Tips to avoid pitfalls under the Texas Wage Theft Act

Each year, wage theft impacts millions of workers to the tune of tens of billions of dollars. Wage theft could occur when an employer fails to pay its workers as agreed, when workers are paid less than the minimum wage or when workers are not properly paid for their overtime work.

Federal, state and local governments continue to enact laws against employers engaging in wage theft. To 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.

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.

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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On the federal side, an Obama-era executive order, which was recently repealed by President Trump, in part discouraged businesses from committing wage theft by not allowing them to receive federal contracts.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 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.

This article was adapted and originally appeared on the Foley & Lardner website. The information in this legal alert is for educational purposes only and should not be taken as specific legal advice.

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