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Labor report highlights scant enforcement of wage and hour laws

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Labor report highlights scant enforcement of wage and hour laws

Feb 28, 2024 | 1:43 pm ET
By Evan Popp
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Labor report highlights scant enforcement of wage and hour laws
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The accommodation and food services industry had 3,134 complaint-based violations last year and was responsible for $3,750 of the $4,150 in penalties assessed by the Maine Dept. of Labor. (Jeenah Moon/Getty Images)

Last year, Maine employers faced average penalties of just 39 cents per wage and hour violation and could expect a Department of Labor investigation about once every 323 years.

Those numbers came from a report presented by the DOL on Tuesday to the Legislature’s Labor and Housing Committee outlining how the department has struggled to create stiff enough penalties to deter bad behavior but is working on implementing a more proactive enforcement strategy. 

The extent of the department’s deterrence issue was made clear with several figures. One is that the overall likelihood of a business being inspected in a given year is 0.31% — with the DOL having just one wage and hour inspector for every 69,177 employees. That combined with a low average penalty of just 39 cents per violation means the department’s “deterrent effect has been non-existent in past years,” the agency wrote. 

Those findings come as the DOL last year reported an upward trend in labor violations involving youth workers. And they also come as wage theft across the country could be costing workers $50 billion per year, with a Maine-based analysis cited by the DOL estimating that employers in the state stole around $30 million from minimum wage workers alone in 2017 and that just 0.028% of that was recovered by the department. 

The 2023 DOL report found there were over 10,000 wage and hour violations within resolved cases last year, an increase from a little over 5,500 in 2022. For those resolved cases, the DOL found that workers were owed a little more than $785,000. However, only about $590,000 of that was actually paid back to employees. 

Proposals to beef up Maine’s wage and overtime laws head to floor

In all, the DOL reported levying a total of $4,150 in wage and hour penalties in 2023 — a number that will likely increase due to the roughly six months it takes the department to resolve complaints that result in a violation.

Even recovering a little bit of money can make a huge difference for low-income employees in particular, the department noted. But while the DOL believes most employers in Maine follow the law, it acknowledged that not enough money is being recouped to deter bad actors and that violations are outpacing its ability to enforce the law. 

Change in enforcement strategy

In an effort to address some of the highlighted issues, the DOL’s Bureau of Labor Standards in recent years has been moving toward what it calls “strategic enforcement.” 

The DOL said one important aspect of strategic enforcement is proactively investigating labor violations rather than waiting for a complaint to be made. That is important because studies have shown that the workers most willing and able to file complaints are often not the workers whose rights are most often being violated, the department explained. Many of the workers most impacted by labor violations feel they cannot complain for fear of retaliation, among other reasons, according to the report. 

Another element of strategic enforcement is prioritizing which industries to focus on. To that end, the Bureau of Labor Standards will be conducting yearly assessments to find out “which violations are occurring and where.” The DOL has also implemented a “triage system” for complaints it receives, prioritizing those involving child labor or minimum wage workers and expanding some investigations to entire workplaces. 

Additional parts of strategic enforcement are using all available enforcement tools and ensuring that employers and workers are educated on the law. 

The effect of the department’s shift in strategy wasn’t reflected in much of the 2023 data, the DOL said, but the agency expressed optimism about the overall impact of its efforts.

“Strategic enforcement allows the department to use our limited resources to better protect workers as required by the law,” Laura Fortman, commissioner of the Maine Department of Labor, said in a statement. “We will use all of our tools, including enforcement, outreach, education, and collaboration to level the playing field for both workers and ethical employers.”

Arthur Phillips, an analyst at the Maine Center for Economic Policy, agreed that the move to strategic enforcement is important, especially given that current low inspection rates and slow complaint resolution times can lead to workers not bothering to speak up. 

However, Phillips said strategic enforcement can mean several different things. In Maine, he hopes such enforcement includes proactive checks within workplaces and industries where there is reason to believe violations are occurring.   

“Going out and looking under the hood without having to rely on a complaint is a really important component,” he said. “And that coupled with higher penalties and less of a tendency to negotiate penalties down to next to nothing, all of those things combine to actually create effective deterrence.”  

Legislative solutions

In conjunction with its shift to strategic enforcement, the DOL has also proposed new rules that agency officials believe would beef up the department’s enforcement ability. Those new rules would simplify the process for imposing penalties for labor violations, modify the way appeals work and allocate resources more efficiently, according to the DOL. 

The department added that the rules would also increase “the deterrent effect associated with violations” by making initial penalties higher and the criteria for reducing fines more strict.

In its 2023 report, the DOL gave several explanations for the current low average penalty employers face for breaking labor laws. The department explained that in the past it often cited an employer rather than fining them, reduced or waived penalties due to settlement agreements, imposed fines that employers have sometimes refused to pay, and that current law limits its ability to set high penalties. 

The legislative vehicle for the DOL’s proposed rules has advanced out of the Labor and Housing Committee and will soon be considered by the House and Senate. 

Along with that reform, the department is supporting a bill that would allow the state to more quickly recoup money employees are owed by allowing the DOL to directly order the restitution of unpaid wages, damages and interest. The Labor and Housing Committee has advanced that bill to the full Legislature. 

Labor violations by the numbers

Along with information about its enforcement challenges, the DOL report included a variety of additional numbers on wage and hour violations last year.

The number of complaints received by the DOL increased slightly in 2023 to 286 from 283 in 2022, with the department resolving 247 of last year’s complaints, according to the report. However, the DOL said those numbers alone don’t “tell one much about the bigger picture” because of the issues that come with relying on complaints.

The DOL also broke down labor violations by industry. Of complaint-based violations, the accommodation and food services industry led the way with 3,134 and was responsible for $3,750 of the $4,150 in penalties assessed by the DOL. That was followed by the construction industry, with 2,414 complaint-based violations in 2023. In instances where there wasn’t a complaint but the DOL still launched an investigation, the retail industry had the highest number of violations (2,220). 

Because the department’s inspection capacity is limited and relying on complaints is a flawed mechanism, the DOL said it’s difficult to draw sweeping conclusions from the data. But the department did write that some areas of the economy clearly have serious issues with wage and hour violations, although it didn’t provide specifics. 

“There are entire industries, or subsectors of industries, where experience tells us compliance is the exception,” the report stated.