Back pay is the difference between the pay due to an employee and the amount they received. An employer may owe back pay to a worker for hours worked, or it may be due to a pay increase, promotion, or bonus.
Learn more about when an employer might owe back pay and how you can collect it.
What Is Back Pay?
When an employee hasn't been paid the full amount they are owed, the difference due is called back pay. Back pay is a way for an employer to remedy a mistake in payment or wage violations, whether deliberate or accidental. Salaried workers, hourly workers, freelancers, and contractors are all entitled to back pay.
- Alternate name: Back wages
How Does Back Pay Work?
If an employer withholds a portion of your pay without permission, you are entitled to back pay.
For example, if an employee resigns from a company, they are still owed wages for hours worked and should be paid their final check no later than the usual pay date for the last pay period worked. If not, their employer owes them those wages as back pay.
A common occurrence of back pay involves the misclassification of workers as exempt from overtime laws. However, generally speaking, if a salaried employee earns less than $684 weekly, then they are actually non-exempt and entitled to time-and-a-half of their regular rate of pay for any hours worked over 40. The back pay they are owed would be the difference between their regular rate of pay and the overtime pay they should have received.
In some cases, you might believe you deserve pay that you have not yet received, but your employer disagrees or doesn't want to pay it. You might have to initiate an effort to collect back pay yourself, sometimes through legal action.
It is usually advisable to exhaust all options for directly addressing your concerns with your employer prior to taking legal action.
The Fair Labor Standards Act (FLSA) has provisions for recovering back pay, including for unpaid minimum and overtime wages. You should also check with your state's labor department for information on the laws in your location. When state law differs from federal law, an employer must comply with the standard most protective to employees.
Reasons for Back Pay
There are several possible reasons why a worker might be entitled to back pay.
Unable to Complete the Job
If an employee was unfairly prevented from completing a job for some reason, they might also be eligible to collect back pay. For example, if an employer unlawfully fires an employee, the employee might be due back wages for the time they were not allowed to work.
Change From Hourly to Salary Employment
Sometimes you will receive unexpected back pay from your employer. For example, if you transition from hourly to salaried employment (or the other way around), you might end up receiving some additional pay from your employer based on your prior category of employment.
Retroactive Compensation for a Pay Increase
Union members might be eligible for back pay if there are retroactive stipulations for pay increases when new contract agreements were delayed beyond the expiration date of a prior contract.
Employer Doesn't Pay Minimum Wage
Another common back pay issue involves the failure of employers to pay at least minimum wage to the growing number of workers covered by state minimum wage laws.
Government contract employees who were underpaid under the Davis-Bacon and Related Acts and the McNamara-O’Hara Service Contract Act also may be owed back wages. These laws specify pay and benefit requirements for workers performing on federally funded contracts.
Back pay may also come into play after wrongful termination as the amount of salary and benefits that an employee claims to be owed after being improperly fired. Back pay is usually calculated from the date of termination to the date a claim was finalized or judgment determined.
For example, say a company fired an employee on Dec. 1, 2018. The employee thought that the termination was unwarranted and filed a claim against the company. During the case, it was revealed that the plaintiff's manager had a personal problem with the employee and fired him for reasons other than his conduct and performance. The court required the employer to reinstate the employee and rendered the judgment on June 1, 2020. The employer is liable for back pay for one-and-a-half years.
How to Collect Back Pay
The FLSA provides several methods to recover unpaid minimum and overtime wages.
- The Wage and Hour Division or the Secretary of Labor might supervise the payment of back wages.
- The Secretary of Labor might sue for back wages and damages.
- The Secretary of Labor can prevent an employer from violating the FLSA, including unlawful withholding of wages, by obtaining an injunction.
- An employee may sue for back pay and damages plus attorneys' fees and court costs.
If you received back wages under the supervision of the Wage and Hour Division, or if the Secretary of Labor already filed suit to recover the wages, then you cannot file suit under the FLSA.
There is a two-year statute of limitations on recovery of back pay, extended to three years in the case of willful violations. (Willful violation means the employer intentionally disregarded or was indifferent to the requirements of workplace policies and laws.) If you don't address the issue within the limitation period, you won't be able to file suit.
Keep documentation of your payments, including copies of your pay stubs and timesheets or a log of your hours. If you ever have to claim back pay, this information will come in handy. It will be easier to claim unpaid wages retroactively if you can document when you worked and what you were owed.
- Back pay is the amount due to an employee that hasn't been paid yet.
- Whether the employer willfully or accidentally withheld pay, the employee is still entitled to it and it must be paid.
- You can get help from the Wage and Hour Division or the Secretary of Labor to secure your back pay, or you may choose to file suit if you are within the statute of limitations.