Common wage theft schemes and what to do if you’re a victim in New Jersey

This content was originally published by Documented, an independent, non-profit newsroom dedicated to reporting with and for immigrant communities in New York City. It’s republished here with New Jersey-specific information as part of a collaboration between Documented and The Jersey Bee. Two articles were combined to produce this resource, and can be accessed here and here.

Governor Murphy signed the Domestic Workers’ Bill of Rights into law in July 2024, expanding labor protections for New Jersey’s domestic workers after years of advocacy from labor groups. According to the National Domestic Workers Alliance, many of the state’s 50,000 domestic workers have experienced wage theft, denial of breaks, and lack of sick leave.

This guide explains how to identify and avoid common wage theft schemes and what to do if you think your wages may have been stolen. This information below is summarized from Herrmann Law, Pelton Graham LLC, Lipsky Lowe LLP and McInnes Law LLC.

Common forms of wage theft

Paying less than minimum wage

The federal minimum wage for covered nonexempt workers is $7.25 per hour, effective July 24, 2009, as established by the Fair Labor Standards Act (FLSA).

Employers must pay employees regularly receiving over $30 per month in tips $2.13 per hour. However, employers must make up the difference if the tips plus the $2.13 amount is less than $7.25 per hour.

The New Jersey minimum wage is $15.49 per hour for most workers. Employers must pay tipped employees a minimum of $5.26 per hour. The employer must make up the difference if the hourly rate and tips do not equal at least the minimum hourly wage.

There are exceptions, according to the New Jersey Department of Labor and Workforce Development, including “automobile salespersons, outside salespersons, and minors under the age of 18, except for minors working in retail, food service, the first processing of farm products, beauty culture occupations, laundry, cleaning and dyeing occupations, light manufacturing and apparel occupations, and hotel and motel occupations.”

Regardless of your immigration status, New Jersey law protects your rights for all hours worked, overtime in most circumstances, and public work projects.

Stealing tips

FLSA prohibits employers from keeping employees’ tips under any circumstances. Managers and supervisors also cannot keep employees’ tips, including through tip pools.

Drew N. Herrmann, a lawyer advocating for workers’ rights at Herrmann Law, explains that it is illegal for employers to take a portion of employees’ tips or charge an “administrative fee”. The tip pool tactic where employers retain a portion of tips and thus fail to distribute all the tips from the pool to other workers is also unlawful.

Failure to pay or miscalculating overtime

Federal and state law require that the employer pay the employee 1.5 times the worker’s regular rate for each hour beyond 40 in a week. Overtime exceptions could include certain salaried employees who meet New Jersey’s definition of an executive, administrative, or professional workers. 

Herrmann points out that some compensation, including “bonuses, commission payments, reimbursements, inventive payments, pier diems and any other type of compensation”, should be included while determining an employee’s rate of pay to calculate overtime pay. However, not all bonuses count towards overtime pay. Under the Fair Labor Standards Act, bonuses for “attendance” and “quality and efficiency of work” for non-exempt employees must be included to compute overtime pay; an “employee-of-the-month bonus” would not. 

LEARN MORE: Read FAQs about bonuses included in overtime pay for non-exempt employees

It is also possible that the overtime rate of pay may vary from week to week if the employee has multiple components (for example, regular rate of pay, tips, and gratuities) to their wages.

Employee misclassification

Employee misclassification occurs when a worker is hired as an independent contractor when they should be an employee. Employers may use this strategy to avoid complying with minimum wage, overtime pay, social security, tax withholding, and more. It often occurs in the gig economy for jobs like rideshare drivers, freelancers, or event workers.

The “economic reality test” is often applied to determine the employer-employee relationship. The U.S. Department of Labor has listed seven important factors that are considered when evaluating the case. No single factor is determinative.

According to the New Jersey Department of Labor and Workforce Development, a misclassified employee may be entitled to several settlements according to state law, including: 

• “Backpay for unpaid minimum wage, overtime, failure to pay prevailing wage, and other payments due under the NJ Wage & Hour Laws, including reimbursement for any illegal deductions
• Entitlement to the benefits and protections listed above
• Workers can be awarded up to 5% of the worker’s gross earnings over the past 12 months as a penalty for the illegal practice of misclassification
• Reinstatement or correction of discriminatory actions taken in retaliation against an employee making an inquiry or complaint about possible misclassification”

If you believe that you have been misclassified as a worker, you can file a complaint by calling 609-292-2321 or emailing misclass@dol.nj.gov.

Unpaid internships

Some employers try to take advantage of interns by exploiting interns’ production without paying them. The U.S. Department of Labor has developed seven criteria as part of the “primary beneficiary test” to determine whether an intern should be treated as an employee entitled to minimum wage and overtime pay.

Note that the “primary beneficiary test” is flexible, meaning that no single factor in determinative. Courts may assess the case based on its unique circumstances.

Meal breaks

Under FLSA, employers are not required to provide meals or rest breaks. If they do, however, breaks that are less than 20 minutes should be compensated. Meal breaks over 30 minutes are not compensable.

New Jersey only provides a mandatory break law for minors under the age of 18. Minors must be given a 30-minute break after 5 consecutive hours, according to the New Jersey Department of Labor.

LEARN MORE: Read FAQs about wage and hour compliance for workers and employers

What to do if you suspect you are a victim of wage theft

Your employer must pay wages you’re owed even if you stop working. Before you file a complaint, the Department of Labor advises collecting documentation like copies of pay stubs, records of hours worked, or employer practices for your complaint. 

File a complaint with the New Jersey Division of Wage and Hour Compliance in several ways: 

• Online: File your complaint through the division’s online portal. You will need your employment information, contact details, and any supporting documents you may have such as copies of pay stubs or hours worked. You can check the status of your complaint after you have filed online with the confirmation number they provide.
  
  
• By mail: Complete the appropriate form depending on your employment and complaint and mail or fax your form to the New Jersey Department of Labor and Workforce Development, Division of Wage and Hour Compliance, P.O. Box 389, Trenton, NJ 08625. Here is more information on the various forms available:
  • For employees working in New Jersey or working for a New Jersey-based company with complaints about wages, complete the MW-31A form in English or the MW-31S form in Spanish. 
  • If your complaint is about another employment issue, complete the MW-31C form.
  • For healthcare workers who provide direct care, complete the MW-31OT form.
  • For employees working on a construction-related public works project or building services, complete the MW-31B form.
• Anonymously: You can file an anonymous complaint by mail. However, you will not be able to receive information or check the status of the complaint if you file anonymously.

Other resources in New Jersey

The New Jersey Department of Labor and Workforce Development provides labor information including wages and overtime, paid leave and benefits, employer retaliation information, immigrant rights, and safety and health.

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