Is it illegal to get paid under the table?

Yes – get paid under the table means paying wages to employees by cash, check, or other compensation with the intent to evade paying payroll taxes. In California, failure to report wages to any government agency is illegal.

Author: Douglas Wade, Attorney

Email  |  Call (800) 484-4610

By paying employees under the table, employers effectively avoid paying taxes. The IRS requires that employers withhold and deposit employment taxes. If an employer pays an employee under the table and the IRS finds out about it, the employer is going to have to pay all that tax money. Additionally, an employee might be entitled to damages if the employer is getting paid under the table.

Is It Against the Law to Pay Workers Under the Table?

It is against the law in California for employers to pay cash under the table and not report employee earnings to a government agency. An employer paying cash under the table can avoid paying workers’ compensation insurance, avoid tax obligations, and more.

When employers pay workers without record, many do so to avoid paying taxes to the Internal Revenue Service (IRS). Other employers pay workers off the books to avoid providing them benefits or other services.

In California, companies must withhold from all payments to employees and in doing so, pay:

  • Workers compensation
  • State unemployment insurance (SUI)
  • Social Security
  • Federal taxes
  • Unemployment insurance (FUTA)
  • Overtime payments
  • State disability insurance (SDI)
  • State taxes
  • Medicare
  • Additional employment benefits, depending on the job and industry

When a business does not pay these taxes and other fees when paying employees in cash, the employer is still responsible for these withholding amounts and charges. Therefore, employers who pay employees under the table can be penalized in several ways.

What Penalties Do Employers Who Pay Under the Table Face?

Employers who do not record cash payments to workers face the following issues:

  • Federal tax penalization that require the business to pay the employees’ unpaid liabilities. Penalized employers might also have to pay additional fines for misclassifying their employees, such as $5000 per worker, 20% of the worker’s social security withholding, and 1.5% of the worker’s federal income tax liabilities.
  • Criminal prosecution. Companies that pay their employees under the table face investigation from the IRS, and companies found guilty of tax evasion sometimes must serve time in prison.

Employers face sizeable risks for paying workers under the table, but employees also risk forfeiting their eligibility for social Security and worker’s compensation benefits.

What Should Workers Do if Their Employer Pays Them in Cash?

It is not against the law for businesses in California to compensate their workers in cash. However, an employee getting cash under the table can make it difficult for workers to pay the correct amount of payroll tax. Many employers who pay under the table do not provide their workers with pay statements, but the law states that employers must follow all employment laws when paying their workers cash. For example, businesses must keep accurate records to compensate for the lack of a paper trail that accompanies cash payments.

California Labor Code Section 226(a) states that all pay statements must include the following information:

  • The number of gross wages
  • The number of hours worked in total
  • The earned piece rate
  • The number of net wages
  • The pay period of the paycheck or cash payment
  • The worker’s name
  • The last four digits of the worker’s Social Security number
  • All deductions
  • The address and name of the company
  • The employee’s hourly rate

Therefore, if an employer opts to risk paying workers in cash, they must abide by all of the states of California’s payroll requirements even when paying cash under the table.

Can Employees File Lawsuits Against Their Employers for Paying Them Under the Table?

When a California business pays its workers under the table, the workers may be able to collect damages, according to the state’s Labor Code Section 226.

Companies may be responsible for:

Unpaid Wages

Employees who make a successful wage claim typically collect the wages the employer refused. If the worker earned overtime pay yet only was paid regularly, they are also entitled to the amount of the difference between the standard pay rate and the overtime rate.

Attorney Fees

The employer may have to pay legal fees if the employee wins the case.

Interest

Workers may be able to collect interest on their uncompensated wages at a rate reliant on the law, and they also might be able to collect liquidated damages. Liquidates damages help pay employees for losses that are challenging to quantify.

Penalties

In California, businesses must pay “waiting time penalties” for 30 days of unpaid earnings. This penalty equals the worker’s daily pay rate for each day the earnings go unpaid.

How Can Workers Report Employers for Paying Them Under the Table?

Employees who collect their pay under the table should contact a professional attorney to discuss their options. All workers in California are entitled to the proper compensation for their hard work and time. At Nakase Wade, our California business lawyers and Corporate attorneys provide each client with an individualized plan of action created to help protect them and to help them collect the damages they deserve. Contact Nakase Wade for a free initial consultation today.

Have a quick question? We answered nearly 2000 FAQs.

See all blogs: Business | Corporate | Employment

Most recent blogs:

Exempt Employee California 2025 Rules, Salary Thresholds & Classification Tests Explained

Exempt Employee California: 2025 Rules, Salary Thresholds & Classification Tests Explained

California's 2025 exempt employee rules include new salary thresholds for fast food and healthcare workers under state wage laws. Detailed tests determine exemption status based on duties, salary structure, and consistent application of independent judgment.
Fair Chance Employers A 2025 Guide to Compliant and Inclusive Hiring Practices

Fair Chance Employers: A 2025 Guide to Compliant and Inclusive Hiring Practices

Fair chance hiring promotes compliance with evolving state and federal laws that support inclusive recruitment for applicants with records. Employers must assess convictions individually, follow proper procedures, and align background checks with job relevance and legal standards.
PAGA Claims in California How Workers Can File and What Penalties Employers Face

PAGA Claims in California: How Workers Can File and What Penalties Employers Face

Employees in California can file PAGA claims for labor violations and recover civil penalties on behalf of the state. Penalties vary by infraction, and employers may reduce liability if violations are corrected within the allowed timeframe.
How Many Hours Can a 16 Year Old Work A Complete Guide to U.S. Child Labor Laws

How Many Hours Can a 16 Year Old Work? A Complete Guide to U.S. Child Labor Laws

Federal law sets no limit on work hours for 16-year-olds, but many states impose restrictions and nighttime limits. This guide breaks down FLSA rules, state variations, job types, and penalties for violating child labor laws.
New Hire Forms Checklist- Required Documents & Onboarding Essentials for Employers

New Hire Forms Checklist: Required Documents & Onboarding Essentials for Employers

Manage new hire onboarding smoothly using this checklist of required federal, state, and internal employment documents. Meet compliance needs and simplify hiring by collecting tax forms, offer letters, benefits paperwork, and signed policy acknowledgments.
Comp Day Explained - Eligibility, Benefits, and How to Calculate It Correctly

Comp Day Explained: Eligibility, Benefits, and How to Calculate It Correctly

Comp day lets eligible employees take time off instead of receiving overtime pay, offering flexibility in work schedules. This article explains how comp time is calculated, who qualifies, and the differences between comp time and overtime rules.
Work Permit California - Requirements, Age Limits, and Job Restrictions for Minors

Work Permit California: Requirements, Age Limits, and Job Restrictions for Minors

Minors in California need a work permit to get jobs, with specific restrictions based on age, role, and school status. This article outlines age requirements, job limitations, working hours, and exceptions to the state’s work permit rules for minors.
Split Shift Meaning Explained - How It Works, Benefits, Laws, and Real-World Examples

Split Shift Meaning Explained: How It Works, Benefits, Laws, and Real-World Examples

Split shifts divide a workday into separate periods with a long unpaid break, boosting flexibility and reducing staffing costs. This schedule helps businesses meet demand during peak hours while supporting employee well-being and complying with labor laws.
Is California an At-Will State - 4 Key Exceptions You Need to Know

Is California an At-Will State? 4 Key Exceptions You Need to Know

California permits at-will employment, but specific exceptions restrict when employers may legally terminate an employee without explanation. Contracts, public policy, fraud, and fairness-based exceptions can provide legal grounds for challenging terminations.
California Pay Data Reporting - 2025 Deadline, New MENA Category, and Updated Filing Requirements

California Pay Data Reporting: 2025 Deadline, New MENA Category, and Updated Filing Requirements

The 2025 deadline for California pay data reporting brings updated requirements, including MENA classification and new employer obligations. Covered employers must submit demographic wage data by job role, gender, race, and pay band or face financial penalties.
Family Leave California - Paid Family Leave Benefits, Eligibility, and Updates for 2025

Family Leave California: Paid Family Leave Benefits, Eligibility, and Updates for 2025

California’s Paid Family Leave program provides up to eight weeks of partial wage coverage for caregiving and bonding with children. Eligibility criteria and compensation limits have changed for 2025, administered through the State Disability Insurance (SDI) system.
California Child Labor Laws - Key Rules About Work Permits, Hours, and Restrictions for Minors

California Child Labor Laws: Key Rules About Work Permits, Hours, and Restrictions for Minors

California sets strict rules on work permits, hours, and job types allowed for minors under its child labor laws. State and federal rules also limit dangerous tasks and require school attendance for working minors.
California Minimum Wage Increase 2025 - New Rates for State, Fast Food, Healthcare, and Localities

California Minimum Wage Increase 2025: New Rates for State, Fast Food, Healthcare, and Localities

California’s 2025 minimum wage increase sets new statewide, fast food, healthcare, and local rates employers must comply with. Exempt and industry-specific employees face new salary thresholds, impacting wage standards across sectors and jurisdictions.
Background Check California - Laws, What Shows Up, and How to Clear Your Record

Background Check California: Laws, What Shows Up, and How to Clear Your Record

California background checks show criminal history, credit data, education records, and other public details under strict screening laws. Options such as expungement, pardons, and record sealing may remove damaging entries from your personal background file.
How Many Hours Can a Minor Work in California - A Complete Guide to Labor Laws and Restrictions

How Many Hours Can a Minor Work in California? A Complete Guide to Labor Laws and Restrictions

Minors working in California must follow strict hour limits based on age, school attendance, and job category. Employers who violate labor rules risk significant fines and possible criminal consequences.
California Overtime Law - Rules Exemptions Pay Rates and Worker Rights Explained

California Overtime Law: Rules, Exemptions, Pay Rates, and Worker Rights Explained

California overtime law requires non-exempt workers to receive extra pay for working beyond daily and weekly hour limits. Certain employees, including independent contractors and exempt workers, do not qualify for overtime based on legal standards.
How to Calculate Overtime in California - Daily, Weekly, and Double Time Pay Explained

How to Calculate Overtime in California: Daily, Weekly, and Double Time Pay Explained

California overtime laws require daily and weekly overtime pay for nonexempt workers, including salaried, commissioned, and piece-rate employees. This guide outlines calculating overtime, daily double time, regular pay rates, and employer responsibilities without addressing alternative workweek schedules.
What is Comp Time for PTO - A Complete Guide for Employers and Employees

What is Comp Time for PTO? A Complete Guide for Employers and Employees

Employers and employees can use comp time for PTO if it is applied legally with clear policies in place. Comp time rules differ between public and private sectors, affecting when it can substitute for overtime pay.
No Tax on Overtime in California 2025 Policy Updates, Exemption Timeline, and What Workers Should Expect.

No Tax on Overtime in California: 2025 Policy Updates, Exemption Timeline, and What Workers Should Expect

California may introduce a 2025 overtime tax exemption, but no confirmed start date or final state legislation exists yet. Workers and employers await Sacramento’s decision on removing state taxes from overtime earnings under the proposed changes.
Minimum Wage in California 2025 State and City Rates Explained

Minimum Wage in California 2025: State and City Rates Explained

The minimum wage in California will rise to $16.50 per hour in 2025, with some local rates set even higher. Employers must follow state, city, and industry-specific wage regulations carefully to remain compliant and avoid penalties.
California Fast Food Minimum Wage 2025 Statewide and Local Updates

California Fast Food Minimum Wage 2025: Statewide and Local Updates

The California fast food minimum wage will rise to $20 per hour in April 2025, affecting many workers statewide. Local minimum wage rates also vary across California cities, with some surpassing the new state baseline.
How old do you have to be to work Age limits explained

How old do you have to be to work? Age limits explained

Minimum age requirements for work depend on federal, state, and job-specific rules that focus on young workers' safety and rights. Teens can start working at 14, but restrictions remain in place until 18, depending on the specific type of job.
Workplace Culture and Hostile Work Environments in California Your Rights and Legal Options

Workplace Culture and Hostile Work Environments in California: Your Rights and Legal Options

Employees facing hostile workplaces in California have legal protections to address harassment, discrimination, and toxic work environments. Protect your rights, report misconduct, and pursue action through California's Civil Rights Department or with legal support.
What Is a Pay Stub and Why It Matters for Employees and Employers

What Is a Pay Stub and Why It Matters for Employees and Employers

Pay stubs detail wages, deductions, and taxes, helping employees track earnings and employers comply with state payroll regulations. They support loan applications, reduce payroll disputes, and are required or regulated in many states across the U.S.
What Are the Proper Steps to Fire Someone in California

What Are the Proper Steps to Fire Someone in California?

Terminating an employee in California requires following legal guidelines, maintaining professionalism, and ensuring proper documentation. This guide outlines lawful termination reasons, key procedural steps, and best practices to reduce legal and financial risks.
How Long Does a Misdemeanor Stay on Your Record in California

How Long Does a Misdemeanor Stay on Your Record in California?

A misdemeanor conviction in California stays on public record indefinitely but may be eligible for expungement under specific conditions. Background checks typically show misdemeanor convictions for seven years, but expungement can remove them from most employment screenings.
How do I prepare a script for firing someone

How Do I Prepare a Script for Firing Someone?

Learn the professional steps for firing an employee, from preparing a script to handling emotional reactions. Understand the proper procedures, reasons, and communication techniques to ensure a smooth and respectful termination.
What is involved in a PAGA lawsuit

What Is Involved in a PAGA Lawsuit?

PAGA lawsuits allow employees to file claims for labor code violations on behalf of themselves and others in California. Employers can face significant penalties, prompting many to settle to avoid costly judgments.
What are the rules for 10-minute breaks

What Are the Rules for 10-Minute Breaks?

California law mandates two paid 10-minute breaks and a 30-minute unpaid meal break for an eight-hour shift. Employers who fail to provide required breaks may face penalties, and employees can seek legal action for compensation.
Can I work six hours without a lunch break

Can I Work Six Hours Without a Lunch Break?

California law requires a 30-minute meal break for shifts over five hours, but employees can waive it if working exactly six hours. Employers must comply with strict labor laws, ensuring uninterrupted meal breaks and legal protections for workers.

Free Consultation