Wage Theft in Ireland

Should We Be Paying More Attention?

Michelle O'Sullivan11/04/2022

When the issue of hospitality workers not receiving tips gained prominence nationally in recent years, unions called the action of employers retaining tips a form of ‘wage theft’. The term wage theft is more prominent in other countries such as the USA and Australia where it has been a hot topic for several years. Wage theft refers to situations where workers are not paid for work performed. It can emerge in different forms, such as when workers are not paid minimum or agreed wages, when they do not receive their entitlements to leave or rest breaks, when they do not receive due tips or when they are bogusly self-employed. In the USA and Australia, policy debates around wage theft have often been spurred by scandals revealing large scale underpayments of workers. For example, Walmart has paid more than US $1.4 billion in fines and settlements for wage theft since 20001 while more recently in Australia, Woolworths have paid up to $400m as a result of underpaying workers2, and the 7-Eleven franchise paid back over $170m to workers after it was found by a state body to have falsified records to reduce wages3.

In Ireland, outside of tipping practices, the issue of wage theft has not garnered much traction. The question is: should it? One of the challenges with examining wage theft is trying to find out how prevalent it is. There is no one-stop-shop data available to give an accurate picture of underpayments so we must rely on a variety of sources from unions, research bodies and state bodies. The Economic and Social Research Institute (ESRI) estimated that in the period 2016-2018, 5.6 per cent of minimum wage employees were paid below the national minimum wage for reasons other than those allowed for in legislation, amounting to 1.2-1.4 per cent of total employment.4 Using a different data set, Walsh found higher non-compliance with the national minimum wage, amounting to 7.8 per cent of total employment in 2018.5 He established that non-compliance increased between 2011 and 2018 and that it was highest among 21-24 year olds followed by workers aged 65 and over. The Workplace Relations Commissions’ labour inspection and enforcement service recovered over €12m in unpaid wages on behalf of workers between 2016 and 20206. A survey of over 2,400 early years professionals reported that 65 per cent undertook unpaid work and half did not have enough time to take rest breaks7. In a survey by the Migrants Rights Centre of Ireland of 104 migrants in services sector jobs, 44 per cent reported receiving less than the minimum wage and 61 per cent stated they worked extra hours for no pay while 82 per cent indicated they were not compensated for working on Sundays as required by legislation8. A union survey of 291 hospitality workers found that two-thirds reported not getting proper rest breaks and over one third did not get paid for holiday entitlements9. These sources need to be supplemented by evidence of underpayments from the multitude of legal claims made by workers against employers either to the Workplace Relations Commission or the courts. For example, in 2016, the High Court concluded (using a WRC labour inspectorate report) that three construction companies that employed 180 Portuguese construction workers on the Limerick-Nenagh motorway had ‘engaged in the systematic and deliberate’ under-recording of employees’ hours, leading to underpayments of €3m10.

What have governments in other countries done about wage theft? In the USA, approximately 250 wage theft bills were proposed at state level between 2004 and 2012 while the Australian states of Queensland and Victoria introduced laws on wage theft in 2020. A key focus of such laws has been to increase penalties on employers for wage theft, both civil penalties and criminal penalties. If we look at the National Minimum Wage Act 2000 in Ireland, the most workers can get if they successfully win a claim is the recovery of their unpaid wages and expenses, but no additional penalties are imposed on employers. This raises concerns about the effectiveness of such outcomes in dissuading against the practice of underpayment. A strongly held view in research is that labour inspectorate systems with sufficient resources and robust powers are critical to combatting wage theft.

There is reason to believe that the scale of wage theft in Ireland is greater than captured in the sources above because research internationally shows that workers, especially migrant and undocumented workers in low paid employments, are very reluctant to speak up or take action on wage theft. While high profile companies in typically high paid sectors in the US have repaid very large sums in wage theft claims11, the consequences for low wage workers of underpayments can be particularly serious. This warrants more policy attention wage theft because of the consequences not just workers but also for the state.

 


P. Mattera, (2018) Grand Theft Paycheck: The Large Corporations Shortchanging Their Workers Wages (Corporate Research Project of Good Jobs First/Jobs with Justice Education Fund).
D. Powell (2020) ‘Investors Want Heads To Roll As Woolies’ Underpayments Rise to $315m’ (The Sydney Morning Herald, 26 February).
P. Karp (2020) ‘7-Eleven repays $173m to workers after some franchisees falsified records in underpayments scandal’ (The Guardian, 30 October).
S. McGuinness, P. Redmond and J. Delaney, Minimum Wage Non-Compliance: Evidence From Ireland. IZA Discussion Paper no. 12884.
F. Walsh (2021) Non-compliance with the Irish NMW (NERI Labour Market Conference, 6 July).
WRC (various years) WRC Annual Reports 2016-2020 (Dublin: WRC).
SIPTU (2022) Early Years Professionals Survey 2021/22. Dublin: SIPTU
Migrant Rights Centre of Ireland (2015) All Work and No Pay: The Experience of Migrants Working in Ireland (Dublin: MRCI).
UNITE (2021) Hidden Truths – The reality of work in Ireland’s hospitality and tourism sector. (Dublin: UNITE).
10 Da Silva and others v Rosas Constructores S.A, Construcoes Gabriel AS Couto S.A. & Empresa Construcoes Amandio Carvalho S.A. trading under the style and title of RAC Contractors and/or RAC Eire Partnership [2016] IEHC 152.
11 P. Mattera, (2018) Grand Theft Paycheck: The Large Corporations Shortchanging Their Workers Wages (Corporate Research Project of Good Jobs First/Jobs with Justice Education Fund).

Posted in: Corporate governanceEconomics

Tagged with: corporatesocialresponsibilityeconomicinequalityminimum wage


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