Is It Legal in California for Employers to Pay Under the Table?
Concerned clients periodically contact our employment lawyers because they are worried about the consequences of being paid under the table.
This article explains an employee’s rights in this situation.
If you are ready to talk to an attorney about your specific circumstances, contact Starpoint LC, Attorneys at Law, today.
What It Means to Pay Wages Under the Table
Many people receive their pay under the table, meaning the employer fails to report the wages to any government agency.
Keeping the payment “off the books” is another way to say the same thing. Usually, the employer will pay cash so that the payment is untraceable.
Why Some Employers Pay Under the Table
Employers typically pay under the table to save money. By not reporting your wages, your employer may avoid paying their share of:
- State and federal income tax,
- Workers’ compensation insurance,
- Overtime pay,
- Social Security and Medicare withholdings,
- Unemployment insurance,
- State disability insurance,
- State unemployment insurance, and
- Health and retirement benefits.
Employers may also be motivated to keep payments off the books so that they can hire illegal immigrants.
And of course, criminal enterprises pay under the table to avoid alerting the government to the illegal nature of their business.
When Employees Want Under the Table Pay
There are instances when employees agree to under the table pay for their own reasons.
They may seek to save money by avoiding taxes, or they may not legally be allowed to work.
But there are downsides. If your employer pays you less than minimum wage, refuses to pay overtime, or engages in other labor violations, you are left in a tough situation.
Is It Illegal to Pay Someone Under the Table?
In most circumstances, it is illegal to pay employees under the table.
The Internal Revenue Service generally requires employers to withhold at least federal income tax, social security, and Medicare from their employees’ wages.
California requires most employers to contribute to unemployment insurance and the employment training tax as well as withhold state disability insurance and personal income tax.
Failure to comply with these requirements is tax evasion, which is a crime.
As described in California Labor Code section 226(a), employers must also provide employees with a statement of the following for each wage payment:
- Gross wages earned;
- Total hours worked;
- The number of piece-rate units earned, if applicable;
- All deductions;
- Net wages earned;
- The pay period;
- The employee’s name and the last four digits of the employee’s social security number;
- The employer’s name and address; and
- The hourly rates in effect during the pay period.
So while paying in cash is not itself illegal, failing to provide the accompanying statement does violate the law.
Furthermore, this documentation allows employees to comply with their own tax reporting obligations and to verify that they received all payments due to them.
Without these deductions and statements, employees risk losing eligibility for Social Security Disability benefits, Medicare, and other benefits.
Employers who pay employees under the table also frequently violate the federal Fair Labor Standards Act (FLSA), which sets the federal minimum wage and overtime requirements.
Thus, these employers may violate state or federal law.
When Is It Legal to Pay Under the Table?
Sometimes making unreported payments is legal. The money children earn babysitting or doing odd jobs generally may be paid under the table.
Likewise, it typically is legal to pay under the table for those earning amounts under the minimum reporting requirements set by the government.
What to Do When Your Employer Is Providing Under the Table Pay
An attorney from Starpoint LC, Attorneys at Law, will meet with you one-on-one to discuss your unique situation and rights.
We know every client’s circumstances and needs are different. Our core values are empathy, integrity, and commitment, and we are here to help you.