Getting paid for work you’ve already done is the right of every employee in the state of New York. Nevertheless, unpaid wages are often a reality for workers across various industries.
This can happen for several reasons, including an accounting error, a misclassification, or an employer’s negligence. Whatever the circumstances, if an employer violates an employee’s right to a fair wage, they are entitled to compensation.
If you’re owed back pay, there are a few things you should know to get what you’re rightfully owed. This article discusses back pay and how it works, how to calculate it, and how to claim it.
What exactly is back pay?
Back pay is the wages and benefits an employee is owed for work they have already completed. However, back pay isn’t just payments that were withheld based on the hours worked.
Back pay can also be a bonus or pay increase promised but never delivered. If an employee has been prevented from completing their work for a specific reason, they could also be owed back pay if their wages were withheld.
Additionally, if an employee has been unlawfully fired, they may be due back pay since they were unlawfully prevented from performing their work. Back pay is then determined by the date an employee was dismissed and the date a judgment was received.
Union employees can receive back pay from an employer if the contract stipulates a pay increase. In some instances, the labor department can oversee the back pay process to ensure employees receive withheld wages.
Typical reasons for awarding back pay are:
- Classification errors
- Minimum wage violations
- Payment errors
- Unpaid overtime
- Wrongful dismissal
How does it work?
If an employer, intentionally or unintentionally, withholds back pay from an employee, the employee has a right to back pay. This means that an employee can legally force the employer to pay them their lost wages if the employer refuses to willfully do so.
The Wage and Hours Division of the U.S. Department of Labor (DOL) investigates and resolves wage violations and issues with back pay. The Department of Labor is the governmental entity ultimately responsible for ensuring that employers treat employees properly.
Furthermore, the Department of Labor is responsible for upholding the Fair Labor Standards Act (FLSA), a law established to protect workers. The FLSA, among other things, establishes the federal government’s minimum wage, overtime regulations, and recordkeeping standards for companies.
Other laws, such as the Davis-Bacon Act (DBA) and the Service Contract Act (SCA), have their own requirements for minimum wage and back pay for contract workers receiving federal funding.
When can an employer be responsible for back pay?
Wage violations could sometimes be the result of misclassification or a simple accounting mistake.
In other instances, employers may use unethical employment practices to exploit their employees and cheat them of wages.
Here are some of the most common reasons an employer may owe back pay:
- Accounting mistakes – The company’s accountant can unintentionally miscalculate an employee’s pay or add up their hours worked.
- Misclassification – An employer’s misclassification or change in classification might result in back pay. For instance, an employee can switch from hourly to salaried status and potentially be eligible for back pay. The same goes for receiving a pay raise.
- Minimum wage violations – Employers must comply with federal and state minimum wage laws and regulations like the Davis-Bacon Act and Service Contract Act. The federal minimum wage is the lowest rate of pay that can be paid to an employee, however, the state minimum wages can be higher. If an employer fails to pay the state minimum wage, an employee may be entitled to back pay.
- Unpaid overtime – The FLSA requires that nonexempt employees receive overtime pay after working 40 hours in one workweek. Overtime pay must be equal to or higher than one and a half times an employee’s pay rate. If an employer asks an employee to work overtime, they must compensate the worker accordingly. If they fail to do so, an employee can be entitled to back pay for overtime.
- Wrongful termination – If an employer fires an employee and violates an employment contract or the law, an employee can sue for wrongful termination. If their claim is successful, the employee can be entitled to back pay for the time they lost and could have spent working. Typically, an employee can expect to get back pay from when they were fired until the lawsuit is resolved.
Is it ever legal for employers to withhold pay?
Employees have a limited amount of time to bring a claim for unpaid wages before the statute of limitations applies. Generally, employees can receive up to two years of back pay for unintentional wage infractions. This period is extended to three years in cases of deliberate underpayment.
After the statute of limitations for a particular wage violation has expired, employees are prohibited from filing a claim for back pay. This means the employer is not legally required to pay back wages to an employee, even if they have committed a wage violation.
How is back pay calculated?
Back pay calculations can differ depending on whether an employee is paid on a salary or hourly basis.
Calculating back pay for hourly employees involves:
- Calculating the number of hours worked (adding up the number of hours an employee is owed back pay for)
- Multiplying hours worked by the hourly rate of pay
- Adjusting for overtime if needed
Here is an example of back pay calculation for hourly employees:
An employer is conducting layoffs, and an employee making $20 per hour is fired in February 2021. An employee, believing the terms of their employment contract has been violated, files a claim against their employer.
The case concluded in October 2021 when a judge ruled in favor of an employee and ordered the employer to compensate the employee.
In this case, the employer must issue back pay for the employee’s wages from February to October 2021.
Assuming the employee has worked full-time, the calculation would go as follows:
$20 per hour x 40 hours x 4 weeks = $3, 200 per month
$3, 200 per month x 8 months = $25, 600 in back pay
This way, the employer who has wrongfully terminated an employee must pay them $25,600 in back pay for those eight months of unpaid wages.
Here is an example of back pay calculation for salaried employees:
Calculating back pay for salaried employees is somewhat different from calculating for hourly workers.
An employer first needs to:
- Determine the number of pay periods they have in a year
- Divide an employee’s wage by the number of pay periods to figure out the amount they make each pay period
- Multiply this amount by the number of pay periods the employee is owed back pay for
Let’s say an employee earns $60,000 and has 52 pay periods. The calculation goes like this:
$60,000 salary / 52 pay periods = $1,154
$1,154 per pay period x 16 pay periods = $18,464
According to this calculation, the employer who has wrongfully dismissed an employee must pay them $18,464 in back pay for the 16 pay periods of unpaid wages.
In both cases, the employer may also need to factor in employee benefits since they are an important part of workers’ compensation and must be included in back pay.
What factors affect back pay calculations?
Several factors affect back pay calculations, such as:
- The type of violation
- The statute of limitations
- Whether an employer acted intentionally or unintentionally
The type of violation is very important when it comes to calculating back pay. Employees who are owed back pay for unpaid wages will typically receive a different amount than those who are owed back pay for vacation time.
Jurisdiction is also highly important since all states have laws regarding back pay, so an employee in New York can be entitled to a different amount than an employee in California.
When it comes to the statute of limitations, in most cases, employees have only two years to file a back pay claim. However, this timeframe can be either shorter or longer, depending on the jurisdiction and the type of violation.
The last factor affecting back pay calculations is whether the employer acted willfully or not. In general, employees are entitled to a higher amount of back pay if the employer knew that they were violating the employment law but chose to do so anyway.
How can you collect back pay?
Although an employee has the ability to sue on their own, the Fair Labor Standards Act empowers the U.S. Department of Labor to act on their behalf and reclaim lost pay.
If the Wages and Hours Division of the Department of Labor determines that an employer owes an employee back pay but refuses to pay, the Secretary of Labor can file a lawsuit to force them to pay.
If an employee is found to be in the right, he or she is entitled to back pay in addition to liquidated damages equal to their lost salary. Liquidated damages are additional compensation paid to an employee.
Suppose an employee wins a case against their employer and is awarded $1,000 in back pay. In that case, an employer may also be forced to pay them an additional $1,000 in liquidated damages.
Employees may also initiate a separate civil lawsuit against their employer, which may involve back wages, court costs, and attorney fees. Benefits may also be provided at the employee’s attorney’s request.
Although an employee has the right to sue their employer, they cannot do so if they have received a judgment or compensation from the Wage and Hours Division. In addition, they cannot do it if the Secretary of Labor has already filed a claim.
The statute of limitations for filing a claim for back pay or unpaid overtime is either two or three years, depending on the employer’s intent.
The statute of limitations for unintentional withholding of back wages is two years. The statute of limitations is three years if the money owed was willfully withheld, which is to say, knowingly or deliberately.
The Wage and Hours Division’s Investigation
There are two phases to the WHD investigation. Even though the Department of Labor can sometimes conduct its own investigations into employers or groups concerning back pay, it is the employee who initiates the claim in most cases.
The first phase involves providing the WHD with all the relevant information about the employer and themselves. This information includes:
- The names of all parties
- Their work titles
- An employee’s address
- An employee’s phone number and other contacts
- An employer’s address and contact information
An employee will also have to provide evidence. This can be documentation such as pay stubs, timesheets, logs of hours worked, tax returns, and more.
All information pertaining to the case, as well as the identity of an employee, is confidential. The DOL cannot disclose an employee’s identity unless they allow it and only when it is required to investigate the complaint.
The employer is forbidden to fire or discriminate against an employee because they brought a claim against them.
In the second phase of the investigation, the WHD inspectors will meet with the employer to assess whether any legal exemptions can apply to the business or the employee. They will also require time cards, payroll records, and other relevant information for the investigation.
A one-on-one interview with employees will follow this to determine the validity of any records. Interviews are usually conducted at the workplace, however, the claimant can request another location.
The interview can be conducted anywhere from the employee’s home to a mail-in interview in which the employee will receive a set of questions that they will respond to via mail.
Determining back pay
After the DOL collects and compiles all relevant information, it will determine whether the employer has intentionally or unintentionally withheld wages from their employee.
If it concludes that the employer is in the wrong, they will be required to pay the employee in full and will even monitor to ensure compliance.
If the unpaid wages resulted from a termination that was judged discriminatory or otherwise unlawful, the employer might be forced to rehire the employee or provide some other form of compensation.
The Fair Labor Standards Act evaluates intentional and unintentional wage violations differently. In either scenario, penalties may be assessed in addition to a favorable decision for the employee.
Infractions of wage laws are subject to civil penalties of up to $1000, while intentional violations are subject to fines of up to $10,000. Willful violations of the FLSA can result in criminal prosecution, and multiple convictions can lead to incarceration.
What to do if the WHD cannot help you?
If the Wage and Hours Division cannot help an employee receive back pay, other options exist. The employee can file a lawsuit directly in court or go to their state’s labor department.
The state labor department is likely to have similar procedures to the WHD. They will investigate the claim and may order the employer to provide back pay if they find that the employee is owed wages.
Filing a lawsuit may be the only option if the state labor department cannot help the employee. The employee will have to prove that the employer owes them back pay and may have to pay court fees.
If the employee wins their case, the court can order the employer to provide back pay and may also order them to pay the employee’s legal fees.
Back pay, like any other type of wage, is the right of every employee. It is the employer’s responsibility to ensure that their employees are paid correctly and on time.
If an employer withholds back pay from an employee, the employee has a right to file a claim with the Department of Labor or take legal action against the employer.
Other options are also available for employees who are owed back pay, including contacting the state labor department or talking with an attorney.
Employees should act quickly if they believe their employer has withheld back pay, as there may be time limits on how long they have to take action.
To find out whether you have a back pay case worth pursuing, feel free to contact Cilenti & Cooper today. We treat every case with the attention and care it deserves and can fight for your civil rights from beginning to end. We offer a free consultation to all of our prospective clients, so you have nothing to lose.