February 19, 2019

February 19, 2019

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February 18, 2019

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Your Get of Out Jail Free Card: Tips to Avoid Pitfalls Under the Texas Wage Theft Act

In the classic version of the iconic board game Monopoly, “Monopoly Jail” is the first corner space after “Go.” When playing the game, no one really wants to be sent to jail, as it immediately takes away your turn and ends your ability to keep collecting money and property.

The same is true about your “work life.” Almost no one wants to go to jail because of their work. But federal, state and local governments continue to enact laws that potentially send employers to jail for doing bad things—like engaging in wage theft.

Wage theft occurs when an employer fails to pay its workers as agreed, when workers are paid less than the minimum wage, when workers are required to work “off the clock,” and when workers are not properly paid for their overtime work. Each year, wage theft impacts millions of workers to the tune of tens of billions of dollars. In addition, employers who properly pay their employees are at a competitive disadvantage to employers who do not.

jailTo combat these injustices, the Texas legislature, following the lead of a number of other states with wage theft laws, such as California and New York, passed the Texas Wage Theft Act (the “Act”). Among other things, the Act makes the nonpayment of wages a third-degree felony and allows for criminal prosecution for wage theft if, with the intent to avoid payment, an employer fails to make full payment after receiving a demand for wages. The Act also closes a well-known loophole that allowed employers to evade prosecution by paying only a fraction of what they owed employees. In addition to jail time, employers may be ordered to pay a fine as well as restitution to the aggrieved employee. The act allows for private lawsuits, and affected employees are not required to file complaints with the Texas Workforce Commission of the Department of Labor before initiating those lawsuits.

The Act is one of the most aggressive mechanisms to counter wage theft, but it is not the only one. Cities like El Paso and Houston have enacted ordinances that prohibit employers who commit wage theft from receiving potentially lucrative city contracts and/or city permits. On the federal side, an Obama-era executive order, which was recently repealed by President Trump, in part discouraged businesses from committing wage theft by not allowing them to receive federal contracts.

The consequences for wage theft are severe, but there are a number of ways in which employers can be mindful of the pitfalls that lead to wage theft. First, at an absolute minimum, employers everywhere should ensure they are in compliance with the federal Fair Labor Standards Act (FLSA), which establishes, among other things, the minimum wage and overtime pay eligibility. Second, employers should also make sure that individuals who perform services for the entity are properly classified as employees or independent contractors. Third, employers should keep detailed and accurate records of their employees, including but not limited to, the hours an employee works in a work week, the employee’s rate of pay, the total amount of pay for the period as well as any deductions made.

Finally, employers should pay their employees in full when wages are due, particularly a separating or separated employee. In Texas, for example, an employee who is separated from work for a reason other than discharge must be paid in full not later than the next regularly scheduled payday. Discharged employees must be paid in full not later than the sixth (6th) day after termination. When and how often employees must be paid varies from state to state, so make sure you are in compliance with the laws in your state.

© 2019 Foley & Lardner LLP

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About this Author

Michael Rahmn Litigation Attorney
Senior Counsel

Michael (Mike) R. Rahmn is a member of Foley Gardere’s litigation practice group in Houston, where he focuses his practice on business and employment disputes. Mike, who is licensed to practice law in Texas and Louisiana, handles litigation matters from inception through completion, including pre-suit investigation, motion and pleading practice, discovery, mediation, settlement, trial, and appeal. He has significant experience handling commercial disputes for clients in the oil and gas, construction, healthcare, and transportation industries. Mike also routinely advises clients on...

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