The Fair Labor Standards Act requires employers to maintain payroll records, but not to share the information with workers. This lack of transparency creates both honest mistakes and opportunities to short workers on their wages. Doing so is theft.

Policy Matters Ohio has documented a quiet crisis of wage theft in Cleveland[2] and Columbus.[3] Employers steal wages from an estimated 217,000 Ohio workers each year through minimum wage violations alone: On average, victims lose $2,800. For workers employed by companies willing to steal from them, a paystub is a vital layer of protection.

Requiring employers to provide basic and accurate paystub information is a necessary element of preventing wage theft, but it isn’t sufficient. Even though most states require employers to provide a paystub, an estimated 20 million U.S. workers do not receive them.[4] A landmark 2008 survey of low wage workers in New York, Los Angeles and Chicago by the National Employment Law Project (NELP) found that 57% of respondents had not received a paystub for their most recent work week, even though employers in all three cities are required to provide one.[5] This fact underscores the need to pair policy with robust enforcement. In Ohio, we need to start by making a payroll record a right for all workers.

House Bill 137 would help workers make sure their paychecks include the full wages they earn in each pay period, and account for all the hours they work. The bill was heard last week by the Senate Transportation, Commerce and Workforce Committee. The Committee should advance HB 137 to a vote, and the Senate should pass it.

Why do working people need paystubs?

Workers need a paystub to ensure that their employers have not shorted their wages, by accident or intent. Unscrupulous employers use tactics like shorting hours worked, not paying time-and-a-half rates for overtime, and misclassifying employees as contractors. When an employer must give workers a paystub, these practices become much easier to spot. If mistakes are made in pay, they can be quickly resolved. More than half of U.S. workers have spotted an error in their paystub at some time in their careers.[6] And if employers engage in wage theft, workers can use paystubs to document their cases and seek restitution.

Employers who don’t provide paystubs cut their employees off from participation in basic aspects of economic life. When a worker lacks proof of income, securing everything from a car loan to an apartment may be off the table. Meanwhile, safety net programs exclude workers who can’t prove they are working.

Workers need paystubs:

• To rent an apartment or qualify for a mortgage.
• To qualify for credit, such as an auto loan.
• To verify eligibility for safety net programs.
• To determine whether they will owe a tax bill at filing time and whether their employer is paying payroll taxes at all.[7]
• To confirm that they are classified as an employee, not misclassified as a contractor.
• To know the identity of their employer.

According to the Northeast Ohio Coalition for the Homeless (NEOCH), receiving no paystub makes it difficult or impossible to qualify for basic services. A worker may have to go to the IRS office and ask for a record of pay, which the IRS itself may not have if the employer has not filed payroll tax forms. Traditional lenders may refuse buyers for auto loans, relegating them to buy-here-pay-here arrangements which charge higher interest. Such lenders often require family members to co-sign, jeopardizing their own credit standing if the worker’s income is disrupted: Workers who can’t prove employment get turned away for unemployment compensation when jobs fall through. Because low wage workers often work temp jobs with no guarantee of work on a given day, even NEOCH’s housing requires eight paystubs.

Paystubs help with wage and hour enforcement

Today just five wage and hour investigators and a supervisor oversee employment relationships for more than 5.6 million Ohio workers. That’s one staffer for every 932,367 workers. Without a paystub, employees are deprived of critical information to protect their rights. When a paycheck is smaller than expected, the worker may not understand why, or may believe that the balance will come in the next check. A paystub puts everyone on the same page, every earnings cycle.

Ohio provides workers with a private right-of-action in wage theft cases, meaning they can hire a lawyer and sue their employer for unpaid wages. The system places on workers the burden of retaining and paying a lawyer; excludes workers whose pay is too low to afford an attorney; and lacks punitive authority. Yet, without sufficient wage and hour enforcement the private right-of-action is a vital tool for some workers to recover stolen wages.

Workers who do not receive a paystub may not get a check to verify earnings, either. The NELP study found that 97% of employers who paid workers in cash did not provide a paystub, and employers paying cash committed minimum wage theft violations at twice the rate of those that paid by check.[8]

What information does a paystub contain?

• Gross and net pay amount. Gross pay should equal the rate of pay times hours worked, match the rate agreed, and account for all hours worked. If there is no difference between gross and net pay, the employer has not withheld taxes. This is a red flag that the employer may be misclassifying the employee as an independent contractor. This leaves workers ineligible for unemployment or workers compensation and in for a big surprise when the tax bill comes. Independent contractors are responsible for both the employer and employee portion of payroll taxes. Thus, if an employer misclassifies and gives no paystub, they can shirk payroll taxes for months without the worker’s knowledge.
• Hours worked and rate of pay. For hourly workers, the paystub should show the number of hours worked for the pay period, the hourly rate should match the rate agreed, and the hours times the rate should match the gross pay. A common practice among unscrupulous employers is to short workers on hours worked. A paystub helps workers verify they are getting paid for all their hours. Hours exceeding 40 should be paid at 1.5 times the base pay rate for most workers. A paystub can help workers determine whether they are being paid hourly, or on a salaried basis. Employers sometimes misclassify workers as salaried to avoid paying overtime.
• The dates of the pay period. When employers are deceptive about the start and end of the pay period, they create uncertainty for workers about whether they have been shorted pay, or are simply owed pay that will appear in a later check.
• Deductions. Employers may make deductions only for specific things. These include taxes, withholdings for employee health insurance, union dues, and voluntary contributions to retirement accounts.[11] Employers may not dock employees’ pay retroactively as punishment. They may not charge employees for mistakes that damage products or equipment, unless the employee has signed an advance contract and still receives at least the minimum wage.[12] In its 2008 report, NELP found that New York, Los Angeles and Chicago employers illegally withheld money from 41% of employees. A paystub should clearly state the amount and purpose of all withholdings.
• The employer’s identity. Firms increasingly use tactics to get workers off their payrolls. These include using temp workers; misclassifying workers as contractors; subcontracting to outside firms who put workers on their payroll instead; challenging franchisor joint employment; and implementing Alternative Employer apparatuses that insulate firms from tax and workers’ compensation liability. These schemes help some firms get away with not paying workers at all. When a worker seeks legal help, they often learn that the business they’ve been reporting to is not their official employer. In some cases, workers are employed by subcontractors that run up big back-wage bills then dissolve the business and form a new one under a different name.

Most Ohio business owners follow the law and cultivate partnerships with their workforce. Providing an accurate and regular pay record establishes good faith between the company and workers, and may boost morale and productivity. It’s an essential verification that workers need to obtain credit, secure housing, and verify their eligibility for work supports.

Policy Recommendations

Workers need paystubs to spot earnings discrepancies and correct any mistakes; protect themselves from employers who would steal from them; verify eligibility for public work supports; and qualify for everything from a bank account to an apartment. Withholding paystubs from workers relegates them to unofficial employment status and closes off access to participation in basic facets of economic life. The Ohio House has passed House Bill 137 to address the problem. The bill now stands before the Transportation, Commerce and Workforce Committee in the Senate. The Committee should advance HB 137, and the Senate should vote it into law.

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