What Is Wage Theft?

What is wage theft? As wage and hour issues have grown in prominence in recent years, government officials have increasingly cracked down on employers that commit wage theft.

The U.S. Department of Labor’s Wage and Hour Division enforces federal regulations of the Fair Labor Standards Act (FLSA), but many jurisdictions have passed their own wage theft laws, which impose additional regulations on employers.

But what is wage theft, exactly? Below we’ll examine:

• Types of wage theft
• Examples of wage theft
• States with wage theft laws

What Is Wage Theft: Types

There are several ways for an employer can commit wage theft. Some are more common than others, but all can create headaches for violating employers, including back pay, fines and negative headlines.

Overtime Violations

• When an employer wrongfully denies overtime pay to an eligible employee

Minimum Wage Violations

• Not adhering to minimum wage laws (there are more than 60 city and county minimum wage laws on the books, along with many states with their own rates)

Misclassification Violations

• Classifying employees incorrectly, such as independent contractors

Illegal Deductions

• When an employer takes a portion of an employee’s paycheck for items that do not qualify

Off-the-Clock Violations

• Failing to pay an employee for work performed when not technically on duty

Rest Break Violations

• Not adhering to rest break laws, including deducting meal breaks from employees’ pay

Clearly, there are several ways employers can run afoul of wage and hour laws. For a more comprehensive look at the wage theft violations check out our whitepaper, Wage Theft: What Employers Need to Know.

Examples of Wage Theft

Wage theft costs workers an estimated $15 billion a year. And more than $3 billion in wages was recovered between 2017 and 2020.

Regarding specific examples of wage theft last year alone…

Overtime: A California restaurant owner denied five frontline employees overtime wages by not maintaining accurate records nor combining hours worked across multiple locations.

Minimum wage: A farm in New York State faced a class-action lawsuit due to misclassifying employees and not paying the correct minimum wage.

Illegal deduction: A business owner in Oregon for two years withheld the tips of employees, keeping the majority of earned cash and tips made through credit cards.

Off-the-clock: A West Coast construction firm did not properly track work employees did before an after scheduled shifts.

Rest break: Meal breaks were deducted from employees’ pay at a Midwest business.

All these cases were investigated by federal officials and resulted in back pay and fines. But beyond the FLSA, there are state-level wage theft laws employees also need to monitor.

State Wage Theft Laws

Employers should note that nearly every jurisdiction has a law requiring them to pay employees the correct wages. But some states have gone further, creating criminal penalties for wage theft and imposing additional burdens on employers.

California

While California has had a wage theft law on the books, in September 2021 the state enacted a new intentional wage theft law, allowing prosecutors to charge employers with a misdemeanor or felony for certain violations.

Colorado

In Colorado, a wage theft law went into effect in 2020, defining violations as a felony if the amount is over $2,000.

Connecticut

Connecticut’s law forces employers in violation of wage theft to repay double the stolen wages, as well as attorney’s fees.

Iowa

Iowa’s Wage Payment Collection Act requires employers to pay wages due on regular paydays and pay employees all wages on the first regular pay day after the employee’s termination of employment. Its law also prohibits an employer from withholding wages for several reasons.

Illinois

In 2021, Illinois updated provisions of its wage theft law, making employers found in violation liable not only for unpaid wages and final compensation, but also damages equal to 5 percent of the underpayment, per month (calculated from the date of the underpayment) for each month during which wages or final compensation remain unpaid. Damages are payable to the employee and continue to accrue, without limitation, until the amount found owing is paid.

There are also hefty fines for employers found in violation of wage theft in Illinois.

Massachusetts

In Massachusetts, the law allows employees to sue for up to three times the unpaid wages, plus attorney’s fees.

Minnesota

Minnesota’s wage theft law went into effect July 1, 2019, with criminal wage theft and sanctions provisions going into effect Aug. 1, 2019. There are also stringent notice and recordkeeping requirements for employers in Minnesota.

New Jersey

New Jersey enhanced penalties for employers found in violation of wage theft in 2019. Employers could face 18 months in prison and fines of nearly $15,000 for repeat offenders.

New York

New York’s Wage Theft Prevention Act went into effect in 2011, with fines, public notices of wage theft in some cases and fines up to $20,000.

Virginia

In 2020, Virgina passed wage theft bills that impose stiff penalties for violations and enhanced employee protections. At a high level, the laws:

• Increased fine amounts
• Made general contractors liable under certain conditions
• Expanded the Virginia Department of Labor and Industry’s investigative authority
• Added employee protections for reporting suspected wage theft

Of course, these are but a few of the wage theft laws employers need to look out for.

Conclusion

What is wage theft? Clearly, there are many ways an employer can be found in violation of wage theft laws. And with additional attention on wages in recent years, employers should be sure to research the laws where they have locations in order to remain compliant.

This Employment Law News blog is intended for market awareness only, it is not to be used for legal advice or counsel.