Earning

Is your employer stealing from you? How to spot wage theft, and what to do about it

"Low-wage workers are less likely to complain .... A lot of workers don't know what they're supposed to be getting."

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Figuring out if you've been the victim of theft is usually pretty straightforward. If you come home to smashed windows and your jewelry is missing, or wake up to find your car is sitting on cinderblocks rather than tires, it's time to call the cops, and probably your insurer.

But for many Americans, another kind of stealing is harder to spot: wage theft. "Broadly, the term is used to encompass any situation where employers aren't paying employees what they're owed under the law," says Michael Cohen, a senior employment associate at law firm Ogletree Deakins.

It's a bigger and more common problem than you may think. Some 2.4 million workers lose $8 billion annually to minimum wage violations — just one of the many forms of wage theft — according to the most recent estimates from the Economic Policy Institute. That equates to about $3,300 per year for year-round workers.  

What is wage theft, and who might it apply to?

In order to properly compensate you, your employer must comply with the Fair Labor Standards Act, which mandates, among other things, that the workers it protects receive a minimum wage (currently $7.25 an hour at the federal level) and earn a 50% pay bump for hours worked beyond 40 hours per week.

The Department of Labor's Wage & Hour division enforces federal labor laws. Depending on where you live, you could also be protected by stronger wage theft laws enforced by an analogous state or local agency. Workers in New York City, for instance, receive a minimum wage of $15 per hour. Employee protections differ from state to state but no state or local protections are permitted to be weaker than the Labor Department's.

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Here is where you may be thinking, wait a second, I work more than 40 hours a week all the time — am I being stolen from? That depends what type of worker you are. Some employees are classified as "exempt" from the FLSA, depending on factors such as how much the company earns and whether it does business across state lines. The most common exemption is for executive, managerial, skilled, and professional employees who receive a salary rather than wage-based pay.  

"If you're exempt, it doesn't matter how many hours you work — you won't be entitled to overtime or the minimum wage," Cohen says. "Your employer can say, 'Get here at 5 a.m. and work until midnight.'"

4 common forms of wage theft

Not every instance of wage theft happens at the behest of a mustache-twirling CEO looking to take advantage of his workers. Companies are likelier to engage in wage theft when they narrowly beat or miss financial estimates, according to a recent study from London School of Economics professor Aneesh Raghunandan. The research suggests that higher-ups at companies looking to tighten their belts may instruct middle managers to increase productivity and look the other way when it comes to cutting corners.

Wage theft may also just be the result of ignorance of the law, notes Cohen. "The FLSA is highly technical and regulatory," he says. "Employers make plenty of good-faith mistakes."

This kind of confusion ends up damaging the most vulnerable workers, says Jessica Looman, acting administrator of the Labor Department's Wage & Hour division. "We know that low-wage workers are less likely to complain, especially since these are situations where a lot of workers don't know what they're supposed to be getting," she says.

The first step to combatting wage theft is knowing it when you see it. Here are four of the most common violations Looman and her team come across:

Refusal to pay as agreed

An employer must pay you at the rate you agreed to when you were hired. If they pay you at a lower rate, fail to pay you for all the hours you worked, or stiff you altogether, they're in violation of labor laws.

Failing to meet minimum wage

Employers must pay the highest of federal, state, or local minimum wage. Under federal law, service industry workers can earn as little as $2.13 per hour before their tips. But if customer generosity doesn't get them over the $7.50 mark (or higher depending on the state), the employer is required to make up the difference.

In other words, if the restaurant you work at is slow and your boss isn't making sure you're earning at least $7.50, that's wage theft.

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Not paying overtime

"One of the biggest areas we see is overtime," says Looman. "You have to get time-and-a-half for every hour you work over 40." But not every employer complies, she says, and some try to game the system by incorrectly claiming exempt status for their employees. "They may say someone is exempt or claim they're an independent contractor in order to get out of paying them overtime," she says.

Forcing employees to work off the clock

Employees must pay you for every hour you work, regardless of when your shift officially starts or ends. "We see employers requiring workers to come in early, stay late, or work through lunch breaks. Those things may seem normal and routine and part of the culture," Looman says. "But if you tell me, 'I have to come in 15 min before my shift to sweep the front walk,' guess what? That's work. You should be getting paid for that."

What to do if you're a victim of wage theft

You can begin combatting wage theft soon after you start a new job: Start by being clear with your superiors regarding what you're willing to do, says Laurie Ruettimann, an author of "Betting on You" and human resources consultant based in Raleigh, North Carolina. "There's a lot of fear in the workplace and a lot of historical learned helplessness because people think, 'I can't stand up for myself because I'm going to get fired,'" she says. "We often find ourselves in the situation where we're doing all of this work because we said yes to everything. It can be a problem of setting boundaries."

It may pay to keep a record of your working hours, says Looman. "We encourage all workers to keep track of their hours as well as when and what they're getting paid," she says. "A lot of these disputes are he-said-she-said. Having a log can help a worker advocate for themselves."

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If you determine that your wages are being stolen, you can file a complaint with the federal or local Department of Labor. "We have parallel enforcement in virtually every state," says Looman. "If you call us or call the state, we might refer you to one another. Whichever of the federal or state laws that's most protective is the one that applies to you."

Complaints received by her office are confidential, Looman notes, and that the department protects workers from retaliation from employers to the best of its ability. Generally, complaints to the Labor Department must be for incidents that have occurred within the past two years, and an investigation into your employer typically takes a few months.

We often find ourselves in the situation where we're doing all of this work because we said yes to everything. It can be a problem of setting boundaries.
Laurie Ruettimann
author of "Betting on You"

Another potential path to recover wages you're owed, although without the benefit of anonymity: the courts. "Given the technical nature of the FLSA, attorneys who specialize in the area can make a tremendous difference," says Cohen. "They're also likely more efficient at helping employees fight these cases because they're motivated by their own profits — their interests often align with those of their clients."

If you hire a private lawyer, look for one that will work on a contingency basis, meaning that you pay a percentage of your award if you win rather than paying an up-front fee. "This allows even low-wage workers to get effective representation," says Cohen.

If you win your case, your employer will likely have to cover your attorney's fees, as well as pay damages above and beyond the back pay you're owed. These conventions encourage lawyers to take these cases on and discourage employers from underpaying their workers and taking their chances in court, Cohen adds. "The FLSA is a civil rights statute — it's designed to help people," he says. "Attorneys aren't necessarily limited by the fact that you may have a small case."

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