Back Pay: Everything You Need to Know
Back pay is considered payment for work that was done in the past but has not been received.
What is Back Pay?
Back pay doesn't just mean money that has been withheld based on the amount of hours that have been worked. It also can be a pay increase that was not honored or a bonus that was never received. Additionally, if a worker was prevented from completing work for a particular reason he or she could be owed back pay if wages were withheld.
If an employee has been discharged or fired unlawfully, that employee could be due back pay because they were being illegally prevented from doing their work. Back wages are typically determined by the date an employee was terminated and the date a judgment was received.
The Fair Labor Standards Act (FLSA) is enforced by the Wage and Hour Division of the Department of Labor. It codifies standards and sets into law labor practices governing minimum wage, overtime pay, child labor and more. It also empowers the Department of Labor to enforce the FLSA in regard to recovery of back pay including unpaid wages or overtime.
Other laws such as the Service Contract Act and the Davis-Bacon Act have requirements regarding minimum wage and back pay for contract employees receiving federal funding. The Wage and Hour Division of the Department of Labor is tasked with the responsibility of enforcing the laws and provisions found in the FLSA, Davis-Bacon and the Service Contract Act.
There are several remedies for employees who are the victim of wage violations. A civil suit may be filed by an employee or former employee. They may also file a claim with the Department of Labor and request an investigation. If the Wages and Labor Division determines that a violation has occurred the employer may be forced to pay restitution under the Fair Labor Standards Act.
To Whom Do You Report Any Unpaid Wages and Recover Back Pay?
There are several remedies for recouping unpaid wages. You can bring a civil suit yourself but the Fair Labor Standards act empowers the US Department of Labor to act on your behalf to recover your lost wages. If the Wages and Hours Division of the Department of Labor determines that an employee owes you back pay but refuses to pay the Secretary of Labor can file suit to force them to pay. If you are found to be in the right you are entitled to your back pay and an equivalent amount in liquidated damages. Liquidated damages are additional money paid to you. So, for example, it's found that your employee owes you $1000, they may also be forced to pay you an additional $1000 in liquidated damages.
Employees are also entitled to file a separate civil suit against their employer. This suit can include any back pay owed, court costs and attorney fees. Benefits may be included as well at the request of the employee or their attorney.
While an employee can bring their own suit against an employer they may not do so if they have received a judgment or money under the supervision of the WHD. They may also not bring a suit if the Secretary of Labor has done so already.
Depending on the intent of the employer there is either a two or three year statute of limitations when filing a claim for back pay or unpaid overtime. If the back pay owed was not withheld willfully than the statute of limitations is two years. If the money owed was withheld willfully, that is done overtly or intentionally, then the statute of limitations is three years.
Investigations conducted by the Wage and Hour Division are broken down into three main steps. While the Department of Labor sometimes conducts their own investigations into companies or groups concerning back pay, in most instances it will be you that initiates the claim. You will be required to give the WHD pertinent information about yourself and your employer.
This information will include the names of all parties, their titles and your address, phone and other contact information as well as that of your employer. You will likely be asked to provide corroborating documents. These documents can take the form of pay stubs, time sheets, logs of hours worked, tax returns and more. All of this information as well as your identity is completely confidential.
While your employer cannot fire you or otherwise discriminate against you for any claim that you make against them the Department of Labor will not reveal your identity unless you give them permission to do so and only when it's necessary to pursue the allegation.
The second phase of an investigation from WHD will include them sitting down with your employer to determine if any legal exemptions exist regarding the business or the employee. They will also request payroll records, time cards and other information that they deem pertinent to the investigation.
This will be followed up with one on one interview conducted with employees to verify any records and determine their validity. Though interviews typically occur at the place of employment an employee can request an alternate venue. This can be anywhere from the employee's home to a mail-in interview where the employee receives a set of written questions and replies through the Post Office.
After the Department of Labor has completed collection and compiling all the facts they will decide as to whether the employer wrongfully withheld wages from their employee. If WHD determines that they do in fact owe back wages the company will be asked to pay the employee in full and will be supervised by the department to ensure that they do.
If the unpaid wages were due to termination deemed to be discriminatory or otherwise unlawful the employer may be required to rehire that employee or offer some type of relief. The FLSA looks at violations in two different ways, willful or not. In either case penalties may be assessed over and above a judgment found for the employee.
Violating wage laws are subject to up to $1000 in civil penalties. While willful violations are subject to fines that can reach $10,000. Willful violations of the Fair Labor Standards Act can also result in criminal prosecution and multiple convictions can result in imprisonment.
Back Pay Owed Due to a Wrongful Termination
Wrongful termination is one reason that an employee may claim that they are owed back wages. Unwarranted or wrongful dismissal may lead to a claim by an employee that they are due back pay for not only salary but benefits as well. Most employees in the United States are "at will" which means they can be fired at any time, for any reason or even no reason at all.
Wrongful termination can still apply to at will employment if they firing occurred as retribution or an employee feels that they have been discriminated against. In addition to receiving a monetary judgment for the time they were not allowed to work they may also be reinstated to their previous position within the company.
An employee may not be considered "at will" if they have a written contract and were terminated by the employer before the contract expired. If the employer was found to be in violation of the contract than they employer may owe back pay under the Fair Labor Standards Act.
Wrongful termination suits can take years to resolve, sometimes they can take years to conclude. Because of this some companies may decide it is in their best interest to settle with the employee. In this case, the employer and employee will come to a mutually agreed upon settlement and the legal case will cease to move forward.
To protect against large settlements for back pay or wrongful termination many employees will purchase liability insurance. These insurance policies can mitigate the risk involved with claims from an employee that claims his rights were violated or wages were withheld. Liability insurance can also protect the employer against other employee related concerns such as sexual harassment or discrimination.
What You Should Know About Back Pay and Social Security Disability
Past Due Benefits from Social Security Disability are also another form of back pay that may be owed to you. Rather than money owed to you by an employer it is the money that is owed to you by the Social Security Administration based on the time that you initially applied for benefits and the date you are approved for those benefits.
When you are approved for Social Security Disability (SSDI) your benefits may be retroactive but they will not go back to the initial application date. There is a five-month waiting period to receive benefits through SSDI. If you have waited longer than a few months you may be eligible for past due benefits. If the total amount is less than a few thousand dollars this will be paid to you in one lump sum when you start receiving benefits. If it is a larger amount it may be broken up into three separate payments. It can take months and sometimes even up to two years to receive benefits.
Supplemental Security Income (SSI) is another form of Social Security benefits. These benefits are eligible for past due benefits, or back pay, starting one month after filing a claim. SSI benefits differ from SSDI benefits in that they are designed for low income beneficiaries with little or no work history. SSI only takes your income and savings into account and is not based on your work history.
What About the Date of Disability?
It's important to establish the onset date of your disability when applying for SSI benefits. This is the Alleged Onset Date (AOD) and is the day that the applicant claims that the inability to work began. This will need to be backed up with evidence such as medical records and the person's work history.
While establishing this date for SSI back pay for Social Security will not begin until a month after the claim has been made so when applying or SSI benefits it's important to do so as early as possible. When applying for SSDI benefits it is more important to establish the Alleged Onset Date as pack back will be dependent on that date. This will be determined either by an administrative law judge or a disability examiner.
If you have a protective filing date that precedes the date you applied for disabilities it can help you to receive a larger amount of benefit and a larger pay back based on the dates that are assessed. Social security will pay back benefits to the date of the application if you do not have a protective filing date. Depending on the specific situation it can take months to years to navigate the system. Often times those waiting for benefits accrue a lot of debt which makes the determination of the start date critical. Most of those approved won’t see any payments until months or possibly years down the road.
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