How Toothless Enforcement of Labor Laws Undermines the Rule of Law

Regulation of business in America is defined by an enduring political conflict between the interests of workers and the interests of businesses. This conflict is particularly evident in the field of labor protections and regulations. Due to a strong incentive for employers to increase profits by violating the Fair Labor Standards Act and state labor laws that require fair compensation, employees are regularly not paid overtime or for the total number of hours they have worked. Legislators’ fear of upsetting the business community disincentivizes them from increasing enforcement of labor laws, causing the playing field to be tipped further in favor of employers and leading to stagnation or defanging of government enforcement of protections. The resulting lax enforcement of regulations reduces labor laws to toothless recommendations, weakening the rule of law in America particularly with respect to business behavior. 

Employers in America don’t simply violate labor law, but flout it with breathtaking frequency and regularity: 

Fully 64 percent of low-wage workers have some amount of pay stolen out of their paychecks by their employers every week…In total, the average low-wage worker loses a stunning $2,634 per year in unpaid wages, representing 15 percent of their earned income.[1]

The power imbalance inherent in the majority of low-wage employee-employer relationships makes it nearly impossible for employees to demand their full compensation without fear of losing their source of income, a consequence too catastrophic for most low-wage workers to risk. 

Workers need a third party to help enforce the laws that govern their wages: the government. While states have dedicated staff within their departments of labor to conduct investigations into wage theft and other labor code violations, they are often grossly underfunded to tackle the massive task at hand. The federal system of enforcement is no better: 

 When the federal minimum-wage law was first established in 1941, there was one federal workplace inspector for every 11,000 workers. By 2008, the number of laws that inspectors are responsible for enforcing had grown dramatically, but the number of inspectors per worker was less than one-tenth what it had been in 1941, with 141,000 workers for every federal enforcement agent. With the current staff of federal workplace investigators, the average employer has just a 0.001 percent chance of being investigated in a given year.[2]

This decrease in enforcement power by both the federal and state governments, however, has not just come from institutional inertia or apathy. In some cases, it is a deliberate effort by politicians to neutralize the enforcement of the laws on the books without making the politically unpopular move of repealing those laws: “Ohio’s General Assembly, for instance, voted to completely eliminate funding for labor inspectors in 2011, leaving no staff to enforce state minimum-wage, overtime, child labor, or prevailing wage laws.”[3]

The effect of this lackluster enforcement is that employers don’t just widely violate these laws, but often continue to violate them even after being found guilty of having done so. When regulatory enforcement is both rare and small in severity and business owners come to see compliance as optional, these labor protections have lost the normative force we typically accord laws.

Lacking a robust system of enforcement of the law by the government, employees are left with one method to try to pursue justice: making a civil claim in the courts. However, the low dollar value of the claims at stake, the disproportionate access to robust legal representation, and the expensive and time-consuming reality of litigation combine to make this option infeasible for nearly all low wage workers. The method best able to address the downsides of individual suits is combining together employee claims in a class action lawsuit in which the total dollar value of the claim is high enough to attract private attorneys to represent clients. Employers, wary of their exposure to class action claims against them by employees, have sought to preemptively curtail collective action rights via employment contracts prohibiting collective action.  

Cases such as Epic Systems Corp v. Lewis have ruled that employees are bound by contracts that mandate individual arbitration of labor disputes, preventing employees from joining collective action lawsuits over Fair Labor Standards Act violations or other labor law violations.[4]

According to a study by the Economic Policy Institute, last year more than 50 percent of private-sector, non-union employers demanded that would-be employees agree to arbitration in the event of a dispute. Just shy of a third also insisted that their workers agree to surrender the right to join a class-action lawsuit.[5]

This means that as employers increasingly require employees to sign these contracts as conditions of employment. Employees whose labor rights have been violated or wage contracts have been breached are unable to effectively seek legal remedy via class action. 

There exists no effective method of tackling the problem of wage theft on a large scale under the current system of practices, rules, and policies. Employers can commit wage theft with near impunity. When laws are not enforced by the state, and private citizens cannot effectively utilize the court system to ensure they are paid what they are owed, our conception of a society governed by the rule of law is not upheld. Further, by permitting businesses to break laws widely, we foster a culture of “getting away with it,” in which people are more prone to cheat when they think the rewards outweigh the potential risks of enforcement. An across-the-board increase of substantial magnitude is required in the funding of both state and federal labor standards enforcement agencies. Also necessary is a broader rethinking and conversation in American society about the business ethics surrounding what it means to compensate employees fairly.     

 [1] Lafer, Gordon, “The Legislative Attack on American Wages and Labor Standards, 2011–2012,” Economic Policy Institute, October 31, 2013, http://www.epi.org/publication/attack-on-american-labor-standards/.

[2] Gordon, “The Legislative Attack.”

[3] Ibid.

[4] Epic Systems Corp v. Lewis, 584 U.S.___ (2018). 

[5] Helaine Olen, “The Supreme Court Just Made It Easier on Employers - and Harder on Workers,” The Washington Post, WP Company, May 21, 2018, https://www.washingtonpost.com/blogs/plum-line/wp/2018/05/21/the-supreme-court-just-made-it-easier-on-employers-and-harder-on-workers/.