For more than four years Attorney General Peter F. Neronha sought to adjust an oversight in state law that he argues could have been a plot in the theater of the absurd.
Up until state legislators passed a law in June making wage theft and employee misclassification a felony, the criminal penalties for petty theft could be greater than if an employer pilfered wages of more than $1,500 from a worker.
Now employers who knowingly fail to pay an employee more than $1,500 in wages could face up to three years in prison and pay fines. The prison term up to 10 years for theft of more than $10,000.
Bringing the law over the finish line wasn’t easy. During the Statehouse debate, opposition came from a cross-section of industry lobbyists, trade associations and business owners who argued the bill would pave the way for owners and subcontractors potentially finding themselves in front of a judge for an innocent mistake.
The legislation keeps in place the
R.I. Department of Labor and Training’s ability to open inquiries into accusations of wage theft and misclassification. But Neronha says his office doesn’t have to wait for a DLT referral to open an investigation.
“We want to be able to move quickly,” he said, noting that industries such as construction often involve employers and employees moving frequently throughout the country from job to job.
Most wage theft cases, Neronha says, involve contractors who fail to distribute the last paychecks before finishing a job, often leaving the state and leaving local employees empty-handed. He met privately with the top executives of several large companies in the lead-up to the law’s passage, many of whom were frustrated with competitors who they argued were skewing the playing field to their advantage by not paying workers what they owed them.
“Companies that cheat can undermine these legitimate companies,” he said.
As for employers facing felony charges for what in essence would be a paperwork mishap, Neronha called this argument “nonsense,” adding that his office already kicks back more than 800 criminal referrals a year from local law enforcement agencies.
“They know exactly what they are doing,” he said. “We are not going to be charging people that make an innocent mistake.”
Sen. Meghan E. Kallman, D-Pawtucket, a primary sponsor of the legislation, has heard from many constituents who have fallen victim to wage theft, usually “people with precarious legal status.”
“It’s a recipe for massive exploitation,” she said.
A 2022 study by the University of Massachusetts Amherst, which called Rhode Island a “hot house” for wage theft, found that in 2019, 9.3% of Rhode Island employers were illegally misclassifying workers as independent contractors; 20.3% of employers failed to fully report their workers’ wages and salaries to the DLT; and an estimated $185.3 million in workers’ wages and salaries went unreported. Payroll fraud was estimated to have cost taxpayers between $25 million and $54 million.
Patrick Crowley, secretary-treasurer for the
Rhode Island AFL-CIO, hopes the new penalties will have a deterrent effect.
“[The judicial system] has this tool at their disposal. And it will be transformative as far as how management treats working people in Rhode Island,” he said. “This shows a commitment to the belief that wages matter more than rich people’s property.”
Crowley says he is happy the felony classification also gives the state grand jury subpoena power “to corral the bad actors.” Those with knowledge of these crimes will be less likely to try a coverup, and witnesses to wrongdoing will be quicker to call the state’s tip line knowing that perpetrators may have to return to Rhode Island to face a Superior Court judge.
Neronha says these provisions in the law were necessary to prosecute cases.
“You cannot extradite someone on a misdemeanor warrant,” he said. “Many of these cases are complicated, and you want to question the witness under oath. And you want to be able to subpoena records. This will make investigations of this kind much easier to do.”
It remains to be seen whether the legislation will have a transformative effect on labor rights, whether as a deterrent or otherwise. Some cases are so egregious that “a jail sentence would be appropriate,” Neronha said.
As an example, Neronha referenced the felony and misdemeanor charges filed in 2022 against Marcos Mutz, the owner of the now-defunct M. Mutz Construction.
The attorney general alleges he stole more than $93,000 in wages from workers during the construction and renovation of RISE Prep Mayoral Academy in Woonsocket. That case is now pending, and if Mutz is found guilty, Neronha would recommend prison time.
“I consider this legislation to be as much pro-business as pro-worker. It’s allowing law enforcement to go after businesses that aren’t playing by the rules,” he said. “Now working men and women will be protected from unscrupulous employers.”
