The Pitiful Penalties for Violating Labor Law

The United States is experiencing an invisible crime spree—by employers. Since 2014, the number of children employed in violation of labor law has quadrupled. Wage theft (i.e., violations of minimum wage and overtime laws) reduces paychecks by an estimated $50 billion per year, or more than half what retail outlets lose from shoplifting. And last year nearly 20,000 charges of unfair labor practices were reported to the federal government, the highest level since 2017.

Unlike the property crimes that politicians talk about (which fell 59 percent between 1993 and 2022), violations of labor law are committed by respectable citizens in no danger of criminal prosecution. The penalties they pay are monetary, in the form of fines or mandatory back pay. These penalties are—as the title puts it in a new report prepared by the Democratic staff of the House Education and the Workforce Committee—“a slap on the wrist.” Violating labor law is, the report notes, a routine cost of doing business.

Indeed, committing labor violations is less costly than many routine fees paid by businesses voluntarily. The $2,500 maximum annual membership fee to belong to the United States Chamber of Commerce is more than many businesses pay when they get caught red-handed firing an employee for engaging in union-related activity. The median car allowance for a chief executive officer is $15,000; that’s higher than the median penalty leveled by the Occupational Safety and Health Administration ($14,063) when a worker gets killed on the job.

The two highest maximum penalties permitted by law, according to the report, are the OSHA fine for a “repeat or willful safety and health violation” ($161,323) and the Labor Department fine for a “child labor violation that causes death or serious injury” ($71,031). Other maximum penalties are all below $17,000, and usually well below. Repeated or willful minimum-wage violation? Pay the man the five dollars—in this case, $2,451. If the violation isn’t repeated or willful, there will be no fine at all; the boss is merely on the hook for back pay at the minimum-wage level of $7.25 per hour or $10.88 per hour for overtime, even if the worker in question got paid more than minimum wage. A wage-theft bill introduced last fall by Senator Patty Murray, Democrat of Washington, would for the first time add a civil penalty for committing wage theft of up to $22,030 and, for repeat or willful violations, $110,150.

Violating somebody’s right to organize a union and engage in collective bargaining is another offense that carries no financial penalty, merely the requirement that the employee in question be reinstated and furnished with back pay. When the National Labor Relations Board last year issued a decision against Noah’s Ark Processors, a meat-packing company, for bargaining in bad faith, the management-side law firm Holland & Knight called the penalty “heavy-handed.” What was this cruel and unusual punishment? Noah’s Ark Processors had to read publicly and mail to employees a “notice and explanation of rights” and endure periodic visits from an NLRB representative to check on compliance. Boo freaking hoo.

The nonprofit Economic Policy Institute reported in 2019 that U.S. employers get charged with violating labor law in 41.5 percent of all union election campaigns. President Joe Biden’s Build Back Better bill, which cleared the House in November 2021, would have introduced a fine of up to $50,000 for each unfair labor practice committed by management, and up to $100,000 for repeat offenders. Alas, the bill died in the Senate. These provisions were taken from the Protecting the Right to Organize, or PRO, Act, which also cleared the House in 2021 before dying in the Senate.

It’s tempting to blame these weak penalties on a federal government that hesitates to punish business scofflaws. But the Democratic House report makes clear that the price of violating labor laws is low even when compared to the price of violating other laws that regulate business. While OSHA’s maximum penalty for a “repeat or willful health and safety violation” is $161,323, the Environmental Protection Agency’s maximum penalty for polluting the air is almost three times that—$450,000. OSHA’s maximum penalty for “a child labor violation that causes death or serious injury” is $71,031. But a tuna fishing boat’s failure to abide by the provisions of a 2016 treaty with 16 Pacific island states could cost the company $639,908. You’re welcome to kill or injure your own workers, the government in effect says, but please don’t piss off some fisherman in Tonga.

Why the discrepancy? Possibly because the laws that protect workers tend to be older. The Fair Labor Standards Act, which governs wage theft, dates to 1938, and the National Labor Relations Act, which governs union elections, dates to 1935. The maximum penalties under these laws haven’t been updated since 2008, which was also the year Congress last legislated an increase in the minimum wage. Both laws are badly in need of more substantial updating, but any wholesale revision risks weakening rather than strengthening them. It took a Great Depression to pass the FLSA and NLRA, and neither would have a prayer of clearing Congress today. Indeed, Democrats have been trying to rewrite the NLRA since 1947, when a Republican Congress passed the anti-union Taft-Hartley revisions to the law over President Harry Truman’s veto. Not even President Lyndon Johnson could repeal Taft-Hartley during the liberal heyday of the Great Society. The PRO Act is the Democrats’ latest attempt, and although I believe it’s going to pass eventually, it won’t be soon.

Maybe the age of the law doesn’t matter. The Occupational Safety and Health Act, dating to 1970, is a relative youngster, and Congress hesitates to revise that law too; its maximum penalties haven’t been updated since 1990. For some reason Congress is just more fearful of policing employer-employee relations than it is of policing other types of business abuses.

I suspect it comes down to an insufficiency of interest groups pressuring Congress to protect American workers. There’s the AFL-CIO, of course, but its clout is severely diminished by organized labor’s decline. There’s the Economic Policy Institute, which performs invaluable economic research on issues related to workers, but it’s a think tank, not a lobby group. The National Employment Law Project, another excellent group, does engage in advocacy, but most people have never heard of it. There are other groups, but mostly at the state and local level. The power vacuum created by labor’s six-decade decline has never been filled.

In the meantime, the labor laws we have, even when enforced vigorously, will seldom inflict much more than mild reputational damage. Don’t be surprised to see the current crime spree in labor violations continue. There’s no practical reason for it to stop.