Wage theft is a pervasive issue that costs American workers billions of dollars annually. Many violations are subtle and go unnoticed, leaving employees underpaid without their knowledge.
Type of Wage Theft | What It Looks Like | Key Indicator |
Off-the-Clock Work | Answering emails after hours or performing pre-shift setup without pay. | Unrecorded work time that benefits the employer. |
Overtime Miscalculations | Overtime pay is based only on your hourly wage, excluding bonuses or commissions. | Your regular rate of pay is not correctly calculated. |
Employee Misclassification | Being paid a salary and told you are exempt despite performing non-managerial duties. | A job title that does not match actual responsibilities. |
Independent Contractor Misclassification | You are labeled a 1099 contractor but the company controls your hours and work. | Lack of autonomy and economic dependence on one company. |
Meal and Rest Break Violations | Lunch breaks are automatically deducted, even when you work through them. | Performing any work duties during an unpaid break. |
Illegal Deductions | Your employer deducts costs for uniforms, tools, or cash register shortages from your pay. | Paycheck deductions that are not legally authorized. |
Minimum Wage Violations | Your total pay for a week, divided by hours worked, falls below the federal or state minimum wage. | Earning less than the mandated minimum hourly rate. |
Day-Rate Pay Violations | Being paid a flat daily rate without receiving time-and-a-half for hours worked over 40. | Working long hours for a fixed daily sum with no overtime premium. |
Averaging Hours | Working 50 hours one week and 30 the next, but getting paid for 80 hours of straight time. | Pay is calculated over a bi-weekly period instead of week-by-week. |
Withholding Final Paycheck | An employer refuses to issue your final paycheck after you leave the company. | Delay or refusal to pay all wages owed upon termination. |
Wage theft is a widespread problem in the American workforce, but its signs are often subtle enough to go unnoticed. It occurs whenever an employer fails to pay an employee the full wages they are legally owed. According to the Economic Policy Institute, more than $1.5 billion in stolen wages were recovered for workers through enforcement and lawsuits between 2021 and 2023, yet this is only a fraction of the total amount stolen. A recent report highlights an escalating wage theft crisis across the United States, with violations ranging from paying below minimum wage to denying earned overtime.
Understanding the different forms of wage theft is the first step toward protecting your rights. These illegal practices can appear in various ways, from complex payroll schemes to simple unrecorded work hours. This article will break down 10 of the most common examples to help you identify if you are being underpaid and what actions you can take.
A Resource to Protect Your Rights
Navigating the complexities of wage and hour laws can be challenging. The rules surrounding overtime, employee classification, and proper pay calculations are intricate, and employers may, intentionally or not, fail to comply. For employees who suspect they are being shortchanged, having access to a reliable resource is critical. The legal experts at The Lore Law Firm, led by attorney Michael Lore, specialize in advocating for workers whose rights have been violated. With decades of advocacy and success in class-action lawsuits, the firm provides authoritative guidance for employees facing these very issues.
To empower workers with the knowledge they need, the firm has developed a free overtime and wage theft guide. This comprehensive resource breaks down federal laws, explains common employer tactics used to avoid paying proper wages, and outlines the steps workers can take to recover their earnings. It is an invaluable tool for anyone looking to understand their rights and ensure they are being compensated fairly for every hour of their labor.
Resource Snapshot | Details |
Resource Title | The Complete Guide to Overtime and Wage Theft Under the FLSA |
Provider | The Lore Law Firm |
Key Benefit | Empowers workers with a deep understanding of their rights under federal and state labor laws, helping them identify and act against wage theft. |
Target Audience | Employees who suspect they are being underpaid, especially concerning overtime, misclassification, or other illegal pay practices. |
Cost | Free |
1. Requiring Off-the-Clock Work
One of the most frequent forms of wage theft involves work performed outside of scheduled, paid hours. Under the FLSA, all time an employee is required to be on duty for the employer's benefit is considered compensable. This includes activities performed before clocking in or after clocking out. A common scenario occurs in retail or call centers, where employees are required to boot up computers, log into systems, and be ready to work the moment their paid shift begins. If this setup takes 10-15 minutes, that time must be paid. Similarly, post-shift duties like cleaning, cashing out, or undergoing mandatory security screenings can add up to significant unpaid labor. While an employer might dismiss a few minutes as trivial, this time is legally protected and can trigger overtime if it pushes an employee's weekly hours past 40.
2. Miscalculating the Overtime Regular Rate
Even when employers pay overtime, they may calculate it incorrectly. Overtime must be paid at 1.5 times an employee's regular rate of pay, which is not always just their base hourly wage. The regular rate must include most other forms of compensation, such as non-discretionary bonuses, commissions, and shift differentials. For example, if an employee earns a $100 performance bonus in a week they worked 50 hours, that bonus must be factored into the regular rate for calculating the overtime premium. A recent class-action complaint filed against Ahlstrom NA Specialty Solutions alleges the company failed to include non-discretionary payments in overtime calculations, a practice that shortchanges workers. This complex calculation is a common source of error, which is why many businesses rely on robust payroll platforms like ADP to automatically incorporate all forms of compensation and ensure FLSA compliance.
3. Misclassifying Employees as Exempt
Employers can avoid paying overtime by classifying an employee as exempt from FLSA rules. However, specific legal criteria must be met for this classification to be valid. Simply giving someone a manager title or paying them a salary does not automatically make them exempt. To be lawfully exempt under the primary white-collar exemptions, an employee must meet three tests: a salary basis test, a salary level test ($684 per week federally), and a duties test. Many wage theft cases arise from employees, such as assistant managers in retail, who are paid a salary but spend most of their time performing non-exempt tasks. Misclassifying workers as exempt to avoid overtime pay is a clear violation of their rights under the law.
4. Misclassifying Employees as Independent Contractors
Another common tactic is labeling workers as independent contractors to avoid overtime, minimum wage, and other employment obligations. An employer cannot simply call a worker a 1099 contractor to bypass labor laws. The nature of the working relationship is what matters. Courts look at the economic reality of the situation, considering factors like the degree of control the employer has over the worker and the worker's opportunity for profit or loss. If a worker is economically dependent on the company, they are likely an employee and entitled to FLSA protections. This issue has become particularly widespread in the gig economy, construction, and trucking industries, where misclassification denies workers fundamental protections.
5. Violating Meal and Rest Break Rules
Federal law does not mandate meal breaks, but if an employer provides an unpaid break (typically 30 minutes or more), the employee must be completely relieved of all duties. If an employee answers calls or performs any work during their unpaid lunch, that time becomes compensable. Meal break violations are a frequent form of wage theft, often occurring when employers automatically deduct break time from an employee's hours, even if they worked through it. To avoid this, modern HR systems like BambooHR provide tools for employees to accurately log their break times, preventing unlawful deductions. Short rest breaks of 20 minutes or less are considered paid work time under the FLSA and cannot be deducted from an employee's pay.
6. Making Illegal Paycheck Deductions
Employers sometimes make deductions from an employee's paycheck that are not permitted by law. While deductions for taxes or health insurance are standard, an employer generally cannot deduct for business expenses. Common illegal deductions include costs for required uniforms, tools, customer walkouts, or cash register shortages if doing so would drop the employee's earnings below the minimum wage for the hours worked. These deductions effectively shift the cost of doing business onto the employee, which is an illegal form of wage theft recognized by labor laws. Protecting your paycheck from these unauthorized subtractions is a fundamental worker right.
7. Paying Below the Minimum Wage
While it may seem straightforward, minimum wage violations are common, especially in industries that rely on tips or piece-rate pay. An employer must ensure that an employee's total earnings for a workweek, divided by the hours worked, meet the applicable federal, state, or local minimum wage. For tipped employees, if their tips combined with their direct wage do not reach the minimum wage, the employer must make up the difference. Examples of wage theft include paying less than the legal minimum wage or failing to pay overtime, both of which deprive workers of their lawfully earned compensation.
8. Abusing Day-Rate or Flat-Rate Pay
Workers in industries like construction and oil and gas are often paid a flat day rate, regardless of how many hours they work. Many employers mistakenly believe this exempts them from paying overtime. However, day-rate workers are generally entitled to overtime pay for hours worked beyond 40 in a week. The Supreme Court affirmed this in *Helix Energy Solutions v. Hewitt*, ruling that even highly compensated employees paid a daily rate are not exempt from overtime if they do not receive a guaranteed weekly salary. This ruling reinforces that payment structures cannot be used to bypass fundamental wage and hour laws.
9. Averaging Hours Across Pay Periods
Each workweek stands alone for the purposes of calculating overtime. An employer cannot average an employee's hours over two or more weeks to avoid paying the overtime premium. For instance, if an employee works 50 hours in the first week of a pay period and 30 hours in the second, they are owed 10 hours of overtime pay for the first week. Paying them for 80 hours of straight time is illegal. This tactic is particularly common with employers who use bi-weekly pay periods. Compliant payroll software, such as Gusto, is designed to calculate pay on a week-by-week basis, preventing this clear violation of the FLSA, which costs workers billions of dollars annually.
10. Withholding a Final Paycheck
When an employee quits or is terminated, the employer is legally obligated to pay all earned wages in a timely manner. The specific timing varies by state law, but an employer cannot lawfully withhold a final paycheck as a form of punishment or for any other reason. This includes all accrued wages, and in some states, unused vacation time. Refusing to issue a final paycheck is a direct and illegal form of wage theft. In places where wage theft is rampant, workers often find themselves fighting for their last payment, turning a job transition into a financial crisis.
Protecting Your Hard-Earned Wages
Recognizing the signs of wage theft is the most critical step in defending your rights as a worker. From reviewing your pay stubs for incorrect overtime calculations to ensuring you are paid for all time worked, vigilance is key. The state of Texas has seen such a surge in wage theft that its enforcement system is struggling to keep up, with paycheck complaints doubling since 2021. Meanwhile, enforcement efforts in cities like Denver are proving successful, with Denver Labor recovering a record $2.3 million for workers in 2024, demonstrating that holding employers accountable is possible.
If you suspect your employer is engaging in any of these practices, document your hours, save your pay stubs, and consider seeking professional guidance. Your labor has value, and the law ensures you are compensated for it fully and fairly.
