Michigan attorney general takes on persistent yet little-known crime wave: Wage theft

In April, Michigan Attorney General Dana Nessel announced the creation of a Payroll Fraud Enforcement Unit to tackle the problem of businesses that steal from their employees and their communities. Earlier this month, Nessel’s office announced that it was getting ready to launch “potential civil and criminal charges” against at least 10 Michigan businesses.

Those 10 businesses may be just the beginning. According to the release announcing the pending charges, in just two months Nessel’s Payroll Fraud Enforcement Unit received nearly 100 complaints—and “in some instances, (individual) complaints claim the number of workers affected by these practices surpass 300.”

While stunning, those complaints likely represent just a sliver of the scope of wage theft in Michigan.

According to a study by the Economic Policy Institute cited in Nessel’s announcement of the pending charges, “unscrupulous businesses stole an estimated $429 million in wages and overtime pay from Michigan workers between 2013 and 2015, impacting more than 2.8 million workers.” David Cooper, a senior economic analyst with the EPI, told Daily Kos in a recent interview, “We have estimated that wage theft, in its totality, costs workers something on the order of $50 billion a year” on a nationwide scale.

Unlike some sorts of theft, wage theft and payroll fraud can be complex, with one type of theft leading to others. For example, Cooper explained, employers who misclassify employees as independent contractors then refuse to pay mandated overtime. In other cases, employees lose out on overtime when they’re forced to work off the clock, or their pay for the combined (paid and unpaid) hours they’ve actually worked may fall far short of the minimum wage. The many forms of wage theft “can sort of blend into one another,” Cooper said.

According to a 2017 EPI report, minimum wage violations alone cost 2.4 million workers in the 10 states studied (including Michigan) $8 billion annually. In addition to workers losing an average of $3,300 a year to this form of wage theft, both state and federal governments are shorted the taxes those workers would otherwise have paid—and, according to the EPI report, “this form of wage theft causes many families to fall below the poverty line, and it increases workers’ reliance on public assistance, costing taxpayers money.”

While 17% of low-wage workers are being ripped off by their employers, they are far from alone. Detroit-area employment attorney Deborah Gordon is representing two cardiologists who were fired from their positions with the Detroit Medical Center after they alleged problems, including dirty medical instruments, unnecessary procedures being done on patients, and Medicare and Medicaid fraud.

However, since the cardiologists were misclassified as independent contractors, Gordon told Daily Kos, she has had to file a separate lawsuit just to try to get access to their personnel files. “[The Detroit Medical Center] actually take[s] the position that my clients are not entitled to their personnel records, that presumably contains the information used in the decision to fire them, because they’re not employees.”

Independent contractors are exempt from virtually every law protecting employees. In addition to avoiding paying Social Security and unemployment insurance, Gordon explained, misclassifying employees also “gets the (employers) out of litigation.” Gordon added that misclassification “runs the gamut” of workers. “I did represent a group of women who were dancers at strip clubs” who had been misclassified as independent contractors, she said.

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