New York State law makers are pushing for legislation to protect low wage workers. The bill would prevent employers accused of wage theft from selling assets and claiming bankruptcy to avoid having to pay employees back pay.
An old bag of tricks
When business owners are facing a wage dispute, they often resort to several tactics to lessen their net worth in order to avoid paying financial penalties. Business owners sell their assets, including their homes and businesses, for nominal sums, often to family members. Declaring bankruptcy is another known measure to avoid paying back wages.
If an employer is willing to cheat their workers out of wages or overtime pay, it is not surprising that they will employ unscrupulous tactics to avoid having to pay the damages.
Unfortunately, employees who have won a successful wage claim against employers are not guaranteed to receive compensation. As noted, employers will attempt to evade payments in any manner possible. A group of workers advocacy organizations authored a report about the amount of back wages the New York State Department of Labor (DOL) was unable to collect. According to the report, from 2013-2015 the DOL failed to collect over $101 million owed to employees from business.
A lien or a wage bond
The bill would prevent businesses from selling their assets while engaged in a wage dispute by placing a lien against their properties. There are several states that have wage dispute lien laws and others that allow liens once wage theft has been proven after a lawsuit or investigation.
In 2015 Gov. Cuomo required nail salons to carry wage bonds. A wage bond is a type of insurance that prevents nonpayment to workers by acting as a legally binding contract between the employer, the employee and the insurance underwriter who issued the bond. The underwriter provides a financial guarantee of the employer’s ability to uphold their duties.
Low wage employees are often at the mercy of their employers. When employers do not fairly compensate the employee for the time worked, the employee has legal options available. A vulnerable workforce does not need to be an exploited workforce and lawful pursuit is the best course of action.