Back Pay Laws

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 What Is Back Pay?

Back pay may also be referred to as back wages, or retro pay. The term back pay describes wages that an employee should have received, but for some reason did not. This pay would be any money that the employee was entitled to receive according to their salary or to their hourly wage amount.

There are many circumstances in which the payment of back pay may be necessary. Back pay could be the fault of either the employee or the employer, or sometimes both at once. Additionally, the cause for the need for back pay may be either something done intentionally, or it may have been an honest mistake.

Some common examples of situations which would necessitate back pay include:

  • Mathematical calculation mistakes made by the employer’s human resources department
  • Issues associated with employee wage garnishment
  • Missed final payments that should have been made if the employment was terminated by the employer, or if the employee voluntarily left the company
  • Disputes between the employer and the employee in terms of overtime pay rates
  • Disputes between the employer and the employee concerning logged working hours
  • Disputes between the employer and the employee in terms of paid leave of absence or days off, or vacation pay
  • Pay increases that should have been applied
  • Sales commissions that were not paid
  • Bonuses that were not paid
  • Worker misclassifications (i.e, incorrectly classifying an employee as an independent contractor)

Who Is Entitled to Receive Back Pay?

One of the most common disputes associated with back pay concerns who is actually entitled to receive such payments. Generally speaking, both hourly and salaried employees are entitled to receive back pay. They are entitled to back pay whenever they lose wages and/or benefits as a result of simple mistakes or wrongful employment practices. Any kind of employee may have a valid dispute regarding overtime.

Most back pay awards are made because of wrongful termination, either due to a hostile work environment or because of harassment. These are known as wrongful employment practices.

Some of the most common examples of wrongful employment practices include:

  • Employment discrimination in the termination of an employee
  • Denying promotions which were explicitly promised
  • Withholding qualified overtime pay
  • Withholding wages to stop an employee from reporting misconduct, or as punishment for reporting previous misconduct

Employees may also be entitled to back pay when an employer retroactively increases wages and benefits, and their paychecks did not reflect this.

In cases in which the employer disputes the number of hours an employee worked, or how much they should be paid, it can be considerably difficult to determine if the employee is actually entitled to back wages.

An example of this would be overtime. While time and a half is generally accepted as the correct pay for overtime work in most states, this is not always the case. Additionally, there may be outside agreements (such as employment contracts) that will influence if back pay is owed for overtime pay, and how to calculate exactly how much back pay is owed.

To expand on this example, suppose that you were instructed to work ten hours of overtime. Your boss verbally confirmed that you would be paid double your normal hourly rate. You then worked twelve overtime hours, but those hours were not properly recorded. Your check only reflects ten hours of overtime, and at the lower rate of time and a half.

You can file a dispute regarding your overtime situation. However, the following issues would most likely need to be considered in any legal proceedings in order to determine whether any back pay is appropriate:

  • If the overtime hours were not logged, it will be difficult to prove whether you worked ten or twelve overtime hours. Testimony of witnesses can be invaluable
  • The agreement for double time pay was not put into writing, and you will have to find a way to demonstrate that you were promised double time
  • Whether there is any history of overtime pay handled in the similar manner, and whether the full amount was disbursed in those past instances

If you win a lawsuit against your employer for back pay issues, you will be entitled to receive the full amount of the money that is owed you.

Note that in addition to back wages, an employee may actually be entitled to other amounts. An example of this would be if your case is based on wrongful termination, or discrimination. You could be entitled to punitive damages (damages in an amount large enough to punish your employer) and the recovery of the cost of the lawsuit, including attorney’s fees.

How Can Back Pay Be Recovered?

There are several different ways in which back pay may be recovered. One way is to file a personal lawsuit. You could recover any money that is owed you. An example would be if an employee was entitled to a salary increase with a promotion, but the employer doesn’t receive that money for three months.

A claim may be filed with the Wage and Hour Division (“WHD”) of the Department of in order to ensure that the back pay is actually awarded. The WHD is a federal office, and most of its cases involve issues associated with wage and hour disputes.

Back pay can also be ordered under the FLSA, or Fair Labor Standards Act, under different federal contract labor statutes. The following methods are generally how the FLSA provides for recovering unpaid minimum and/or overtime wages:

  • As previously mentioned, the Wage and Hour Division supervises the payment of back pay
  • The Secretary of Labor may bring a lawsuit against the employer for back wages
  • The affected employee may file a private lawsuit for the back pay they are owed. They may also be entitled to be paid for their attorney’s fees and court costs
  • The Secretary of Labor may request an injunction in order to restrain a party from violating the FLSA. This could include the unlawful withholding of proper minimum wage and overtime pay.

According to the FLSA, employees are entitled to receive at least the minimum wage in back pay. What this means is that they may receive no less than the federally mandated minimum wage per hour of work that has necessitated back pay. In addition, if the employee has been wrongfully denied overtime pay, they are entitled to receive at least the standard overtime pay rates.

Generally speaking, an employee cannot bring a private lawsuit if they have been paid back wages under the authority of the Wage and Hour Division. Additionally, if the Secretary of Labor has previously filed suit in order to recover the wages, the affected employee usually cannot file their own lawsuit.

It is also important to note that there is a two year statute of limitations for filing a case to recover back pay. However, if the case involves intentional violations, there is a three year statute of limitations.

When Should I Get My Back Pay?

State laws regarding the speed of paying employees back pay vary. This is a good reason to talk to a lawyer, who will know the rules in your state.

In general, employers are required to pay all the wages to which an employee is entitled by the next scheduled pay day. If there is a legal dispute regarding the payment of back wages, payment could be delayed until the issue is resolved.

Do I Have to Pay Taxes on Back Pay?

If you would have received the true amount of compensation that was due when it was due, it would have been taxed just as other wages. As such, back pay is subject to taxes in the year it is eventually paid.

Do I Need an Attorney for Issues with Back Pay?

Refusing to pay back pay that is owed is considered to be a wrongful employment practice. If you are experiencing issues related to back pay, you should consult with an experienced local employment lawyer. Because many laws associated with back pay vary from state to state, working with a local back pay attorney is advised so that you receive the most relevant legal advice.

An experienced and local employment attorney can help determine whether you are owed back pay, and if so, how best to pursue that payment. Finally, an attorney will also be able to represent you in court, as needed, while protecting your legal rights as a worker.

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