One of the smartest ways to improve your finances and work toward money goals is by increasing your income. If you’re interested in bringing in more money, start by making sure you’re getting adequately paid for work you already do.
Millions of workers each year are victims of wage theft, meaning they do not receive pay to which they are legally entitled, according to the Economic Policy Institute (EPI). Workers lose billions of dollars’ worth of pay and other benefits when employers fail to follow labor laws.
If you think you’re entitled to more pay than you’re getting, take a look at the most common violations of labor laws that lead to wage theft — then learn what you can do to get the pay you’re entitled to.
5 common forms of wage theft
Unfortunately, there are many ways that workers can lose out on fair pay. These are the most common, however, and can often lead to the biggest losses in wages.
1. Asking for off-the-clock work
The Fair Labor Standards Act’s (FLSA) main goal is to ensure that workers are fairly compensated for their work. The FLSA defines “hours worked” as including “all time an employee must be on duty, or on the employer’s premises or at any other prescribed place of work.”
This means that employers must pay you for any work you are required to do, or any time you’re required to spend onsite.
This extends to trainings and meetings, or if workers are encouraged to show up early to prep a workstation before clocking in or clean up after clocking out upon closing. Even time spent changing into a uniform could, in some cases, be considered “time worked.”
2. Failing to pay for overtime
The FSLA also has federal guidelines in regards to overtime pay. Workers must receive overtime pay, equal to time-and-a-half their regular pay, for hours worked past 40 hours in a work week.
Sometimes employers do not track, or workers do not report, overtime hours worked. Overtime infractions could also include employers who allow employees to take work home and continue it after hours.
This issue commonly arises when employees are improperly classified as exempt from overtime restrictions when they aren’t.
Mitchell Langbert, a Brooklyn College associate professor of business with a focus on human resources, says his students frequently raise situations in which they worked overtime for which they weren’t paid.
“One student recently said he worked in a drugstore chain and was not paid overtime to stock shelves and handle inventory because he was considered managerial,” Langbert says.
3. Misclassifying workers as exempt
Under FSLA guidelines, some employees are exempt from overtime pay due to the nature of their work, what they are paid, and how they are paid.
However, workers are often misclassified as exempt, which is one of the most common ways employees miss out on overtime pay.
Joseph Richardson, Esq., a labor and employment attorney based in Southern California, says that workers and employers think that exempt status is a question of whether pay is hourly or salaried, or how high the pay is. They might also think that because the employer and employee agree on exempt status, this agreement is enough.
“Neither is true,” Richardson says. “The key question is whether more than half of what an employee does falls into an exempt category, regardless of how much they are paid.”
Exempt categories are outlined by the FSLA:
- Outside Sales
In addition to performing duties defined by the FSLA as exempt, workers must also be salaried and earn a minimum of $913 a week, equal to $47,476 per year (beginning December 1, 2016).
4. Withholding tips
Employees who make tips of $30 or more a month fall under special rules about tipping. They are entitled to keep all tips they make, but this might reduce the hourly pay. However, the worker is always entitled to pay (combined tips and wages) equal to at least minimum wage for the hours worked.
Tips might also be pooled and divided among shift workers so that they are divided equally among all tipped employees. But payouts from pooled tips must only go to workers “who customarily and regularly receive tips,” according to the Department of Labor.
For example, a Manhattan restaurant manager was caught illegally taking a share of the tips he pooled for his staff, reports the Economic Policy Institute. This was illegal as managers do not receive customer tips.
5. Treating independent contractors like employees
Another issue of wage theft is having workers filed as independent contractors, but treating them like employees.
If you receive a 1099 instead of a W-2 for your taxes, you are classified as an independent contractor. But if you “perform services that can be controlled by an employer (what will be done and how it will be done),” you might actually be closer to an employee, according to tax laws.
Workers who are misclassified as independent contractors can lose out on a lot of wages and other benefits. These can include overtime pay, paid time off, health insurance coverage, and more. Independent contractors will also face a self-employment tax, and will have to pay their own payroll taxes.
What to do if you suspect you’re a victim of wage theft
If your pay doesn’t match up with what’s required under labor laws, take action.
“Seek information to understand your rights,” Richardson suggests. “This can be through an attorney, your state labor board, or through doing self-research.” Rules can vary widely from state to state, so make sure you’re checking both local and federal labor laws.
If you do think your employer is breaking labor laws, don’t assume it’s with the aim to steal wages from you. Many cases of labor law violations are inadvertent.
“Not all noncompliance is strategic and greedy,” Langbert says. “Many firms do not understand the implications of the law because of its complexity.”
Bring your concerns up with your manager or your company’s human resources department. Try to avoid coming off as confrontational, and frame the conversation as you being helpful.
Hopefully, your employer will be receptive to the conversation and take efforts to investigate and comply with any laws they might be violating. This might include correcting their practices so you’re paid fairly and paying any back-wages you’re owed for past work.
As a worker, labor laws are in place to protect you and ensure you’re getting fair pay for your hard work. Make sure you’re getting the wages you’ve earned, and it could benefit both your bank account and your work-life balance.
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1 Important Disclosures for Earnest.
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Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
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