Wage Theft: What Every Worker Should Know About Their Rights

Every worker deserves to be paid fairly and on time. Sadly, wage theft remains a widespread issue in the United States, affecting millions of employees across industries, from restaurant servers to construction workers to office staff. 

Employers who skirt wage laws not only cheat their employees but also undermine the entire labor system. Luckily, you don’t have to take it.

If you’ve ever been underpaid, denied wages, forced to share your tips unfairly, or not compensated for mandatory breaks, you might be a victim of wage theft, and we can help.

Morgan & Morgan, America’s largest personal injury law firm, holds corrupt employers accountable and fights for the compensation our clients need and deserve. Contact us today for a free case evaluation to learn more about your legal options.

What Is Wage Theft?

Wage theft occurs when an employer fails to pay employees the full compensation they’re legally owed. This can happen in various ways, including:

• Paying less than the minimum wage
• Failing to pay overtime
• Misclassifying workers as independent contractors
• Making illegal deductions
• Not paying for all hours worked (including before or after a shift)
• Denying legally mandated breaks or not paying for them when required
• Unlawful tip pooling

The Economic Policy Institute estimates that U.S. workers lose more than $15 billion annually due to wage theft, more than all the property crimes like burglary or car theft combined. And for workers living paycheck to paycheck, even small infractions can be devastating.

What Are the Laws for Not Paying Employees? 

The backbone of wage protection in the U.S. is the Fair Labor Standards Act (FLSA), enacted in 1938. It sets the standards for:

• Minimum wage: Currently $7.25/hour at the federal level (though many states set higher rates), employers have to meet this minimum.
• Overtime pay: 1.5 times the regular rate, minimally, must be paid for any hours worked over 40 in a workweek.
• Recordkeeping: Employers must keep accurate time and pay records
• Child labor: The types of jobs and hours minors can work are limited.

The U.S. Department of Labor (DOL) enforces the FLSA through investigations and lawsuits. However, many employees must also rely on state labor laws, which can provide even stronger protections.

Not Paying Employees: Common Violations

Wage theft doesn’t always look like an employer refusing to cut a paycheck. It can be more subtle or complex. Let’s look at the most common violations:

Unpaid Overtime

If you're a non-exempt employee and work more than 40 hours a week, your employer must pay time-and-a-half. Some employers try to dodge this by:

• Misclassifying workers as exempt (salaried) when they don’t meet the legal criteria
• Averaging hours over two weeks (30 hours one week, 50 the next—this is illegal)
• Offering "comp time" instead of paying overtime (generally illegal in the private sector)
  
   

Misclassifying Workers

Independent contractors are not entitled to minimum wage or overtime, but many employers mislabel workers to save money. If your employer controls your schedule, provides your tools, and directs how you work, you may be a misclassified employee entitled to back pay.

Working Off the Clock

This includes:

• Time spent setting up before a shift
• Staying late to close up
• Answering emails or texts after hours
• Attending mandatory training

If you’re not being paid for this time, it’s wage theft.

Illegal Deductions

Employers can make deductions for things like uniforms or cash register shortages, but only if it doesn’t drop your pay below the minimum wage. Withholding wages to "punish" you or to cover business expenses is almost always illegal.

Breaks: Should You Be Paid?

Whether breaks are paid or unpaid depends on federal and state laws. 

Federal Law (FLSA) Guidelines

The FLSA explains the federal standards for work breaks:

• Rest Breaks: Short breaks (5–20 minutes) must be paid if the employer allows them.
• Meal Breaks: Bona fide meal breaks (typically 30 minutes or more) do not need to be paid as long as the employee is completely relieved of duty.
  
   

Common Violations

As stated before, just because it’s the law, doesn’t mean your employer will obey. Common federal law violations for work breaks can include:

• Requiring employees to work through lunch without pay
• Interrupting a meal break with work duties (answering phones, helping customers)
• Automatically deducting 30 minutes from pay regardless of whether a break was taken
  
   

State Law Differences

Some states, like California and New York, have stricter break laws. For example, California requires:

• A 10-minute paid rest break for every 4 hours worked
• A 30-minute unpaid meal break for shifts over 5 hours

Failing to provide these can result in penalties, including an extra hour of pay per violation.

Tip Pooling: What’s Legal and What’s Not

Tips are a major source of income for many service and hospitality workers, but employers don’t always handle them properly.

Federal law has clear rules on how tip pooling can be handled—and how it shouldn’t be. These rules include:

• Employers can’t keep any portion of employee tips, even if they pay full minimum wage.
• Tip pooling is allowed, but must follow strict rules:
  • Only customarily tipped employees (servers, bartenders, bussers) can share in the tip pool.
  • Managers and supervisors cannot take a share.
• If an employer takes a tip credit (pays less than minimum wage and makes up the difference with tips), only tipped employees can participate in tip pooling.

However, there are many common violations of these rules, including:

• Managers taking part of the tips
• Withholding tips to punish poor performance
• Requiring tips to be shared with kitchen staff (illegal if using tip credit)
• Using tips to cover credit card processing fees

For example, a restaurant pays its servers $2.13/hour (federal tipped minimum) and requires them to tip out the dishwasher. This is likely illegal under the FLSA if the employer is taking a tip credit.

How Employers Get Away With Wage Theft

Wage theft thrives in environments where workers aren’t aware of their rights or there’s fear of retaliation for speaking up, especially undocumented workers in vulnerable positions.

Employers may even falsify records or fail to keep them to cover their tracks.

Industries with high rates of this sort of wage theft include:

• Food service
• Hospitality
• Agriculture
• Retail
• Construction
  Home care

Language barriers, lack of legal access, and threats of job loss often keep victims silent.

Can I Sue for Unpaid Wages?

Yes, you can sue for unpaid wages, and in many cases, you should.

If your employer has failed to pay you what you're legally owed, whether it's regular pay, overtime, tips, or meal/rest break compensation, you have the right to file a claim or lawsuit under both federal and state labor laws.

You may be able to sue if any of the following applies:

• Your employer withheld regular wages
• You weren’t paid overtime at time-and-a-half after working 40+ hours in a week
• You were made to work off the clock
• You were denied meal or rest breaks that should have been compensated
• You were misclassified as an independent contractor
• Your employer made illegal deductions from your paycheck
• Your tips were taken or improperly pooled
• You weren’t paid at least minimum wage
  
   

Retaliation Is Illegal

Some employees may be afraid to act, but under federal and state laws, it’s illegal for employers to retaliate against employees who:

• File a wage complaint
• Talk to a lawyer
• Join a class-action suit
• Speak to other employees about wages

Retaliation can include termination, demotion, schedule changes, or harassment. If you experience this, you may be entitled to damages beyond lost wages.

What Compensation Can You Recover?

If your employer has violated wage laws, you may be entitled to:

• Back pay: Unpaid wages and tips
• Liquidated damages: In many cases, you can receive double your unpaid wages
• Interest: On the amount owed
• Legal fees and costs
• Punitive damages: In extreme or willful violations
• Reinstatement or front pay: In retaliation cases

Time limits apply, so it’s important to act fast. The FLSA typically allows a 2-year window, or 3 years for willful violations.

How to Protect Yourself

If you suspect you’re not being paid properly:

• Keep Your Own Records: Log hours worked, breaks taken, and payments received.
• Check Pay Stubs: Review deductions and hours each pay period.
• Ask Questions: Don’t be afraid to request an explanation for your wages.
• Talk to Coworkers: Others may be affected too. Wage theft often impacts groups.
• Consult a Wage & Hour Attorney: Legal experts can evaluate your case and help you recover what you're owed.
  
   

Morgan & Morgan Can Help

Wage theft is more than just a financial crime, it’s a violation of your dignity and hard work. You deserve every dollar you earn. 

At Morgan & Morgan, we’re committed to fighting back against dishonest employers and standing up for workers’ rights.

If you suspect wage theft, our attorneys are ready to review your case, advise you on next steps, and help you reclaim what’s rightfully yours.

We have the resources to take on large corporations—and win. With more than $25 billion recovered for our clients and a nationwide presence, Morgan & Morgan is the largest plaintiffs’ law firm in the country.

Best of all? You pay nothing unless we win.

Hiring one of our lawyers is easy, and you can get started in minutes with a free case evaluation.