If you are an employee and your employer started paying you under the table, you may be wondering whether it is legal.
Employers may have many reasons why they choose to do this, including avoiding tax obligations and paying for workers’ compensation insurance. However, paying employees under the table is illegal in California.
If you believe your employer is paying you under the table or has failed to adequately compensate you for hours of work, contact an experienced employment attorney today.
Is It Illegal to Get Paid Under the Table?
In California, failure to report wages to any government agency is illegal. Therefore, by paying employees “under the table,” your employer is effectively avoiding paying required taxes. Your employer is required to withhold from your cash payments and pay their share for the following:
- Social Security and Medicare (FICA);
- State and federal income taxes;
- Unemployment insurance (FUTA);
- State disability insurance (SDI);
- State unemployment insurance (SUI);
- Workers compensation;
- Overtime compensation; and
- Some other employment benefits.
If your employer fails to pay these when paying you with cash, they are potentially liable for these delinquencies. An employer’s failure to pay the required withholdings may result in several penalties.
Federal tax penalties include requiring employers to pay all an employee’s unpaid liabilities. Penalized employers may also be responsible for paying $5,000 per misclassified employee plus 1.5% of the employee’s federal income tax liability and 20% of the employee’s social security withholdings.
Additionally, criminal prosecution may occur. Employers risk investigation by the IRS. Tax evasion defendants are known to serve time for their offenses.
Furthermore, an employee paid under the table also accepts some risks. These employees risk losing their eligibility for Social Security Disability benefits and workers’ compensation benefits.
What If My Employer Pays Me in Cash?
As a rule, it is not illegal for your employer to pay you in cash. However, it may complicate the process of paying an accurate amount of payroll taxes. California Labor Code Section 226(a) requires the following information on all employee itemized pay statements:
- Gross wages earned;
- Total hours worked (not for salaried employees);
- Piece rate earned (if applicable);
- All deductions;
- Net wages earned;
- Pay period;
- Name of employee and last four digits of Social Security number;
- Name and address of employer; and
- Applicable hourly rates.
Therefore, while providing payroll in cash is not illegal in California, the law still requires that employers comply with all employment laws when making cash payments. Employers must maintain accurate records, as paying employees with cash eliminates a paper trail.
In summary, if an employer decides to take on the risk of paying employees in cash, they must comply with all employers’ requirements in California.
Can I Sue My Employer for Paying Me Under the Table?
If your employer paid you under the table, you might be entitled to damages under California Labor Code Section 226. Employers failing to properly comply with requirements regarding itemized pay statements may defraud employees out of proper hourly and overtime compensation.
Employers may be liable for the following.
A successful wage claim against an employer awards the employee the wages the employer failed to pay. This award includes any overtime pay. If you earned any overtime pay but your compensation equaled regular pay, you are entitled to the difference between your overtime pay rate and your standard pay rate.
You may be awarded interest on the unpaid wages at a rate set by law. Instead of interest, you may also be able to earn liquidated damages. Liquidated damages are set to compensate you for losses that are difficult to quantify.
In addition to unpaid wages, California law requires employers to pay “waiting time” penalties equal to 30 days of their unpaid wages. The waiting time penalty is equal to the employee’s daily pay rate for each day the wages remain unpaid.
Lastly, your employer may also have to pay your attorney fees if you win your wage and overtime case.
How to Report an Employer for Paying Under the Table
Contact a qualified attorney to discuss your employment rights. You work hard and are entitled compensation for every hour you’ve worked. Contact Workplace Rights Law Group to analyze your case.
Our attorneys understand that each case is unique. Each client’s priorities and needs are different. We provide each of our clients with the attention they deserve in pursuing their claim.
You deserve to have an employer take responsibility for properly compensating employees. Don’t let an employer dissuade you from pursuing your claim. Report your employer for paying you under the table and get the compensation you deserve.
To schedule your free case review, contact Workplace Rights Law Group today!