Then it brought in J&R Drywall as second tier subcontractor/labor broker. J&R brought in 45 carpenters who submitted payroll with zero deductions for state or federal taxes along with false names and addresses for the workers. Then the company owner met his workers at a check cashing facility where he cashed their checks and handed them between $15.00-$22.00 per hour with no 1099 or W2 at the end of the year.
"This information comes from the workers who were asked to file affidavits and the Maine Department of Labor Statement of Claim for Wages and Hour complaint," said Leavitt. "We reported this information to the DOL, Workers Comp and Unemployment but there were no findings."
Maine Chamber Says Law Breaking Companies Should Be Treated Like Drug Users & the Mentally Ill
In opposition to the bill, Maine Chamber of Commerce lobbyist Jacob Lachance said the proposals were too hard on companies that commit labor and wage violations. Committee member Rep. Valli Geiger (D-Rockland) pushed back and said that while most employers are law abiding others "will always be looking to game the system."
"What do you think should be in place so we eliminate bad actors and we make it really unlikely that they decide to take the risk because the price is too high?" Geiger asked Lachance
Lachance, a former police officer, replied there are programs to divert people with drug problems and mental illness from jail and into treatment programs. He said those programs have helped people get "started on the right path" and the two bills "do the opposite of that for the business community." He suggested that similar diversion programs could be used to deal with employers who break labor and wage laws so they "understand the penalties that are before them," rather than "throwing the book at them from the get go."
Unlike drug offenses and regular theft crimes, employers who steal from their workers are not handled by the criminal justice system. While setting up a special treatment program for corporate lawbreakers sounds intriguing, we believe meaningful fines will be a much better deterrent.