Wage Theft and Payroll Fraud Prevention Changes Approved

Dec 05, 2022

New laws to prevent wage theft and payroll fraud on city service contracts, construction and improvement contracts, and contracts for financial assistance, were passed by council at its last meeting of the year.

Businesses seeking city contracts or financial assistance will have to report to the city’s Fair Employment Wage Board any instances of a government agency finding that they or a subcontractor committed wage theft or payroll fraud within the last three years. Businesses that self-report those instances would not be eligible to receive city money or contracts.

The Fair Employment Wage Board is a 7 member board created earlier to monitor the City's living wage ordinance.

If a person fails to self-report such a finding against a business, they could be found guilty of a first-degree misdemeanor.

Wage theft is defined as any violation of state or federal law regarding the prompt payment of wages, payment of minimum wage, or prevailing wage rates. Payroll fraud is defined as the concealment of a business’s true tax liability by not reporting or underreporting applicable wages or by paying employees under-the-table.

“Cleveland has been a leader in ensuring employee rights and this legislation adds important worker safeguards to others already in the code and continues to show we support fairness for workers,” said Council President Blaine A. Griffin, who sponsored the legislation.  “This is a huge deal for working families. This legislation is an outgrowth of my time as an activist when I worked to ensure the city of Cleveland paid a living wage.”  

Under the law, any person employed by a city contractor or subcontractor who says they are the victim of wage theft or payroll fraud could file a complaint with the applicable department, who would notify the Fair Employment Wage Board and the state or federal agency overseeing such violations.

Exceptions would be allowed in some cases. For instance, the city could do business with such an employer, within three years of a wage-theft finding, if the business is under new ownership, or if it can show it has “taken significant actions to prevent future” violations of wage-theft laws.

Waivers could also be granted if city officials demonstrate that “the inability to contract with that person or entity results in serious disruption to efficient and orderly City operations” or that the business “is a sole source provider of goods or services necessary for efficient and orderly City operations.”

The Fair Wage board will maintain a list of persons or entities that have reported Adverse Determinations and it must be published on the City of Cleveland’s website and updated every six months. Ord. No. 892-2022