Business First Look

Disney's $3.8 million labor violation: Costumes push paychecks below minimum wage

'Wage thefts' like these 'are not uncommon and are found in other industries, as well,' says the US Labor Department's Daniel White.

In this Tuesday, June 5, 2012, file photo, visitors stroll along Main Street at Walt Disney World, in Lake Buena Vista, Fla. Disney World has promised reforms after the US Department of Labor found it violating the Fair Labor Standards Act
AP Photo/John Raoux, File | Caption

A job at “The Happiest Place on Earth” isn’t all smiles.

The Disney World employees who play Goofy, Mickey, and other iconic characters don’t just have to spend long hours in their costumes under the Florida sun. According to the US Department of Labor (DoL), they were on the hook for those costumes.

An investigation by the DoL’s Wages and Hours Division has found that “Disney resorts in Florida deducted a uniform or ‘costume’ expense that caused some employees’ hourly rates to fall below the federal minimum wage.” Under the federal Fair Labor Standards Act (FLSA), an employer can require an employee to bear the cost of a uniform – but not so much that it pushes the employee’s wages below $7.25 per hour, the federal minimum.

That’s what happened at Disney World, along with failure to keep required payroll records and requiring employees to perform uncompensated pre- and post-shift duties. Disney has agreed to pay 16,339 of its “cast members” a total of $3.8 million in back wages.

As “Fight for $15” and other groups continue their struggle to raise the minimum wage, this case makes clear that low-income workers face other obstacles on the road to higher take-home pay. Practices like Disney’s regularly push workers’ paychecks below the amounts required by law.

“These violations are not uncommon and are found in other industries, as well,” Daniel White, district director for the Labor Department Wage and Hour Division in Jacksonville, said in a press release. “Employers cannot make deductions that take workers below the minimum wage and must accurately track and pay for all the hours their employees work.”

Outside Florida, in recent months businesses in Minnesota, New England, and South Carolina got in trouble with the DoL when uniform deductions pushed employees’ wages below $7.25 per hour. In most of these cases, as with Disney’s, uniform charges went hand-in-hand with other violations, including failing to pay employees for overtime.

Nationwide, a 2014 study found that “Nearly nine in 10 (89%) fast food workers report that they have been the victim of wage theft at their fast food job, and most have experienced multiple forms of wage theft” – including deductions for uniform expenses.

But the workers at places such as Disney World may be faring better than the fast-food workers that have served as the face of the low-wage worker movement. DoL data show that the number of labor code violations in the “Amusement” sector has been trending down in recent years, from 507 in 2001 to 206 last year.

Part of that drop may be due to a decrease in reporting, rather than improved working conditions, and the “Hotels and Motels” sector actually showed an increase over the same period. But the DoL’s Mr. White made clear that “the Disney resorts were very cooperative throughout the investigative process,” and Disney said in a statement to the Orlando Sentinel said that “We are adjusting our procedures to avoid this in the future.”

An end to workplace abuses at, say, a single McDonald’s restaurant is less likely to have “ripple effects” than a workplace settlement in Disney’s vast enterprise. That’s because the fast-food industry leaves most day-to-day store operations in the hands of franchisees and managers.

Last September, Bloomberg BNA’s Ben Penn reported:

"Worker advocates say there’s a persistent problem of fast-food managers feeling pressured to cut labor costs, and that the franchise business structure plays a role. Stores run by owners of multiple outlets might be especially prone to cheating workers, [attorney] Michael Hancock ... told Bloomberg BNA.”

“‘When you’re in a low-margin business like fast food, there’s always going to be pressure to find ways to cut costs...Part of what’s driving noncompliance is that at the ground level, these managers are given a labor budget’ that is unnecessarily low and ‘that pushes them in some cases to cheat.’”

But regardless of the organization’s management structure – or whether the "uniform" is a polo shirt or Cinderella dress – Mr. Hancock has some straightforward tips for employers to stay on the right side of the law.

“Have a decent time-keeping system; make sure that people get paid $7.25 for every hour they worked; if they go over 40, give them another half-time,” he told Bloomberg. “That’s not that complicated.”

[Editor's note: This article has been updated to specify that Ben Penn reports for Bloomberg BNA.]

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