Wages & Hours

What You Will Learn

• How to determine if you have been misclassified as an exempt employee and cheated out of overtime pay.
• The difference between federal and state laws on minimum wage and overtime, and why your state law is often stronger.
• How to spot and fight back against Wage Theft, one of the most common forms of workplace injustice.

The 30-Second Answer

The Story

Michael Thompson loved being a chef. He worked at a popular downtown restaurant, and the energy of a busy Saturday night service was a thrill. But his paychecks never seemed to add up. He regularly worked 50 or 60 hours a week, but he never saw a dime of overtime pay. When he asked his boss, the owner, about it, the owner just laughed. "You are a chef, Michael. You are a professional. You are on salary. No overtime for you." Michael was not so sure. He was paid a flat salary of $800 per week. He had creative control in the kitchen, but he did not have the power to hire or fire anyone. He spent 90% of his time cooking on the line, just like the hourly cooks. He started keeping a private log of his hours in a small notebook. After two months, he had a clear record: he was consistently working 55 hours a week but was being paid for 40. He calculated the unpaid overtime. It was thousands of dollars. His boss was not treating him like a professional; he was stealing from him. If you are working, you must be paid. There are no exceptions.

The Action Plan

Keep a Personal Time Log. Do not rely on the

1. 1company's time clock. Use a notebook or a notes app on your phone. Every day, write down the time you start work, the time you leave, and the length of your unpaid break. This is your most crucial piece of evidence.
2. 2Gather Your Pay Stubs. Your pay stubs are a record of what the employer claims they paid you. Keep every single one. Analyze Your Duties. Look at the "duties tests" in this chapter. Do you really fit the definition of an exempt executive, administrative, or professional employee? Write down a list of your daily tasks. Complain in Writing. If you believe you are being misclassified, send a formal, written complaint to HR and your manager. Use the specific phrases that trigger legal protections: "I am writing to express concern that I may be misclassified as an exempt employee under the Fair Labor Standards Act and am not receiving overtime pay that I am owed." Contact the Department of Labor. You can file a wage complaint with the U.S. Department of Labor (DOL) or the Illinois Department of Labor (IDOL). They can investigate and force the employer to pay you back wages.

The Details

The Basics: Minimum Wage and Overtime

The Fair Labor Standards Act (FLSA) is the federal law that sets the rules for wages. ⚠ State Variation: Minimum wage rates, overtime rules, and wage payment laws vary significantly by state. Many states have higher minimum wages and stronger protections than federal law. Always check your state's specific wage laws. In Illinois, you also have the protection of the Illinois Minimum Wage Law and the Illinois Wage Payment and Collection Act (IWPCA). Minimum Wage: As of 2024, the federal minimum wage is $7.25 per hour. The Illinois minimum wage is $15.00 per hour (effective January 1, 2025). Your employer must pay you whichever rate is higher. Overtime: For any hours you work over 40 in a single workweek, your employer must pay you 1.5 times your "regular rate of pay." They cannot average your hours over two weeks. The Federal Tip Credit: What Tipped Workers Must Know The tip credit is one of the most commonly misunderstood and abused wage provisions in American employment law. Under the FLSA, employers of "tipped employees" (those who customarily and regularly receive more than $30 per month in tips) are permitted to pay a direct cash wage as low as $2.13 per hour, provided that the employee's tips bring their total hourly compensation up to at least the federal minimum wage of $7.25. The difference between $2.13 and $7.25 is the "tip credit" that the employer claims. However, this arrangement comes with strict legal requirements that employers routinely violate:

Notice Requirement: The employer must inform the employee, in advance, about the tip credit provisions, including the amount of the direct cash wage, the additional amount claimed as a tip credit, that the tip credit cannot exceed the amount of tips actually received, and that all tips are the property of the employee. The Make-Up Rule: If an employee's tips plus the direct cash wage do not equal at least the full minimum wage for any workweek, the employer must make up the difference. Many employers fail to do this. The 80/20 Rule (and its evolution): Under DOL guidance, if a tipped employee spends more than 20% of their time on non-tipped duties (like rolling silverware, cleaning, or doing prep work), the employer cannot claim the tip credit for that time and must pay the full minimum wage. The Biden DOL formalized a version of this rule, though enforcement may vary. The principle remains: you cannot be paid $2.13 an hour to mop floors. Tip Pooling Restrictions: Tips are the property of the employee. Employers who do not take a tip credit may require tip pooling among all employees, but employers who do take a tip credit may only require pooling among customarily tipped employees (servers, bartenders, bussers). Managers and supervisors may never participate in a tip pool. ⚠ State Variation: Many states have eliminated or restricted the tip credit. In Illinois, the tip credit allows employers to pay 60% of the state minimum wage ($9.00/hour as of 2025) to tipped employees, which is significantly higher than the federal $2.13. Seven states (Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington) have eliminated the tip credit entirely, requiring employers to pay the full minimum wage before tips. Check your state's law. The Biggest Issue: Exempt vs. Non-Exempt This is where most wage theft occurs. Non-exempt employees are protected by minimum wage and overtime laws. Exempt employees are not. To be legally exempt, an employee must meet three tests:

Salary Basis Test: Be paid a fixed salary that does not change based on the hours worked. Salary Level Test: Earn a salary above a certain amount ($35,568 per year under federal law as of the 2019 DOL regulations). Note: This threshold is a contested, shifting area of law. In November 2024, a federal judge vacated the Biden administration's DOL rule that would have raised this threshold significantly, reverting to the 2019 regulations. The $35,568 figure is technically current, but this area is subject to ongoing legal and regulatory change. Consult an attorney to assess your specific situation. Duties Test: For the exemption to be legal, your main job responsibilities must clearly fall into a specific category like Executive, Administrative, or Professional. An employer must prove that all three tests are met. Your job title does not matter; your actual, day-to-day duties are what count. Michael, the chef, is likely misclassified. His primary duty is cooking (manual labor), not management. He does not have the power to hire or fire. He is a skilled craftsman, but he is not an exempt executive or administrative employee. He is owed overtime. THE TOOLKIT The Toolkit EXEMPTION WHO IT COVERS COMMON (PRIMARY DUTY) MISCLASSIFICATION Executive Managing the enterprise; directing the work of at least two other employees; has authority to hire/ fire. The "Assistant Manager" who spends 90% of their time working a cash register. Administrative Office or non-manual work directly related to management or business operations; involves discretion and independent judgment. The administrative assistant who performs routine clerical tasks and follows established procedures. Professional Work requiring advanced knowledge in a field of science or learning (Learned Professional) or invention, imagination, originality, or talent (Creative Professional). The graphic designer who primarily does production work and does not have significant creative authority. Remember: T.H.E.F.T. A mnemonic for spotting wage theft: LETTER STANDS THE ACTION FOR T Time Are you accurately recording all your work time? H Hourly Rate Is your hourly rate at least the state minimum wage? E Exempt? Do you truly meet all three tests for being an exempt employee? F Forty Hours Are you being paid 1.5x for all hours over 40 in a week? T Tips/ Deductions Is your employer illegally taking your tips or making improper deductions?

Five Real-World Scenarios