Updated: May 25, 2023

Workers Rights: What To Know About Overtime, Permatemping and More

Wage theft happens when an employer doesn’t legally pay a worker all their wages. Whether you're getting stiffed on overtime or tips, here's advice to help.
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Millions of Americans experience wage theft each year -- and they may not even know it. Wage theft happens when an employer doesn’t legally pay a worker all the wages he or she is entitled to. The company may fail to compensate workers for the actual time they spend working, have them start work before they clock in, short-change on benefits, not pay overtime, steal tips, or intentionally misclassify employees. All of that is illegal -- and unfortunately pretty common in the U.S.

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If you think that you’re experiencing wage theft, your first step should be to research and understand what your rights are. Go to the website CanMyBossDoThat.com, which lists work rules. If you discover that you’re not being fairly compensated, call or place a claim with the Department of Labor. And research online for organizations or labor groups that might have resources to help.

Here are four common ways that Americans experience wage theft and the rules that every worker should know about:

Employee misclassification

Do you know of an employee who has worked at a job without decent health or pension benefits? Employers may intentionally misclassify workers in order to save money. When workers are treated as independent contractors by employees they aren’t eligible for benefits, holiday or sick pay, or overtime. Permatemps work in every industry -- oftentimes doing the same jobs as so-called regular workers who receive better pay and benefits. These workers lose out on certain protections, including the rights to workers’ compensation, minimum wage, and unemployment insurance.

To determine whether you are really an independent contract or employee, take a look at some of the questions listed on tests administered by the Department of Labor (Economic Reality Test) and IRS (Right to Control Test). Here are a few factors the Labor Department weighs when considering whether someone is really an independent contractor:

  1. The extent to which the services rendered are an integral part of the business.
  2. The permanency of the relationship.
  3. The amount of the alleged contractor's investment in facilities and equipment.
  4. The nature and degree of control by the employer.
  5. The alleged contractor's opportunities for profit and loss.

You can find sample questions to the tests here.

If you think you’re a misclassified employee, research what the law says you can do. Unfortunately, laws vary depending on what state you live in and whether you work in the public or private sector. What you should do is get in touch with people who can help. Contact a union or your local labor council for information and assistance, seek out an employment attorney, reach out to the local branch of the Department of Labor’s Employe Benefits Security Administration, or call a labor reporter at your local newspaper for advice.

Being denied overtime pay

A common way that employers cheat workers out of money they have earned is denying or tricking them out of overtime pay. Some employers may require workers to log in hours “off the clock,” be on-call, or make them perform off-hour duties. In many of these cases, these workers are probably entitled to receive overtime.

In general, an employer who requires or permits an employee to work overtime is required to pay for the overtime work. Employees who are covered by the Fair Labor Standards Act must receive overtime pay for hours worked in excess of 40 hours each week. They must get paid at least one and one-half times their regular pay rate. The FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime hours are worked on such days, the Labor Department says.

If you think you’re being denied overtime pay unfairly, here are steps you should take:

  • Keep track of all the hours you work and write down what you did, but don’t keep these records at work. Take them home with you.
  • If you are misclassified as an independent contractor, fill out the IRS’ SS-8 form to determine your status.
  • Contact the Department of Labor via phone or email to ask your questions or report complaints.
  • Contact a lawyer to find out your options and rights.

Getting cheated out of tips

You may think you’re getting stiffed out of tips that you have earned, but it’s important to know the rules. The Department of Labor defines a tipped employee as someone who “engages in an occupation in which he or she customarily and regularly receives more than $30 per month in tips.”

The Labor Department says an employer of a tipped employee is only required to pay $2.13 in direct wages if that amount combined with tips received at least equals the federal minimum wage (many states require higher direct wage amounts for tipped employees). If the amount doesn’t reach the federal minimum wage amount, the employer must make up the difference.

Not making minimum wage

Federal law requires employers to pay all employees a minimum hourly wage, which is currently $7.25 (some states impose their own minimum wage and eligible workers receive whichever is higher). If a business meets the federal requirements set under the Fair Labor Standards Act, they must pay that amount.

However, some employees are exempt from receiving the federal minimum wage. They include: independent contractors, outside salespeople, small farm workers, employees of a seasonal business, newspaper deliverers, domestic workers who provide “companionship services,” apprentices, and workers who receive tips (see above).

A special law applies to employees who are under the age of 20 during their first 90 consecutive days of employment. These young workers can receive $4.25 per hour. But after 90 days, they must receive the full federal minimum wage.

If you think you’re being cheated out of earning the minimum wage, contact someone who can help, like a lawyer. Also, call or place a claim with the Department of Labor.

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