Is It Legal For My Employer To Pay Me Under The Table?

Paying under the table is not generally unlawful, but most of the time paying under the table violate wage and pay stub laws.

By: Brad Nakase, Attorney

Email  |  Call 888-600-8654

Have you ever wonder if you can ask a lawyer, “Can I report my employer for paying me under the table?” You may report and receive money compensation if your employer violates paycheck law.

Employees Can Face Consequences When They Are Paid Under The Table

  • Unemployment or State Disability Insurance benefits may be delayed or denied.
  • They may fall foul of the IRS for not reporting their state and federal income tax.
  • Employees will not have to check their stubs, file a W-2 Form or verify their earnings

If your employer is paying you under the table, you may be entitled to over $15,000.

Please call for a free consultation.

California Taxpayers Have a Greater Burden When Employees Are Paid Under the Table

Taxpayers will have to contribute more to support essential public services like:

  • SDI
  • Schools
  • Unemployment Insurance
  • Law Enforcement

What Is Under The Table?

Paying an employee under the table means paying them in non-traceable forms of payment such as cash to avoid reporting payroll taxes.

What Are Some Excuses For Paying Employees Under the Table?

  • Cannot afford payroll tax and insurance
  • It is common practice in the industry
  • The business is more competitive because of the reduced expenses
  • Employees do not request their tax withheld
  • It makes bookkeeping easier

Why You Shouldn’t Pay Employees Under the Table

It is an illegal practice which can result in criminal prosecution and significant penalties and interest.

Paying Under the Table Does Not Avoid Payroll Taxes

You do not save payroll taxes in the long run. When you are audited, the IRS or EDD auditor will have minimal information to work with. This means that if you are audited, you can end up paying higher payroll taxes, plus penalties and interest. Generally, you will end up paying 20 times more than if you just handled your payroll correctly. All government agencies will be aware of the illegal activity, and it may hamper your ability to receive loans, grants, and participate in government schemes.

The below table shows an example of this to illustrate the costs of avoiding payroll costs.

Employer A reports a yearly payroll of $100,000, with five employees being paid $20,000 each. This employer pays state payroll covering UI and ETT up to the wage limit of $7,000 per employee.

Employer B also pays $100,000 yearly. However, because they pay cash under the table, there are no records of how much was paid to each employee, meaning there is no record of how many employees work in the company.

The below table shows the additional costs Employer B has due to paying employees under the table.

Employer A Employer B
UI/ETT $1,225.00 $3,500.00
1 State Disability Insurance* (SDI) (1.0%) 1,000.00
2 Personal Income Tax (PIT) (6%) 6,000.00
3 Penalty (142.3% – see footnote) 14,941.50
4 Non-Registered Penalty 500.00
5 Failure to Issue Withholding Statement Penalty 250.00
6 Failure to File Electronic Return Penalty 50.00
Interest (@5%) through June 30, 2020 525.00
7 Total due for 1 year $1,225.00 $26,766.50

The penalties listed in this example do not represent all possible penalties that may be charged.

  • Section 1126.1 of the CUIC ($100 per employee).

  • Section 13052 of the CUIC ($50 per estimated employee).

  • Section 1112.1 of the CUIC ($50 for failure to file return) effective January 1, 2019.

  • Calculations are based on year 2020 tax rates. Tax rates, interest, and penalties are subject to change each year.

  • Includes Paid Family Leave (PFL).

Note: The UI and ETT are paid by you, the employer. The SDI and PIT are paid by your employees. However, if you fail to withhold employee-paid taxes, they become your responsibility.


Free Consultation

0 + 6 = ?

Two-Week Notice Letter: 9 Tips and 2 Templates

If an employee decides to resign from his or her job, it is normal and expected to provide their employer with two weeks’ notice. Regardless of why a person is leaving their job, it is considered professional to give their employer enough time to make plans to cover the absence.

Do guys get paid paternity leave?

A father is eligible for paternity leave if three conditions are met: 1) welcome a new child within the first twelve months; 2) Paid into the State Disability Insurance; 3) Has not taken more than eight weeks of paternity leave in the past twelve months.

6 Things to Know About At-Will Employment

“At-will” means that an employer can fire an employee for any reason at any time without getting into legal trouble. The exception is that the reason cannot be illegal in nature.

7 Things Women Should Know About Sexual Harassment

Sexual harassment is an umbrella term covering many forms of unwelcome verbal and physical sexual attention. Sexual assault, meanwhile, is physical sexual contact or behavior that happens without the consent of the victim.

How Long Is Maternity Leave in California?

Under California law, companies with at least five employees must provide new parents with 12 weeks of unpaid maternity leave. Similarly, companies with at least five employees must also grant up to four months of unpaid pregnancy-disability leave to workers who are unable to work due to pregnancy or childbirth.

10 Tips on California Law Expense Reimbursement Time Limit

Under California labor law, employers are required to reimburse employees for business expenses made during the course of their employment, so long as they are necessary and reasonable in nature. This means that an employer must pay an employee back for any financial losses the employee accepted as part of doing his or her job.

What are the 4 Caregiver rights in California?

Employers often face lawsuits from caregivers for violating caregivers’ rights, such as basic wages. A caregiver is an individual who has taken on the role of both care provider and advocate.

How to Find an Employment Lawyer

Often referred to as work lawyers, employment lawyers are attorneys who specialize in employment law and represent workers in all positions across many industries. In California, employment lawyers understand workers’ rights according to the state’s labor laws and can help wronged employees sue and seek damages for improper or unlawful treatment at a workplace.

6 Tips for Prorated Vacation

Employees can earn time off according to different methods, which are normally specified in an employee handbook. Some employers choose to have employees accrue vacation time based on hours worked.

4 Tips on Work Uniform Law

Any employer who does not reimburse employees' for work uniform expenses may result in an employee's lawsuit and over $100,000 in damages.

Do You Get Paid for Pre-Employment Training?

Employers are frequently sued for not paying employees for pre-employment training. There is no such thing as "pre-employment." All training are considered employment training.

4 Good Reasons for Missing Work and 3 Bad Reasons for Missing Work

Illness, family emergencies, and important appointments can happen without warning, and are legitimate reasons for missing work. There are also some bad, and unadvisable, reasons to miss work without notice. These reasons can appear unprofessional and irresponsible and may lead to consequences.

5 Steps on How to Call Off Work

Now and again, and employee will run into situations where he or she needs to miss work. Generally, employers understand when one of their workers needs to clock out early or miss a day on account of personal affairs, medical problems, or emergencies.

Can I Use My PTO Whenever I Want?

When it comes to using PTO, employees can generally use it whenever they want. That said, they must receive the approval of their supervisor first. At some companies, there are “blackout” periods, when no one at the company may take a vacation.

Can California employers force you to take PTO?

In industries that have seasonal business dips, it is common practice for employers to use forced vacations. Employers can also use forced vacations if they know that layoffs are approaching. They might do this to avoid paying out laid-off workers who still have unused vacation time.

© Copyright | Nakase Law Firm (2019)