Wage and Hour Guide: Overtime, Breaks, and Wage Theft

Understanding the Fair Labor Standards Act (FLSA)

The Fair Labor Standards Act (FLSA) is the bedrock of federal wage and hour protection in the United States. Enacted in 1938, this landmark legislation was designed to eliminate 'labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.' Today, it serves as the primary mechanism for ensuring that employees are paid a fair minimum wage and receive additional compensation for working more than 40 hours in a single workweek.

However, the FLSA is complex, and many employers—either through ignorance or intentional malice—fail to comply with its requirements. Wage and hour disputes are among the most common legal battles in the American workplace. For employees, understanding the nuances of the FLSA is the first step in identifying if their rights are being violated. Whether you are a salaried professional or an hourly worker, the 'playbook' of wage and hour law dictates how much you should be earning and when your employer owes you more.

Enterprise and Individual Coverage

Not every worker is covered by the FLSA, though the vast majority are. Coverage is generally determined in two ways: enterprise coverage and individual coverage. Enterprise coverage applies to employees of businesses that have at least two employees and an annual dollar volume of sales or business done of at least $500,000. It also covers hospitals, schools, and government agencies regardless of their size. Even if a business does not meet the enterprise threshold, an individual employee may be covered if their work involves 'interstate commerce,' such as shipping goods out of state or even making regular phone calls to other states. Because of this broad definition, most modern employees fall under the protection of the FLSA.

The Anatomy of Overtime Pay

One of the most frequent sources of wage and hour litigation is the failure to pay overtime. Under the FLSA, non-exempt employees must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rate of pay. While this sounds straightforward, employers often use creative accounting or 'off-the-clock' requirements to avoid these payments.

Defining the 'Regular Rate'

A common misconception is that overtime is simply your hourly wage multiplied by 1.5. In reality, the 'regular rate' includes all remuneration for employment, except for specifically excluded payments like discretionary bonuses or gifts. If you receive non-discretionary bonuses, shift differentials, or commissions, these amounts must be factored back into your regular rate before the overtime calculation is performed. Failing to include these incentives in the overtime calculation is a widespread form of wage theft that can result in significant underpayment over several years.

The Workweek Standard

Overtime is calculated based on a fixed and regularly recurring period of 168 hours—seven consecutive 24-hour periods. It does not have to coincide with the calendar week. Importantly, the FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime is worked on such days. Furthermore, averaging hours over two or more weeks is generally prohibited. If you work 30 hours one week and 50 hours the next, your employer cannot 'average' them to 40 hours; they must pay you for 10 hours of overtime for the second week.

Exempt vs. Non-Exempt: The Misclassification Trap

Not every employee is entitled to overtime. The FLSA provides exemptions for certain 'white-collar' employees who perform specific job duties and meet a salary threshold. Unfortunately, many employers misclassify workers as 'exempt' simply to avoid paying overtime, even when the employee's actual job duties do not meet the legal criteria. If you have been misclassified, you may be entitled to years of back pay.

The Salary Basis and Salary Level Tests

To be exempt from overtime, an employee must generally be paid on a 'salary basis,' meaning they receive a predetermined amount of money each pay period that is not subject to reduction because of variations in the quality or quantity of work. Additionally, they must earn a minimum salary level set by the Department of Labor. In recent years, these thresholds have seen significant updates. If your salary falls below the current federal or state threshold, you are entitled to overtime regardless of your job title or responsibilities.

The Duties Test

Even if you are paid a high salary, you must also pass the 'duties test' to be exempt. There are several categories of exemptions, including:

• Executive Exemption: Primary duty is management; regularly directs the work of at least two full-time employees; has the authority to hire or fire.
• Administrative Exemption: Primary duty is the performance of office or non-manual work directly related to management or general business operations; includes the exercise of discretion and independent judgment on matters of significance.
• Professional Exemption: Primary duty requires advanced knowledge in a field of science or learning acquired by a prolonged course of specialized intellectual instruction.

Simply giving someone a title like 'Assistant Manager' does not automatically make them exempt. If an 'Assistant Manager' spends 90% of their time performing the same tasks as hourly employees—such as stocking shelves or serving customers—they may be misclassified and owed substantial overtime compensation.

Common Forms of Wage Theft

Wage theft occurs whenever an employer fails to pay an employee what they are legally owed. While some instances are blatant—such as a boss refusing to hand over a final paycheck—many forms are subtle and woven into the daily operations of a company. Identifying these patterns is essential for protecting your livelihood.

Off-the-Clock Work

One of the most prevalent forms of wage theft is requiring employees to work 'off-the-clock.' This might include requiring a worker to put on a uniform or safety gear before punching in, making an employee attend 'mandatory' meetings during their lunch hour, or asking them to finish a task after they have already clocked out. Legally, if an employer knows or has reason to believe that work is being performed, they must pay for that time. If you find yourself in this situation, it is important to realize that this behavior is often linked to other illegal activities, such as workplace bias, where certain employees are targeted for unpaid work more than others.

Illegal Deductions

Employers sometimes make illegal deductions from an employee's wages. While deductions for taxes, social security, and court-ordered garnishments are legal, many others are not. For example, an employer generally cannot deduct the cost of uniforms, broken equipment, or cash register shortages if doing so brings the employee's hourly rate below the minimum wage. Furthermore, some states have even stricter laws regarding what can be taken out of a paycheck. If you notice unexplained line items on your pay stub, you should investigate your rights immediately.

The Independent Contractor Misclassification Problem

The 'gig economy' has led to a massive increase in the number of workers classified as independent contractors rather than employees. While being an independent contractor offers flexibility, it also means you lose the protections of the FLSA, including minimum wage, overtime, and workers' compensation benefits.

The Economic Realities Test

Courts and the Department of Labor use an 'economic realities' test to determine if a worker is truly an independent contractor. Key factors include:

• The degree of control the employer has over the work.
• The worker's opportunity for profit or loss.
• The amount of investment the worker has in equipment or materials.
• The permanency of the relationship.
• The degree of skill required for the work.

If the employer controls your schedule, provides your tools, and you work exclusively for them, you are likely an employee in the eyes of the law, regardless of any contract you may have signed. Misclassification is a serious offense that can lead to large class-action lawsuits. For those facing other issues like discrimination based on age or disability while misclassified, the legal situation becomes even more complex, requiring a thorough evaluation of employment status.

Meal and Rest Break Requirements

Contrary to popular belief, there is no federal law under the FLSA that requires employers to provide meal or rest breaks. However, many states have enacted their own laws to fill this gap. In states like California, New York, and Illinois, the requirements for breaks are very specific and strictly enforced.

Paid vs. Unpaid Breaks

Under federal law, if an employer does choose to provide short breaks (usually lasting 5 to 20 minutes), the Department of Labor considers these as compensable work time that must be included in the sum of hours worked. Bona fide meal periods—typically lasting 30 minutes or more—are not considered work time and are not compensable, provided the employee is completely relieved from duty. If you are required to answer phones or remain at your desk while eating, that 'lunch break' must be paid. If you are a pregnant worker and are being denied reasonable break time for health reasons, you may have additional protections under the pregnant workers fairness act.

Tipped Employees and the Tip Credit

The rules for tipped employees, such as servers and bartenders, are among the most misunderstood in wage and hour law. The FLSA allows employers to pay a 'cash wage' that is lower than the standard minimum wage, provided the employee makes up the difference in tips. This is known as the 'tip credit.'

Tip Credit Requirements

For an employer to claim a tip credit, several conditions must be met:

1. The employee must be informed of the tip credit provisions.
2. The employee must retain all tips received (except for valid tip pooling arrangements).
3. The cash wage plus tips must at least equal the federal minimum wage.

If the employer fails to meet even one of these requirements, they lose the right to the tip credit and must pay the full minimum wage for all hours worked. Furthermore, managers and supervisors are strictly prohibited from participating in tip pools. If your manager is taking a cut of your tips, that is a direct violation of federal law and constitutes wage theft.

Travel Time and On-Call Hours

Determining whether time spent traveling or being 'on-call' counts as hours worked is a frequent point of contention. The general rule is that an employee must be compensated for time spent that is for the benefit of the employer.

Travel Time

Normal travel from home to work is not compensable. However, travel from one job site to another during the workday is work time and must be paid. Similarly, if an employee is required to travel to another city for a special one-day assignment, the time spent traveling is compensable work time, though the employer may deduct the time the employee would normally spend commuting.

On-Call Time

Whether on-call time is compensable depends on how restricted the employee is. If the employee is 'engaged to wait'—meaning they cannot use the time effectively for their own purposes—the time is compensable. If the employee is 'waiting to be engaged'—meaning they have freedom to go about their business while remaining available by phone—the time is generally not compensable. The more restrictions placed on the employee (such as a requirement to respond within 10 minutes or a ban on consuming alcohol), the more likely it is that the time must be paid.

Retaliation: Your Right to Speak Up

Many workers are afraid to report wage theft because they fear they will be fired or harassed. It is vital to know that the FLSA contains a strict anti-retaliation provision. It is illegal for an employer to discharge or in any other manner discriminate against any employee because such employee has filed a complaint or instituted any proceeding under the FLSA.

If you are fired for complaining about unpaid overtime, you may have a strong case for wrongful termination. Retaliation can also take other forms, such as reducing your hours, changing your shift to an undesirable time, or excluding you from meetings. Protecting yourself against retaliation is just as important as recovering your lost wages. If you have also experienced reporting sexual harassment and suffered similar blowback, you may have multiple avenues for legal recourse.

How to Calculate Your Owed Wages

If you believe you have been a victim of wage theft, calculating the total value of your claim is the first step toward recovery. You are not just entitled to the wages you were denied; the law provides for additional 'liquidated damages' to penalize the employer.

Liquidated Damages and Interest

Under the FLSA, an employee who wins a wage and hour lawsuit is generally entitled to 'liquidated damages' in an amount equal to the back wages owed. This effectively doubles your recovery. For example, if your employer owes you $5,000 in unpaid overtime, you could be awarded a total of $10,000. These damages are intended to compensate the employee for the delay in receiving their pay. In addition to liquidated damages, you may be able to recover attorney’s fees and court costs, meaning the employer pays for your lawyer if you win.

State Law Variations

Some states offer even more generous damages. For instance, some jurisdictions allow for treble damages (triple the amount of unpaid wages). When evaluating your claim, it is essential to look at both federal and state statutes to ensure you are maximizing your potential settlement. Calculating these values can be complex, especially when factors like comparative fault do not apply to wage claims—if you worked the hours, you are owed the money, regardless of your performance.

The Legal Process: Filing a Wage and Hour Claim

There are two primary ways to recover unpaid wages: filing a complaint with a government agency or filing a private lawsuit. Each has its own advantages and disadvantages.

Department of Labor (DOL) Complaints

You can file a complaint with the Wage and Hour Division of the U.S. Department of Labor. The DOL has the authority to investigate companies, audit payroll records, and negotiate settlements on behalf of workers. This process is free, but the DOL is often backlogged and may not pursue every individual case. State labor departments offer similar services and may be more responsive depending on your location.

Private Lawsuits

Filing a private lawsuit often yields a faster and more substantial recovery, especially since you can seek liquidated damages and attorney’s fees. Most employment attorneys work on a contingency fee basis, meaning they only get paid if you win. This levels the playing field for workers against large corporations. During a lawsuit, your attorney will conduct 'discovery,' where they can force the employer to hand over internal emails, time logs, and payroll data that may prove a pattern of wage theft.

Evidence and Record Keeping

The success of a wage and hour claim often hinges on the quality of the evidence. While the law requires employers to keep accurate records of hours worked, they often fail to do so or even manipulate the data. As an employee, you should maintain your own records to verify your claim.

What to Collect

• Pay Stubs: Save every pay stub, as they provide a paper trail of your regular rate and any deductions.
• Personal Time Logs: Keep a notebook or a digital log of the exact time you start and end work each day, including breaks.
• Communications: Save emails, texts, or memos where your boss asks you to work late, stay through lunch, or perform off-the-clock tasks.
• Witnesses: Note the names and contact information of coworkers who can testify to the company's culture regarding overtime and breaks.

If your employer is also engaging in other illegal practices, such as discrimination, these records can serve a dual purpose in building a broader employment case.

Statute of Limitations: Don’t Wait to Act

Time is of the essence when it comes to wage claims. The FLSA has a two-year statute of limitations for standard violations, which can be extended to three years if the employer's violation was 'willful.' This means that for every day you wait to file, you may be losing a day's worth of back pay from several years ago.

Different states have different deadlines, and some may allow you to go back further than three years. For a detailed breakdown of how these deadlines work across the country, consult our statute of limitations for filing claims. Missing these deadlines is the most common reason why valid wage theft claims are dismissed, so prompt action is critical.

Collective and Class Actions

Wage theft is rarely an isolated incident. If you are being denied overtime, it is highly likely that your coworkers are facing the same issue. In these cases, a collective or class-action lawsuit may be the most effective way to seek justice.

Power in Numbers

In an FLSA collective action, employees who are 'similarly situated' can join together to sue the employer. This allows workers to pool their resources and evidence. It also puts significant pressure on the employer to reach a global settlement. These cases often result in millions of dollars in recovered wages and send a strong message to the industry that wage theft will not be tolerated. Whether the issue is misclassification or systemic off-the-clock work, joining forces can ensure that even the smallest underpayments are addressed.

Why You Need a Case Evaluation

Navigating the complexities of wage and hour law is a daunting task for any worker. Employers have legal teams dedicated to minimizing their liability, and you deserve the same level of protection. A professional case evaluation can help you determine the true value of your claim, identify all potential violations, and decide on the best path forward.

Whether you have been misclassified as an independent contractor, denied meal breaks, or forced to work overtime without pay, you have rights. Don't let your hard-earned money stay in your employer's pocket. Understanding the 'playbook' is just the beginning—taking action is what gets you paid.

If you believe you have been a victim of wage theft or overtime violations, contact us today for a free, no-obligation case evaluation. We will help you understand your legal options and fight for the compensation you deserve.