Most employees probably think that they’re not making enough money for how hard they work. But in some cases, they may be right and are actually being underpaid.
According to the Economic Policy Institute (EPI), wage theft costs American workers as much as $50 billion a year. And in most cases, employees don’t get any of that loss back. For example, between 2017-2020, the Department of Labor (DOL) and others helped return more than $3 billion in stolen wages. However, that still means millions of workers are not receiving what they are due.
But what exactly counts as wage theft? Confusion as to what’s legal and what’s not may be part of the reason many employees end up losing out.
For example, a reader recently wrote us asking if her employer can dock her pay for taking a lunch break. If she’s an independent contractor, then yes, that’s legal. But, in other cases, it might be wage theft, which is a surprisingly huge issue in the United States.
To get a better idea of what constitutes wage theft and if your employer might owe you money, read on.
What Exactly is Wage Theft?
At a base level, wage theft is the failure to give a worker the money to which they’re legally entitled. But sometimes employees don’t even realize they’re being underpaid. That’s because they may see some of their employer’s “asks” as minimal, or part of doing their job well.
The most common forms of wage theft usually come from not paying minimum wage or overtime violations (which is time-and-a-half). But other types of wage theft may be less obvious, including:
- Off-the-clock requests (such as asking workers to do things before/after their shifts)
- Withholding tips
- Cutting lunch/breaks short
- Illegal deductions
- Not paying promised vacations, sick leave, or bonuses
- Forcing work-related purchases (like tools or uniforms)
- Misclassifying employees (i.e., calling a worker an independent contractor to avoid paying minimum wage/benefits/overtime)
- Refusing to issue a final paycheck after an employee has quit
All the above are ways that a worker may find themselves being underpaid without even realizing it. The industries that tend to have the most incidences of wage theft are food service, childcare, and construction. However, retail, healthcare, and agriculture are also on the list.
While wage theft happens to employees at all wage levels, it’s more prevalent for low-wage earners. It’s also more common for young workers, women, minorities, and immigrants to be underpaid.
What’s Being Done to Combat Wage Theft?
More and more people are becoming aware of just how many workers are being underpaid because of wage theft. Fortunately, the government is stepping up its efforts to combat the issue. In 2021, the DOL reported a total of $230 million recovered in back pay for employees.
Many states are also making wage theft a crime. For example, in Minnesota felony charges may apply depending on how much an employer steals from employees. A conviction could include a sentence of up to 20 years in prison and fines up to $100,000.
The National Employment Law Project (NELP) also reports that many workers are losing their rights to recover withheld wages. This is because their employment contracts contain “forced arbitration” clauses. Basically, this means that upon hiring, an employee signs something (often unknowingly) that says they cannot sue their employer. It also prevents them from pursuing class action lawsuits against companies.
Instead, grievances will go directly to arbitration, a secretive process that heavily favors employers since there’s no judge or jury. The NELP report found that employers kept $9.27 billion from workers in 2019 who were subject to forced arbitration agreements.
As a result of this, there’s a push to pass the Forced Arbitration Injustice Repeal (FAIR) Act. FAIR would eliminate the use of forced arbitration and class/collective action waivers as a contingency for employment. The hope is that restoring this right would encourage better employer compliance with federal and state wage-and-hour laws.
How Can I Find Out if I’m Being Underpaid?
Determining if you’re being underpaid will take a little sleuthing. To begin with, do you think you’re being underpaid? If so, why? Then document that.
For example, always check your paycheck. If something doesn’t add up, ask about it. If it continues to be wrong, keep a logbook of the discrepancies and who you speak to concerning the issue. And if you think the “theft” is with extra time being required off-the-clock, also keep track of that. Same thing goes with missed lunch breaks and items you must buy to do your job that aren’t reimbursed. Write down any evidence you have where you suspect you’re experiencing wage theft.
When the Wage and Hour Division (WHD) finds labor law violations, they’ll often acquire unpaid workers’ wages on their behalf. If they can’t immediately locate the worker, they’ll keep the funds for up to three years. After that the money must be sent to the U.S. Treasury.
Are You Also Underpaid? What to Do If You Think you’re a Victim of Wage Theft
The first thing you should do if you suspect you’re being underpaid is speak to your employer. While some cases may indeed be wage theft, some may also be honest mistakes. If a positive resolution is not the outcome, however, then it may be time to try other avenues.
One option is to contact the DOL’s WHD directly at 1-866-4US-WAGE (1-866-487-9243), M-F from 8 a.m. to 8 p.m. Calls are confidential and the WHD fielded more than 913,000 calls in 2022. They can answer questions and give advice for individuals who think they are being underpaid.
Individuals can also file complaints through the DOL for up to two years after leaving a job. However, it is better to file as soon as possible to increase chances of getting money from a past employer.
Another tactic is to file a complaint with your state. Procedures for this vary, so your best bet would be to visit your state’s official website. Once there, enter search words like “wage complaint” or “workplace violation” and see what comes up. In some states you can file online, whereas others may require contacting the state attorney general’s office.
Finally, consider consulting with an attorney skilled in wage theft cases. They can help you determine if you can sue or if you must go through arbitration. And they will prepare you for either scenario, while representing you in all proceedings.
Don’t think your case is too small, either. The reality is you deserve every penny you earn.
Kimberly Dawn Neumann
Kimberly Dawn Neumann is a multi-published NYC-based magazine and book writer whose work has appeared in a wide variety of publications ranging from Forbes to Cosmopolitan. She graduated summa cum laude from the University of Maryland, College of Journalism. For more, visit: www.KDNeumann.com, Instagram @dancerscribe, and Twitter @KimberlyNeumann