Unpaid Wages: The Complete Recovery Guide

Wage theft costs American workers billions of dollars each year. The U.S. Department of Labor's Wage and Hour Division enforces federal wage laws and investigates employer violations. Whether it's unpaid overtime, withheld final paychecks, or misclassification schemes, workers have powerful legal tools to recover what they're owed - often with additional penalties and interest.

This guide covers the types of wage theft, federal and state protections, final paycheck deadlines, employee misclassification, how to recover unpaid wages, and retaliation protections for workers who assert their rights.

Types of Wage Theft

Wage theft takes many forms:

Unpaid Hours

• Not paying for all hours worked
• Requiring off-the-clock work
• Automatic meal deductions when you worked through lunch
• Not counting setup or cleanup time
• Rounding time in employer's favor

Overtime Violations

• Not paying time-and-a-half after 40 hours
• Misclassifying employees as exempt
• Averaging hours over two weeks
• Paying comp time instead of overtime

Final Paycheck Issues

• Not paying all earned wages upon termination
• Withholding last paycheck without cause
• Not paying accrued vacation time
• Delaying final payment

Other Violations

• Unpaid commissions
• Illegal deductions from pay
• Not reimbursing business expenses
• Tip theft or improper tip pools
• Minimum wage violations

Federal Protections (FLSA)

The Fair Labor Standards Act provides baseline protection:

• Minimum wage: Currently $7.25/hour federally
• Overtime: 1.5x after 40 hours per week
• Damages: Double unpaid wages (liquidated damages)
• Attorney fees: If you prevail
• Statute of limitations: 2 years (3 for willful)

State Protections

State laws often provide additional remedies:

States with Strong Wage Laws

• California: Daily overtime, waiting time penalties, expense reimbursement
• Illinois: 2% per month penalty on unpaid wages
• New York: 100% penalty for wage theft
• Massachusetts: Treble damages mandatory
• Washington: Double damages plus interest

Final Paycheck Deadlines

When you quit or are fired, states have different rules:

Immediate Payment Required

• California: Same day if fired, 72 hours if quit
• Colorado: Immediately if fired
• Montana: Immediately if fired

Next Payday

• Most states: By next regular payday
• Texas: Within 6 days if fired
• Florida: No specific law (next payday)

The "Exempt" Employee Trap

Many employers wrongly classify workers as "exempt" from overtime. To be exempt, employees must:

• Earn at least $684/week salary ($35,568/year)
• Perform executive, administrative, or professional duties
• Have authority matching the exemption

Red Flags for Misclassification

• Called "manager" but spend most time on non-management tasks
• Don't supervise other employees
• Don't have authority to hire/fire
• Paid salary but treated like hourly worker

How to Recover Unpaid Wages

Step 1: Document Everything

• Keep records of hours worked
• Save all pay stubs
• Document any agreements about pay
• Keep emails about compensation
• Note witnesses who can verify your hours

Step 2: Calculate What You're Owed

• Add up all unpaid hours
• Calculate overtime (hours over 40 × 1.5 × rate)
• Include any unpaid commissions or bonuses
• Consider penalties your state allows

Step 3: Send a Demand Letter

A formal demand letter should include:

• Dates of unpaid work
• Specific amounts owed
• Citation to applicable laws
• Notice of penalties available
• Deadline to pay (7-14 days)

Step 4: File a Complaint or Lawsuit

If the employer doesn't pay:

• Department of Labor: File complaint with federal WHD
• State labor board: Often faster than federal
• Small claims court: For amounts under state limit
• Private attorney: May take case on contingency

Retaliation Protection

It's illegal for employers to retaliate for:

• Filing wage complaints
• Participating in investigations
• Discussing wages with coworkers
• Refusing to sign illegal waivers

Common Employer Defenses

And how to counter them:

• "You're exempt": Exemption requirements are strict; most people aren't
• "You agreed to comp time": Illegal for non-exempt private employees
• "You signed a waiver": Wage waivers are generally unenforceable
• "It's been too long": You usually have 2-3 years

Statute of Limitations

• Federal FLSA: 2 years (3 if willful)
• State laws: Typically 2-6 years
• Illinois: 10 years under IWPCA

Wage and Hour Resources

These federal and state agencies can help you recover unpaid wages:

• DOL Wage and Hour Complaint — File a complaint with the federal Wage and Hour Division for FLSA violations
• State Labor Agency Directory — Find your state's labor department for state-specific wage claims
• National Labor Relations Board — File complaints about retaliation for discussing wages or organizing
• EEOC — For wage discrimination based on sex, race, or other protected characteristics

Frequently Asked Questions

What are liquidated damages under the FLSA?

Liquidated damages under the Fair Labor Standards Act essentially double your unpaid wages. If your employer owes you $5,000 in back pay, you can recover an additional $5,000 in liquidated damages—for a total of $10,000. This applies unless the employer can prove they acted in good faith, which is a high bar.

Can I file a wage claim if I'm undocumented?

Yes. Federal wage laws protect all workers regardless of immigration status. The DOL does not ask about immigration status when investigating wage complaints, and employers cannot use immigration status as a defense for not paying wages owed.

What if my employer goes out of business before paying me?

You may still have options. Officers and owners can sometimes be held personally liable for unpaid wages. You can file a claim with the state labor board, and if the company is in bankruptcy, file a claim with the bankruptcy court. Wage claims often have priority over other creditors.

How far back can I recover unpaid wages?

Under federal FLSA, the statute of limitations is 2 years for regular violations or 3 years for willful violations. State laws often allow longer—Illinois has a 10-year statute of limitations for wage claims. File promptly to preserve your rights to the maximum recovery.