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Understanding Wage Theft

Posted by Jamison Mark on Oct 10, 2023 10:50:00 AM


Wage theft is, unfortunately, a prevalent and increasing problem. US workers lose billions of dollars each year as a result of underpayment from their employers. The Economic Policy Institute reports that between 2017 and 2020, the US Department of Labor recovered more than $3 billion in stolen wages for workers, representing a small portion of the wages stolen by employers during that time. Wage theft disproportionately affects low-wage workers, who often need every penny they can earn and more to simply get by. The effects also ripple out into larger communities in the form of lost tax revenues, greater demand for social services, and less consumer buying power, all of which create challenges for local economies.

What is wage theft?

Wage theft occurs anytime an employer pays a worker less than they’re legally obligated. This takes many forms, and often, employers convince employees that they’re entitled to less pay than they actually are. Below are examples of common wage theft scenarios.

Minimum Wage Violations

Minimum wage violations are a tremendous source of loss for low-income workers. A 2017 study found that in the 10 most populous US states, 17 percent of low-wage workers were paid less than the legal minimum wage. As a result, these workers were underpaid by nearly one quarter of their earnings, losing an average of $3,300 in earned wages annually.

The Economic Policy Institute estimates this type of wage theft costs workers across the nation more than $15 billion per year. Minimum wage requirements vary from state to state, and many states update them frequently. Low wage workers should stay aware of their states’ current minimum wages and ensure they’re consistently paid at least these amounts.

In New Jersey, the minimum wage for most workers in 2023 is $14.13 per hour and will increase to at least $15.13 per hour on January 1, 2024. Some jobs, including seasonal, agricultural, and tipped positions as well as those with very small employers, are subject to lower minimums. Some long-term care facility staff, on the other hand, are entitled to a higher minimum wage. You can find more detail on the state of New Jersey’s minimum wage chart.

Off-the-Clock Violations

Employers sometimes commit wage theft by requiring employees to work beyond their regular shifts without additional pay. Employers might persuade employees to “help out” and willingly work off the clock, but this is also illegal. Employees must be paid for all hours worked. If an employer permits an employee to work outside their normal shift, they must pay them for it.

Overtime Violations

The Fair Labor Standards Act requires employers to pay employees an overtime rate of 150% of their wages for time worked beyond 40 hours in a week. There are several exceptions to this rule, but covered workers should ensure they’re being paid correctly for all hours worked, even if discrepancies seem small.

Imagine, for example, a minimum wage full-time worker earning $14.13 per hour regularly comes in 15 minutes early and leaves 15 minutes late every day but isn’t paid for that additional time. If they work 5 days per week, 50 weeks per year, they would lose approximately $2,650 in wages annually.

Illegal Deductions

Employers sometimes commit wage theft by taking illegal deductions from workers’ paychecks. In New Jersey, employers are forbidden from deducting anything from employees’ wages other than items specifically permitted by law. For example, they may not reduce an employee’s pay to cover

  • Breakages
  • Cash register shortages
  • Failure to return company property
  • Uniforms
  • Drug testing (except for security guards)

Worker Misclassification

Often, employers misclassify workers as independent contractors to avoid employment regulations. As a result, misclassified workers assume a larger tax burden, lose many federal and state employment protections, and miss out on benefits and other perks that may be offered to employees. If you’re unsure whether you’re appropriately classified, refer to the state of New Jersey’s ABC test to find out.

Tip Theft

Tipped workers have a right to the tips they earn. While New Jersey allows tip pooling, in which workers combine their tips and redistribute them at the end of a shift, employers may not keep any of these tips for themselves, nor may they distribute any portion of them to non-tipped employees.

Wage theft is a rampant and growing problem that affects not only the workers whose earnings are misappropriated but the entire community. Employers have a legal responsibility to pay their workers correctly, fully, and on time. If your employer is falling short of this duty, you have a right to compensation. An experienced employment attorney can help you understand your rights, walk you through the steps to seek recovery, and help you present your case effectively. Workers can also file complaints with New Jersey’s Wage and Hour Division.

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Topics: Wage & Hour, Employment Law

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