Oregon employers rarely pay penalties for wage theft. The state wants that to change

For Oregon’s Bureau of Labor and Industries, tackling wage theft involves more than just collecting unpaid wages. It also involves deterring wage theft from happening in the first place.

That’s why the bureau may issue penalties to employers who investigators determined have unlawfully denied workers pay.

But actually collecting those penalties has proven difficult for labor officials. While the agency has recovered just 41% of wages and penalties overall in the last eight years, a recent InvestigateWest analysis found, employers pay penalties at a much lower rate.

From 2015 through 2020, employers in aggregate paid less than $1 of every $10 in penalties they faced. In just 11% of claims did employers pay their penalties in full.

Now, the labor bureau said it’s strengthening its enforcement of penalties, assessing certain penalties earlier and more often. It also plans to hold more employers accountable for paying the penalties leveraged on them.

Oregon Labor Commissioner Christina Stephenson, who implemented the new penalty policy, wants to disincentivize employers from stiffing workers in the first place, a spokesperson for the labor bureau said.

“Assessing penalties also levels the playing field for law-abiding employers so they don’t have to compete with employers who steal wages from their employees,” said Rachel Mann, communications director.

Jenn Round, an expert with Rutgers University’s workplace justice lab, said effective enforcement of penalties also helps an agency work more efficiently.

“The government is never going to have resources to investigate every employer violating the law,” Round said. “You need to be able to use most of your investigation strategically to send messages to the employer community about the repercussions for violating, so employers understand that it’s worth it to comply.”

A spotty history

In years past, Oregon employers have been unlikely to face any penalties for wage theft.

During the six-year period InvestigateWest examined, just 17% of valid wage claims included penalties for the employer.
 Penalty wages for failing to pay a worker’s final paycheck on time make up the largest share; when paid, those go directly to the worker. Civil penalties, some of which are due to the agency and some of which go to the worker, can be leveraged for any employer’s “willful failure” to pay wages at termination. If the labor bureau pays workers out of its own Wage Security Fund, it assesses a penalty on the employer to reimburse the department.

A common reason that penalties don’t get paid is that when a wage claim is settled, investigators may let the employer off the hook for penalties if they pay the wages owed. From 2015 through 2020, about a quarter of all wage claims were resolved through a settlement, the labor bureau said.

Some workers prefer to settle, because it can mean they receive their back pay sooner, and settlements also increase the likelihood of the employer paying at all. Once the employer fails to pay the wages owed and the claim proceeds to an order of determination, the likelihood of getting the worker their money decreases, the agency said.

Some are critical of the settlement approach, however, because of its broader implications on accountability.

Oregon state Rep. Paul Holvey of Eugene, chair of the House Business and Labor Committee, said dropping the penalties in the past has given employers, some of whom already have enormous leverage over vulnerable workers, less reason to stop committing wage theft.

“(We’re) trying to have a process that really compels employers to do the right thing,” Holvey said. “But when they can just settle, where’s the stick, so to speak?”

Changing policies

The labor bureau’s new strategies around penalties will hold more employers responsible for payment, officials said.

Under Stephenson’s new policy enacted this fall, settlements with employers will not exempt them from payment of the penalties unless the worker specifies they want to settle for just their wages.

Keeping the worker apprised of the investigation and the steps toward resolution will remain an important part of the process, said Laura van Enckevort, administrator for the wage and hour division.

“The economic situation claimants are often in leads them to needing money readily,” she said. “Often, claimants will choose to accept payment early in the process to expedite payment.”

Officials expect the new policy will increase both the amounts of penalties leveraged and the amounts paid in penalties over time. In instances where employers resist paying, however, labor bureau staff and the Department of Revenue, which handles collections, will have only the same tools as they use to collect the unpaid wages.

And that tool box is limited in comparison to other states, as InvestigateWest explored in a previous analysis. The labor bureau is also dealing with an influx of wage claims even while its staffing levels are being slowly built back up after decades of decrease.

Oregon’s Bureau of Labor and Industries has been working with Round and others at the Rutgers University workplace justice lab to best leverage its enforcement resources. The philosophy guiding that work, called strategic enforcement, aims to decrease the wage law violations that drive workers to the labor bureau for help.

In addition to leveraging and holding employers to the payment of penalties, publicizing those enforcement actions and doing proactive, not just complaint-driven investigations can help with deterrence of wage theft, Round said. Oregon’s labor bureau has a proactive investigations unit that handles the latter piece, and changes to the penalties enforcement policy could tie into the former.

The agency can also build trust with workers through strategic enforcement, she said.
 “You want to be sending the message to workers that the agency takes these complaints seriously and when they come forward, it’s going to mean something,” Round said. “The agency will do its job and seek a remedy.”