Unpaid wages are a major problem for many workers across the United States. Employees can be owed money for a variety of reasons – maybe they didn’t get paid minimum wage, or they worked overtime hours that went uncompensated. Whatever the reason, being denied wages you’re legally owed is frustrating and damaging.
When employers don’t pay what they owe, taking legal action through filing claims or lawsuits is often the only recourse employees have. The good news is these actions do frequently end in a settlement, where the employee receives some portion of the unpaid wages. But settlement amounts can vary widely. A single individual might get $1,000, while a large class action lawsuit could see people awarded $100,000 each!
So what is the true average settlement for unpaid wage cases? Let’s take a closer look at the data and factors that determine what employees can expect to receive.
What are Unpaid Wages?
Before diving into average settlements, let’s make sure we understand what counts as unpaid wages. Under the Fair Labor Standards Act (FLSA) wages are considered any compensation owed to an employee for their time worked. Some of the most common reasons wages might go unpaid illegally are:
Minimum Wage Violations
If an employee’s pay rate drops below the legal minimum wage, the employer is violating federal and state labor laws. The minimum wage in 2023 for federal law is $7.25 an hour. That means employees should earn at least that much for regular hours worked. It’s illegal for employers to pay less – for example, $5 an hour. If an employer does so, they owe the employee the difference to meet minimum wage.
Overtime Pay Violations
Federal law requires that employees receive 1.5 times their regular pay rate for any hours worked over 40 in a week. Employers often try to get around this requirement by misclassifying employees as “exempt” even when they don’t meet salary and job duty tests. If an employee works 50 hours but doesn’t get the 10 hours of overtime premium pay, those are considered unpaid wages.
Employers cannot legally deduct money from paychecks if doing so would drop an employee below minimum wage. Improper deductions like cash register shortages or uniform cleaning fees that cause minimum wage violations mean the employer owes those wages back to the employee.
Many employers require employees to work before/after shifts but don’t pay for that time. Answering emails on your phone or doing opening tasks before the store opens are common examples. If an employer allows or requires this off-the-clock work, they must pay for that time. Otherwise, those unpaid hours count as wages owed.
Typical Settlement Amounts
Settlement dollar amounts can vary greatly depending on the specifics of each case. But looking at averages provides insight into what employees can reasonably expect. Some key points on typical ranges:
Small, Individual Claims
When a single employee takes action against an employer for unpaid wages, resulting settlements often fall on the smaller end. This includes cases where just one or several employees are owed wages by the same company. For these situations, settlements commonly end up averaging between $1,000 – $10,000.
One 2017 Labor Department case in New York saw a gas station pay $20,000 in settlements divided between just two employees who weren’t properly paid overtime premiums. On the smaller end, a restaurant might settle a case with a server they failed to pay minimum wage for $2,500. Individual settlements vary widely, but claims involving only one or a just a few employees tend to result in average per-person sums in the lower thousands.
Large Class & Collective Actions
When large groups of employees join together in a class or collective action lawsuit, total settlement amounts balloon while individual payments decrease. Lawsuits against major corporations like Walmart, Amazon, JP Morgan, and others have ended in settlements averaging $10,000 to $50,000 per class member.
The largest class action settlement for wage violations in U.S. history was approved in 2008 against State Farm Insurance. Over 7,000 employees received payments averaging $38,000 per person for being denied overtime wages. Massive collective and class action settlements like this demonstrate why joining together is so valuable for employees.
More recently, a class action settlement against Intercontinental Hotels in 2019 paid out an average of $19,000 to over 16,000 class members following allegations of unpaid wages. Cases involving dozens or hundreds of employees multiply damages and often conclude in per-person settlement averages in the five-figures.
Potentially Massive Damages
In class action suits with very large classes and extensive damages, individual settlement offers can sometimes reach up to six-figures. For example, an unpaid wage class action against Walmart led by a fired employee involved over 150,000 class members. Estimates valued the settlement at over $160 million, which would equal over $1,000 per class member.
However, those numbers are at the most extreme end and are relatively rare. Potentially massive damages depend on having extensive wage violations across tens of thousands of employees, significant legal resources, and strong evidence. But these mega cases do occasionally happen, demonstrating how unpaid wages can rack up over time across an entire company.
Factors That Determine Settlement Amounts
Every unpaid wage case has unique details that will impact the average settlement value. While individual settlements commonly fall in the range of $1,000-$10,000 and class action suits in the $10,000 to $50,000 range, many factors influence where the final number lands. Some of the key details that affect settlement amounts include:
Number of Employees Involved
More employees means more wages owed, which leads to higher damages and larger settlement offers. A single employee might recoup $5,000 whereas 500 employees could share a $5,000,000 settlement. In a class action, having a very large class represented can drastically increase an employer’s motivation to settle.
Length of Time Wages Were Unpaid
Employees owed months or years of unpaid wages unsurprisingly have larger claims than those with only a few weeks’ worth of denied pay. The longer an employer violates labor laws, the more wages go unpaid, leading to exponentially higher damages.
State Labor Laws
Some states like California, New York, and Washington have more protective labor laws than federal requirements. Damages calculations will account for any state law violations, which could include higher minimum wages, stricter overtime rules, meal break requirements, and more. More wage law violations means higher settlement values.
Company Size & Revenue
Larger employers tend to settle unpaid wage claims for higher dollar amounts. Corporations have extensive resources and want to avoid long lawsuits. They also fear the PR backlash of cheating employees, which motivates bigger settlements. Small businesses with less money often settle claims for less.
Strength of Evidence
The clearer the evidence that wage laws were broken, the more leverage employees have in demanding high settlement amounts. Thoroughly tracking hours worked, obtaining copies of policies or pay stubs, and having credible witnesses bolsters claims. Weaker evidence leads to lower settlements.
No two unpaid wage cases or settlements will be exactly the same given the array of influencing factors. But keeping these key details in mind provides insight into the complexity behind the numbers and why settlement values cover such a wide spectrum overall.
Data on Average Settlement Ranges
Looking at real data from labor departments and major class action settlements further confirms typical average amounts that employees receive from unpaid wage claims.
U.S. Department of Labor Settlements
According to data from the Department of Labor, the average settlement received in resolved wage violation cases was $8,908 per employee in 2020. Their data includes both individual cases and group lawsuits overseen by the DOL. The number has steadily risen over the past decade as class actions expanded and more claims were filed.
Data specific to the last five years shows average individual settlements ranging from $900 – $4,000 while group lawsuits resulted in average settlement values of $13,000 to $20,000 per class member. Their data proves that even individual cases yield thousands back to employees, while group legal action secures even higher averages per person.
Top Class Action Settlements
Some of the top recent wage violation class action settlements further demonstrate the potential for major average amounts per employee:
- Walmart – $65 million collective action settlement for 187,000 employees, averaging approximately $350 each.
- Uber – $20 million settlement for 13,600 drivers alleging employee misclassification, resulting in around $1,475 per driver on average.
- FedEx – $240 million settlement in 2022 for delivery drivers claiming employee misclassification. With over 20,000 class members, each received approximately $12,000.
- Disney – $50 million settlement approved in 2022 for over 30,000 theme park and resort workers unpaid for hours worked, averaging over $1,500 per class member.
- Morgan Stanley – $150 million settlement for approximately 10,000 financial advisors paid improperly, equaling around $15,000 per person on average.
Examining real settlement data across both government cases and major class actions confirms that most unpaid wage claims resolve for $1,000 to $50,000 per employee on average. The exact number varies based on case specifics, but these benchmarks demonstrate reasonable expectations.
Settlements provide the only avenue for employees to recoup unpaid wages denied to them by non-compliant employers. While settlement amounts fluctuate widely based on claim details, data shows most fall in the range of $1,000 to $100,000. Factors like number of employees, time period, state laws, company size, and evidence strength all contribute to the average final sums.
Employees owed unpaid minimum wages, overtime pay, or other compensation can turn to legal action to recover their wages. Individual claims may settle for a few thousand dollars, whereas joining larger class action suits can yield average settlements up to $50,000 or more for each participating employee. With proper documentation and support, unpaid wage settlements allow workers to regain wages wrongfully denied them.
No matter the specifics, wage settlements deliver financial justice and consequences for employers who violate labor laws. Workers denied fair pay have legal options to take action, both individually and collectively. Understanding average settlement ranges and the key factors involved allows employees to make informed choices to work towards the pay they deserve.