Economic analysis shows better enforcement needed to protect employee rights

The reports of widespread wage theft, employee misclassification, and employer retaliation have continued, if not increased, in recent years. Consequently, the results of a new study are both unsurprising and deeply troubling for those who seek workplace fairness and to advance the rule of law. The Peterson Institute for International Economics – whose Board Vice Chair is the former Secretary of the Treasury and the former Director of the National Economic Council, Lawrence Summers, and whose Honorary Director is the former Federal Reserve Chair, Alan Greenspan – performed a careful and comprehensive economic analysis regarding the financial penalties for violations of the Fair Labor Standards Act (“FLSA”) and the National Labor Relations Act (“NLRA”) as well as the likelihood that such penalties actually will be imposed on employers for violating the law.

In short, the recent economic analysis confirms what many have known for years: existing penalties for legal violations by employers are not enough under either the FLSA or the NLRA. According to the study, an employer would need to face between an approximately 80% to 90% chance of being penalized for violating the FLSA’s minimum wage or overtime provisions to have a clear economic motivation to follow the law. Given current resources and enforcement efforts of the United States Department of Labor (“DOL”), however, the chances of employers being penalized is less than required. Due to the resources and efforts of the National Labor Relations Board (“NLRB”) now, the economic analysis also determined that employers have an economic incentive to retaliate against employees if it will reduce the likelihood of employees unionizing by 2% or less. Class actions, collective actions, and other advocacy by private parties certainly remain essential to addressing the array of legal violations by employers, but the DOL, NLRB, and the United States Equal Employment Opportunity Commission also clearly need to increase and expand enforcement without delay.