Wage theft is an umbrella term for any practice where an employer fails to pay a worker the full wages they are legally owed. The Economic Policy Institute estimates wage theft costs U.S. workers $50 billion+ per year — more than all other property crimes combined.
Common forms of wage theft affecting tipped workers:
- Tip skimming: managers taking a share of tips or tip pools (always illegal under FLSA)
- Sub-minimum wage: when tips + direct wage don't equal the full minimum wage and the employer doesn't make up the difference
- Off-the-clock work: requiring sidework before clocking in or after clocking out
- 80/20 violations: paying tipped wage for excessive sidework hours
- Illegal deductions: charging workers for walkouts, broken dishes, cash-drawer shortages, or uniform costs that bring wages below minimum
- Misclassification: treating an employee as a 1099 contractor to avoid FICA matching, overtime, etc.
For tipped and gig workers specifically:
- Federal credit card processing fee deductions on tips are limited to the proportional fee on the tip itself, not blanket deductions
- Service charges paid to workers must be paid as wages, not held back by the employer
- Failure to provide notice of tip credit is itself a violation
Remedies: workers can recover back wages, liquidated damages (often double the back wages), attorneys' fees, and sometimes additional penalties. Statute of limitations: 2 years (3 if willful) federally; varies by state.