Editor's Note
When It's Get Pay Right or Else
Wage "theft" usually happens when someone tries to get nonexempt employees to do more work for less money. The edict comes down to reduce overtime. Corporate has frozen or limited new headcount. And the work can't get done without hiring more people or people working more hours, often both. This is extremely common in hospitality and retail.
The managers are stuck in the middle because their personal bonus and compensation depends on both cutting overtime and making sales goals. So they risk it, knowing that it's illegal and could create bigger problems. It's predictable behavior when the organization puts them in an impossible situation.
The irony is that when the class action wage claim comes, it always costs more than just paying the overtime, especially if you lose and have to pay additional penalties and the other side's attorneys' fees too.
But risk of fines and penalties doesn't seem to be deterring wage violations. For many businesses, the short term bottom line is more important than the compliance risk. Some of it is immediate rewards versus later potential costs. I can have what I want now and risk some possible bad thing down the line that may not even happen. Humans are really great at rationalizing what they want and ignoring potential consequences. (I'm coming up on a sobriety anniversary. I know something about this.) There are only so many regulators and plaintiffs' attorneys. The reality is that a lot of businesses get away with it a lot of the time.
Policy issues
This creates several difficulties for policy makers. First, workers, especially nonexempt employees, need that money to survive. Businesses are putting financial burdens on the people who are least able to bear it and have little power to resist. It's both legally and morally wrong.
It's also not sustainable as employees leave, recruiting and training costs go up, and the business ends up in a worse place than they started. And that's before the wage claims.
The next policy problem is that government runs on payroll taxes, which represents the majority of most governments' income and is a steady source of cashflow. When employers underpay, it reduces the payroll taxes the state collects. Cutting public services and dealing with political backlash never goes well, particularly for elected officials.
Third, we are seeing a reduction of governmental aid at the federal level as well as rising prices due to trade policy. This means that states will end up picking up the pieces—if they can. And that means that states are going to be a lot more interested in making sure employers are paying employees everything those employees have earned.
Practical problems with money as punishment
There is also a fundamental problem with paying money as the punishment. If an organization can afford to pay the penalties, then there's not much deterrent, especially when there's only a chance they will get caught.
We're seeing this play out in a lot of places right now. People who can afford to pay the penalties for violating the law, don't really have to follow the law. If they get caught, they write a check for money they won't miss and then keep doing whatever they're doing. The rules no longer apply to them because there's no effective deterrent. Pretty soon, they assume the rules just don't apply to them.
And that is why states are looking to other types of enforcement for wage violations, including criminal liability. One tricky part of imposing criminal penalties on corporations is that you can't put a corporation in jail. So figuring out who should serve the time is an interesting question (for another day).
Another approach in California is to impose personal liability on senior leaders of the company to pay wage violations out of their own pockets. While some of them can still afford it, it does raise the stakes for leadership because they personally have something to lose.
Here's a great article from Littler on where states are imposing criminal penalties for wage violations and some interesting cases where that has happened.
- Heather Bussing
In a significant shift in labor law enforcement, states and localities across the United States are increasingly treating wage theft not merely as a civil infraction, but as a criminal offense. This trend in certain jurisdictions reflects a growing movement that the intentional denial of wages—whether through unpaid overtime, minimum wage violations, or misclassification of workers—should be prosecuted with the same seriousness as other forms of theft.
A Shift Toward Criminalization
Historically, wage and hour violations have been addressed through civil penalties, administrative fines, or private lawsuits. Enforcement agencies, such as the federal and state departments of labor, have traditionally exercised discretion in issuing civil penalties, liquidated damages, or other remedies for wage underpayments. However, a growing number of states and localities are now imposing criminal penalties for willful or repeated wage violations, with penalties ranging from fines to imprisonment. For example:
- Connecticut classifies wage theft as a felony when unpaid wages exceed $2,000, with fines up to $10,000 and potential imprisonment.
- Colorado and California treat intentional underpayment or withholding of wages as criminal theft.
- Colorado, Connecticut, Hawaii, Illinois, New Jersey, New York, Rhode Island, and Virginia have enacted laws that authorize imprisonment for failure to pay wages or falsification of payroll records.
Although some of these laws have long existed, there has been a recent surge in states seeking to enforce these criminal penalties.
- In Minnesota, the Attorney General charged a dairy farm owner with felony racketeering and wage theft for withholding overtime and threatening immigrant workers.
- In Washington, restaurant owners were charged with felony theft for failing to pay $45,000 in wages despite prior civil penalties having been assessed.
- aIn New York, prosecutors indicted owners of a pizzeria for alleged theft of more than $20,000 in wages.sdf
- In California, employers across various industries have faced criminal charges: the owners of a garment manufacturer were arrested and charged with grand theft and perjury; owners of a restaurant were arraigned on felony charges of wage theft, conspiracy to commit grand labor theft, and unemployment insurance fraud; and a construction company was charged with 31 criminal counts, including wage theft and tax evasion.
Several factors are driving this trend. First, criminal charges serve as a stronger deterrent than civil penalties, as they carry the possibility of incarceration and significant reputational harm. Second, advocacy groups have intensified public pressure, framing an employer’s underpayment of wages as a form of economic exploitation. Finally, legislative reforms in many states have expanded the definition of wage theft and authorized criminal penalties, reflecting a growing consensus on the need for stronger enforcement tools. Just by way of example, New York in 2023 enacted a law that amended the penal law to increase prosecution for an employer’s failure to pay wages in full to its employees.
Activity has not been limited to the states and local level. On June 25, 2025, the U.S. Department of Labor (DOL) included in the Federal Register its proposed plans to address criminality with respect to wage violations discovered by the Department in investigations. Specifically, the DOL advised that it plans to provide to the Office of Management and Budget (OMB) a report containing: (1) a list of all criminal regulatory offenses enforceable by DOL or the Department of Justice (DOJ); and (2) for each such criminal regulatory offense, the range of potential criminal penalties for a violation and the applicable mens rea standard for the criminal regulatory offense. The DOL also announced a general policy, subject to subject to appropriate exceptions and to the extent consistent with law, that the following factors, among others, should be considered by the Department when considering whether to refer alleged wage or other violations to DOJ:
- whether an employee has died or was seriously injured as a result of a violation of one of the laws that DOL enforces;
- whether the putative defendant’s conduct is particularly egregious, such as where the employer has a history of similar violations;
- whether the putative defendant has deliberately impeded DOL investigative efforts;
- whether workers were physically or mentally coerced, such as in cases involving trafficking or extortion;
- the harm or risk of harm, pecuniary or otherwise, caused by the alleged offense;
- the potential gain to the putative defendant that could result from the offense;
- whether the putative defendant held specialized knowledge, expertise, or was licensed in an industry related to the rule or regulation at issue; and
- evidence, if any is available, of the putative defendant’s general awareness of the unlawfulness of their conduct as well as their knowledge of the regulation at issue.
Looking Ahead
As more states pursue criminal charges for wage violations, employers should consider taking a proactive and comprehensive approach to compliance. This begins with conducting regular audits of payroll systems to ensure that all employees are being paid accurately and in accordance with state and federal laws. Missteps in overtime calculations, minimum wage adherence, or worker classification can now carry not just financial penalties, but in some cases, criminal charges.
Equally important may be investing in training for human resources (HR) and payroll personnel. As laws vary significantly from state to state, employers may want to ensure staff are well-versed in the specific regulations that apply to their jurisdiction. Employers should also consider implementing robust recordkeeping systems that provide clear documentation of hours worked, wages paid, and employment status—records that could prove critical during an investigation.
In this new era of enforcement, employers that prioritize compliance and accountability may be best positioned to avoid legal—and now potentially criminal—pitfalls.
