Wage Theft

What Is Wage Theft?

Wage theft occurs when employers fail to pay workers the wages and benefits they are legally entitled to receive. It encompasses a wide range of violations, from not paying minimum wage to illegally withholding overtime, tips, or expense reimbursements.

In California, wage theft is one of the most common employment law violations, affecting workers across all industries. State law provides robust protections and remedies, including penalties that can significantly exceed the amount of unpaid wages.

Common Forms of Wage Theft

Wage Payment Violations

Violation Type	Description
Minimum Wage Violations	Paying less than the required minimum wage rate
Overtime Violations	Failing to pay 1.5x or 2x rates for overtime hours
Unpaid Hours	Not paying for all time worked
Illegal Deductions	Subtracting costs that employers must bear
Tip Theft	Taking or misallocating employee tips
Final Pay Violations	Not paying all wages at termination

Time-Related Violations

Violation Type	Description
Off-the-Clock Work	Requiring work before clocking in or after clocking out
Meal Break Violations	Not providing or paying for missed meal periods
Rest Break Violations	Denying required rest periods
Rounding Abuse	Systematically rounding time to employer's benefit
Travel Time	Not paying for compensable travel
Training Time	Not paying for required training

Classification Violations

Violation Type	Description
Misclassification	Treating employees as independent contractors
Exempt Status Abuse	Classifying non-exempt employees as exempt
Piece Rate Violations	Not separately compensating rest periods

California Wage Theft Laws

Labor Code Protections

California provides extensive wage theft protections:

Labor Code Section	Protection
§ 201-203	Payment of wages at termination
§ 204	Timely payment during employment
§ 221	Prohibition on wage deductions
§ 226	Wage statement requirements
§ 351	Tip protection
§ 510	Overtime compensation
§ 512	Meal period requirements
§ 1194	Minimum wage enforcement
§ 1197.1	Minimum wage penalties

California Wage Theft Prevention Act

Requires employers to provide written notice to employees including:

Rate(s) of pay and basis (hourly, salary, piece rate, commission)
Allowances claimed as part of minimum wage
Regular payday
Employer's name and address
Workers' compensation insurance information

Must be provided at hire and within 7 days of any changes.

Local Wage Theft Ordinances

Many California cities have additional wage theft protections:

City	Additional Protections
Los Angeles	Wage Theft Prevention Ordinance with enhanced penalties
San Francisco	Office of Labor Standards Enforcement
San Jose	Wage theft penalties and enforcement
Oakland	Enhanced wage theft remedies
San Diego	Earned Sick Leave and Minimum Wage Ordinance

Recognizing Wage Theft Violations

Off-the-Clock Work

Common scenarios where employees work without pay:

Scenario	Examples
Pre-shift work	Setting up workstations, attending meetings, putting on required gear
Post-shift work	Cleaning up, completing paperwork, shutting down equipment
Working through breaks	Eating at desk while working, being on-call during meals
Work from home	Answering emails, phone calls after hours

Illegal Deductions

California prohibits deductions for:

Breakage or cash shortages (in most cases)
Customer walk-outs or dine-and-dash
Tools and equipment required for the job
Uniforms and uniform maintenance
Medical or physical examinations required by employer
Business expenses (see expense reimbursement)

Time Rounding Issues

While time rounding is legal in California if neutral, violations occur when:

Rounding systematically favors the employer
Employees are rounded down when starting early
Rounding is applied inconsistently
Actual time worked can be captured but rounding is still used

Piece Rate Violations

For employees paid by piece rate:

Rest breaks must be separately compensated at regular hourly rate
Non-productive time must be compensated at minimum wage
Overtime must still be paid on hours over 8/day or 40/week

Penalties for Wage Theft

Civil Penalties

Violation	Penalty
Minimum wage violation	Unpaid wages + liquidated damages (equal to unpaid wages) + interest
Overtime violation	Unpaid overtime + interest
Meal/rest break violation	One hour premium pay per day per violation
Wage statement violation	$50 first violation, $100 subsequent (up to $4,000)
Waiting time penalty	Up to 30 days' wages for willful failure to pay at termination
PAGA penalties	$100-$200 per pay period per employee

Example Penalty Calculation

Scenario: Employer fails to pay $5,000 in overtime over 6 months, misses final pay at termination.

Penalty Type	Calculation	Amount
Unpaid Overtime	Amount owed	$5,000
Liquidated Damages	Equal to unpaid wages	$5,000
Waiting Time	30 days × $200/day	$6,000
Interest	10% per year on wages	$500
PAGA (12 pay periods × 10 employees)	$100 × 120	$12,000
Attorney's Fees	Hourly rate × hours	$15,000
Total Exposure		$43,500+

Criminal Penalties

Intentional wage theft can result in:

Misdemeanor charges for first-time offenders
Felony charges for repeat offenders or large amounts
Fines up to $10,000 per violation
Potential imprisonment

Labor Commissioner Citations

The Labor Commissioner can issue citations for:

Failure to pay minimum wage: $100 per underpaid employee per pay period (first), $250 (subsequent)
Failure to pay overtime: Same as minimum wage penalties
Failure to provide meal/rest breaks: $50 per employee per pay period (first), $100 (subsequent)

Filing Wage Theft Claims

Options for Employees

Method	Description	Advantages
Wage Claim (DLSE)	File with Labor Commissioner	Free, no attorney needed
Civil Lawsuit	Sue in court	Higher potential damages
PAGA Claim	Representative action under Private Attorneys General Act	Recover penalties for all employees
Small Claims	Limited to $10,000	Quick, informal process

Statute of Limitations

Claim Type	Time Limit
Unpaid wages	3 years from when wages were due
Wage statement violations	1 year
Waiting time penalties	3 years
PAGA claims	1 year
Breach of written contract	4 years

Required Proof

Employees should gather:

Time records (personal records, apps, calendars)
Pay stubs and wage statements
Employment contracts and offer letters
Company policies and handbooks
Witness statements from coworkers
Communications about work hours

Employer Prevention Strategies

Time and Attendance Systems

Modern workforce management prevents wage theft by:

Feature	Protection
Accurate time capture	Eliminates disputes over hours worked
Automated break tracking	Ensures meal/rest periods are recorded
Overtime alerts	Prevents unauthorized or unpaid overtime
Geofencing	Verifies work location for pay calculations
Audit trails	Creates documentation for compliance

Payroll Practices

Best Practice	Implementation
Regular audits	Review payroll for accuracy monthly
Correct classifications	Audit employee classifications annually
Proper overtime calculation	Include all forms of compensation in regular rate
Timely payments	Ensure all wages paid by required deadlines
Accurate wage statements	Verify all required information is included

Policy and Training

Written Policies: Clear policies on timekeeping, breaks, and overtime
Manager Training: Train supervisors on wage and hour requirements
Employee Communication: Educate workers on their rights
Complaint Procedures: Establish channels for reporting concerns
Regular Reviews: Update policies as laws change

Common Wage Theft Scenarios by Industry

Restaurant and Hospitality

Violation	Example
Tip theft	Manager takes portion of tip pool
Off-the-clock sidework	Servers do prep work before clocking in
Meal break violations	Staff eat while working
Uniform costs	Employee pays for required uniform

Retail

Violation	Example
Opening/closing work	Employees work before/after store hours
Bag checks	Time spent in security checks not paid
Training	Orientation time not compensated
Commission errors	Commissions not included in overtime rate

Construction

Violation	Example
Travel time	Not paying for site-to-site travel
Tool purchases	Requiring workers to buy tools
Misclassification	Treating employees as subcontractors
Piece rate errors	Not paying separately for breaks

Healthcare

Violation	Example
Automatic meal deductions	Deducting for breaks not actually taken
On-call time	Not compensating properly for on-call hours
Training time	Mandatory training unpaid
Rounding abuse	Shift start/end times rounded against employee

Protection Against Retaliation

California strongly protects employees who report wage theft:

Labor Code 98.6 Protection

Employees are protected when they:

File wage claims with the Labor Commissioner
Report violations to supervisors
Discuss wages with coworkers
Testify in wage and hour proceedings

Presumption of Retaliation

If adverse action occurs within 90 days of protected activity:

Rebuttable presumption that the action was retaliatory
Employer must prove legitimate business reason
Burden shifts to employer

Remedies for Retaliation

Reinstatement
Back pay
Up to $10,000 in penalties per employee
Attorney's fees

See Retaliation and Whistleblower Protection for more information.

Self-Audit Checklist for Employers

Area	Audit Question
Minimum wage	Are all employees paid at least the applicable minimum wage?
Overtime	Are non-exempt employees paid 1.5x/2x for overtime hours?
Meal breaks	Are meal periods documented and premiums paid when missed?
Rest breaks	Are rest periods provided and paid?
Wage statements	Do pay stubs include all required information?
Time records	Are all hours worked accurately captured?
Classifications	Are employees properly classified as exempt/non-exempt?
Deductions	Are all payroll deductions legal?
Final pay	Are terminating employees paid on time?
Tips	Are tips properly allocated without employer taking a share?

Preventing wage theft protects employees' rights while shielding employers from significant legal and financial liability.