Despite the popularity of timekeeping software, wage theft remains rampant in the digital age.
Traditionally, this form of stealing ranges from companies refusing to pay for overtime work, to managers requiring employees to work even during their break.
These days, however, wage theft has been given a digital upgrade.
A new study in the American Business Law Journal revealed how employers are exploiting technology, along with loopholes in employment law, to cheat workers on their pay.
Minimum wage violations cost workers more than US$15bn in stolen wages each year, but the use of digital timesheets and punch clocks, supposedly designed to monitor work hours more accurately, has done little to address the problem of stolen wages.
3 types of digital wage theft
Elizabeth Tippett, author of the study and associate professor of law at the University of Oregon, has identified three ways in which employers cheat workers using a digital punch clock:
- Rounding: Some employers adjust their timekeeping software so that the system automatically changes the clock-in/clock-out record to pre-determined increments, eg 15 minutes.
- Automatic break deductions: Other employers subtract the amount of time equivalent to an employee’s break – whether or not the employee actually took the break.
- Time shaving: Employers change the records to reflect reduced work hours.
The first two types fall under a “legal gray zone” under the Fair Labor Standards Act (FLSA) in the US, Tippett said.
Rounding was initially permitted 50 years ago when companies still had to tabulate hours manually, but automatic break deductions are a relatively new concept not even covered by these regulations.
Cases of time shaving, on the other hand, are “more clearly prohibited under existing rules,” she said, but they can be difficult to prove as collective actions happening beyond a single worksite.
Tippett analyzed 330 lawsuits litigated in federal and state courts to determine these patterns.
“Did companies actually use these features to shortchange workers?” Tippett asked. “[The] answer is yes – and it’s just the tip of the iceberg.”