State:

National
The federal minimum wage is $7.25 per hour (29 USC 206). The FLSA does not supersede any state or local laws that are more favorable to employees. Therefore, if a state has a minimum wage that is higher than the federal minimum wage, employers subject to the state minimum wage law are obligated to pay the higher rate to employees working in that state. Numerous states and localities have increased their minimum wage rates above that of the federal government. In addition, there are movements in many more states, counties, and cities to push for increases in the future. These movements will continue until the federal government increases the minimum wage rate to an amount that satisfies state and local governments.
A few states across the nation have enacted laws, prohibiting cities from enacting their own minimum wage rates that are higher than the state minimum wage rate. The most recent is Alabama, precluding a minimum wage rate in Birmingham that would have increased Birmingham’s rate above the state rate.
The minimum wage for federal contract workers performing work on or in connection with federal contracts covered by Executive Order (EO) 13658 is $10.20 per hour. Future adjustments for the minimum wage will be indexed annually to reflect changes in the Consumer Price Index (CPI).
Tipped workers. The required minimum cash wage that generally must be paid to tipped employees is $6.80 per hour.
Workers with disabilities. All individuals working under service or concession contracts with the federal government will be covered by the same $10.20-per-hour minimum wage protections, including workers whose productivity is affected because of their disabilities.
Hours worked. “Hours worked” includes all time an employee must be on duty, on the employer's premises, or at any other prescribed place of work, as well as any additional time the employee is permitted to work.
Workweek. A workweek is a period of 168 hours during 7 consecutive 24-hour periods. A workweek may begin on any day of the week and at any hour of the day established by the employer. Generally, for purposes of computing minimum wage, each workweek stands alone, regardless of whether employees are paid on a weekly, biweekly, semimonthly, or monthly basis. Compensation from 2 weeks cannot be averaged for purposes of satisfying minimum wage laws.
Virtually all employers are subject to FLSA minimum wage requirements either because the employer is a "covered enterprise" or because its employees engage in interstate commerce. A "covered enterprise" as defined under the FLSA includes:
• All businesses that have $500,000 or more in annual sales or receipts
• Businesses that operate hospitals or residential care facilities for the elderly or people with disabilities
• Schools and government agencies Please see the national Fair Labor Standards Act (FLSA) section.
If an employer is not covered by the FLSA, its employees may be individually covered if they engage in:
• Interstate commerce;
• The production of goods for interstate commerce;or
• Activities closely related or directly essential to the production of goods for interstate commerce.
Interstate commerce includes activities such as working in communications or transportation, sending or receiving mail through the U.S. postal system, using telephones for interstate communication, keeping records of interstate transactions, and making credit card transactions that use the interstate banking system.
An employee is generally covered by FLSA's minimum wage requirements unless the employee qualifies for one of FLSA's exemptions. Employees that do not qualify for an exemption are "nonexempt" employees. An employee who is paid on an hourly basis is usually considered to be nonexempt, regardless of the hourly rate paid. Employees generally classified as nonexempt include clerical, blue-collar, maintenance, construction, and semiskilled workers, as well as technicians and laborers.
The FLSA exempts several “white-collar” jobs from minimum wage requirements. Please see the national Exempt Personnel section.
In addition, the FLSA provides for a number of miscellaneous exemptions from its minimum wage requirements. These include:
• Employees of certain seasonal amusement or recreational establishments
• Employees in fishing operations and in initial processing of seafood
• Agricultural workers employed by employers using fewer than 500 man-days in any quarter of the previous year
• Agricultural workers who are members of the employer's immediate family
• Locally based hand harvest workers traditionally paid a piece rate who worked fewer than 13 weeks in agriculture during the preceding calendar year
• Certain local seasonal harvesters under the age of 17
• Employees who principally work in the range production of livestock
• Seafarers on foreign vessels
• Newspaper carriers who deliver to consumers
• Persons employed outside of the United States for the entire workweek
• Employees of gas stations with annual sales of less than $250,000
In May 2016, the federal Department of Labor (DOL) released final changes to the overtime regulations. With this final rule, the DOL sought to update the salary level required for exemption to ensure that FLSA’s intended overtime protections would be fully implemented and to simplify the identification of nonexempt employees, thus making the executive, administrative, and professional employee exemption easier for employers and workers to understand and apply. These changes were to be effective on December 1, 2016. But, just a week before the December 1, 2016, effective date, the U.S. District Court for the Eastern District of Texas granted an emergency motion enjoining the DOL from enforcing the new overtime rule on a nationwide basis. This means that until further action from the courts, Congress, or the new administration, the minimum salary threshold for the white-collar exemptions will remain where it has been since 2004, at $455 a week. The salary threshold for the highly compensated employee (HCE) exemption will remain at $100,000 per year.
For employers that made plans to reclassify employees as nonexempt rather than raise their salaries to the $913–per-week level that was included in the new rule, these employees may continue to be treated as exempt (for now), as long as they otherwise qualify for exemption. Employers that took steps to raise the salaries of exempt employees will have to carefully consider their next steps, as taking back salary increases will likely create an employee relations problem, and as of right now, the decision on the rule is temporary.
Below is a summary of the regulations on hold for now:
Salary level. The most prominent change would be the increase in the salary level required for exemption from overtime to an annual salary of $47,476. This translates to a weekly salary of $913. This means that your employees who currently earn more than $455 per week ($23,660 annually), but less than $913 per week, would need to be reclassified as nonexempt, if the regulations eventually become effective, and would be entitled to overtime for any hours worked over 40 in a week. The DOL seeks to increase the salary level for employees in American Samoa to $767 per week. In addition, the base rate for employees in the motion picture industry would increase to $1,397 per week.
Automatic adjustments every 3 years. The DOL seeks to automatically update the standard salary and compensation levels every 3 years going forward. The DOL aims to set the salary level at the 40th percentile of full-time salaried workers in the lowest income region in the country, which is currently the South.
Salary level for executive, administrative, and professional employees. In order to be exempt from overtime, executive, administrative, and professional employees would have to be compensated on a salary basis of at least $913 per week, exclusive of board, lodging or other facilities, and meet the duties tests.
Computer professionals. The overtime exemption would apply to any computer employee who is compensated on a salary or fee basis at a rate of $913 per week or more, or on an hourly basis at a rate of at least $27.63 an hour, and meets the duties tests.
HCEs. The DOL aims to set the total annual compensation level for HCEs at $134,004 per year, up from the current threshold of $100,000. This compensation level is equal to the 90th percentile of earnings of full-time salaried workers nationally. According to the DOL, to be exempt as an HCE, an employee would also have to receive at least a standard salary amount of $913 per week on a salary or fee basis and pass a minimal duties test. An HCE must customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee and have the primary duty of performing office or nonmanual work.
Duties tests remain the same. The DOL did not alter the duties tests for exemption. Therefore, employers would follow the duties tests that they have been familiar with since 2004.
Counting bonuses and incentive payments toward the salary level. If the new regulations eventually go through, employers would be able to count nondiscretionary bonuses, incentive payments, and commissions toward as much as 10 percent of the salary threshold. In order to count, these payments would have to be paid on a quarterly or more frequent basis. The new rules would also permit the employer to make a catch-up payment. An HCE’s annual compensation would continue to include commissions, nondiscretionary bonuses, and other nondiscretionary compensation earned, as it has in the past. An HCE would also have to receive at least the new standard salary amount of $913 per week on a salary or fee basis.
Fee basis. Under DOL’s final regulations, administrative and professional employees would still be able to be paid on a fee basis rather than on a salary basis. To determine whether the fee payment met the minimum amount of salary required for exemption, the amount paid to the employee would be tested by determining the time worked on the job and whether the fee payment is at a rate that would amount to $913 per week if the employee worked 40 hours. For example, an artist paid $500 for a picture that took 20 hours to complete would meet the minimum salary requirement for exemption, since earnings at this rate would yield the artist $1,000 if 40 hours were worked.
Educational establishments. Under DOL’s final regulations on hold for now, employees whose primary duty is performing administrative functions directly related to academic instruction or training in an educational establishment or department would be exempt if they were compensated on a salary or fee basis of at least $913 per week (or $767 per week, if employed in American Samoa by employers other than the federal government), exclusive of board, lodging, or other facilities, or on a salary basis that is at least equal to the entrance salary for teachers in the educational establishment in which they are employed.
Computing compensation. An exempt employee’s earnings may be computed on an hourly, daily, or shift basis, without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis, regardless of the number of hours, days, or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned. The reasonable relationship test would be met if the weekly guarantee was roughly equivalent to the employee’s usual earnings at the assigned hourly, daily, or shift rate for the employee’s normal scheduled workweek. Under DOL’s final regulations, for example, where the weekly salary level required for exemption would be $913, an exempt employee guaranteed compensation of at least $1,000 for any week in which the employee performs any work, and who normally works four shifts each week, could be paid $300 per shift without violating the salary basis requirement. The reasonable relationship requirement applies only if the employee’s pay is computed on an hourly, daily, or shift basis. It does not apply, for example, to an exempt store manager paid a guaranteed salary per week that exceeds the current salary level who also receives a commission of one-half percent of all sales in the store or 5 percent of the store’s profits, which in some weeks may total as much as, or even more than, the guaranteed salary.
The DOL prohibits third-party employers, such as homecare agencies, from claiming the companionship or live-in worker exemptions. The DOL has revised the definition of “companionship services” to clarify and narrow the duties that fall within the term. As a result, many more domestic service workers are protected by FLSA’s minimum wage and overtime provisions.
According to the DOL:
• The tasks that comprise exempt companionship services are more narrowly defined than in the past.
• The exemptions for companionship services and live-in domestic service employees can be claimed only by the individual, family, or household using the services, rather than by third-party employers such as home healthcare agencies.
• The recordkeeping requirements for employers of live-in domestic service employees are revised.
The DOL states that there are no changes to regulations concerning:
• What constitutes a private home (the type of residence in which domestic service occurs);
• Whether an employment relationship exists;
• Whether an employee is jointly employed by two or more employers; or
• What constitutes compensable hours worked.
Companionship services. The term “companionship services” means the provision of fellowship and protection for an elderly person or person with an illness, injury, or disability who requires assistance in caring for himself or herself. Companionship services also includes the provision of “care” if the care is provided attendant to and in conjunction with the provision of fellowship and protection, and if it does not exceed 20 percent of the total hours worked per person each workweek. “Fellowship” means to engage the person in social, physical, and mental activities. “Protection” means to be present with the person in his or her home or to accompany the person when outside of the home to monitor the person’s safety and well-being. Examples of fellowship and protection may include conversation; reading; games; crafts; accompanying the person on walks; and going on errands, to appointments, or to social events with the person. By changing the definition of “companionship services,” the DOL has decreased the number of companions who would qualify for the minimum wage and overtime exemptions under the FLSA.
Live-in domestic service employees. Live-in domestic service workers who reside in the employer’s home permanently or for an extended period of time and are employed by an individual, family, or household are exempt from overtime pay, although they must be paid at least the federal minimum wage for all hours worked. Live-in domestic service workers who are solely or jointly employed by a third party must be paid at least the federal minimum wage and overtime pay for all hours worked by that third-party employer. These employers must maintain an accurate record of hours worked by live-in domestic service workers. The employer may require the live-in domestic service employee to record his or her hours worked and to submit the record to the employer.
Credit for lodging. The FLSA allows an employer to count the value of food, housing, or other facilities provided to employees toward wages under certain circumstances. An employer that wishes to claim the credit for lodging must ensure that the following five requirements are met:
1. Lodging must be regularly provided by the employer or similar employers.
2. The employee must voluntarily accept the lodging.
3. The lodging must be furnished in compliance with applicable federal, state, or local laws.
4. The lodging must primarily benefit the employee rather than the employer.
5. The employer must maintain accurate records of the costs incurred in the furnishing of the lodging.
An employer may pay four groups of employees below the minimum wage: people with mental or physical disabilities, full-time students, certain employees under age 20, and certain employees who receive tips.
Individuals with a mental or physical disability may be paid a subminimum wage pending receipt of a certificate from the secretary of labor.
Full-time students employed in retail or service stores, agriculture, or colleges and universities may also be paid subminimum wages. The employer that hires students can obtain a certificate from the DOL, which allows the student to be paid not less than 85 percent of the minimum wage. The certificate also limits the hours that the student may work to 8 hours in a day and no more than 20 hours a week when school is in session and 40 hours when school is out, and requires the employer to follow all child labor laws. Once students graduate or leave school, they must be paid the full minimum wage.
An “opportunity wage” of not less than $4.25 may be paid to employees under the age of 20 for their first 90 consecutive calendar days of employment with any employer as long as their work does not displace other workers. After 90 consecutive days of employment, or when the worker reaches the age of 20 (whichever comes first), the worker must receive the regular minimum wage.
The federal wage and hour administrator may issue special certificates allowing employment at wages below the minimum for apprentices, learners, messengers, students, and workers with disabilities.
Those employees who receive more than $30 per month in tips, and work in a job where tipping is customary, are considered tipped employees. Only tips actually received by an employee as money belonging to the employee may be counted in determining whether an employee qualifies as a tipped employee. Although tipped employees are entitled to minimum wage, employers are allowed to pay tipped employees a cash wage of $2.13 and take a tip credit of up to $5.12 per hour provided that the balance of the minimum wage is made up in the form of tips. Employers may apply the tip credit only to those hours during which an employee performed work as a tipped employee. For example, if tipped employees are required to attend training sessions before beginning their work as servers, the tip credit may be applied only to the hours worked as servers, not to the time spent in training sessions.
Formula: To satisfy the minimum wage requirement for a tipped employee, hours worked multiplied by the minimum cash wage for tipped employees plus tips must be equal to or greater than hours worked times the regular minimum wage rate. Employers also must be able to show that the employee receives at least the minimum wage when direct wages and the tip credit allowance are combined. An employer must make up the difference if the combined total of a tipped employee's direct wages plus tips is less than the amount the employee would have earned if paid the regular minimum wage rate. Tips that employers require employees to turn over to them or compulsory service charges added to checks or bills cannot be credited toward the minimum wage, even if those amounts are eventually distributed to employees. For example, if a hotel's negotiations with a customer for banquet facilities include amount for distribution to hotel employees, the distributed amounts are not counted as tips received.
Notice requirement. An employer that elects to use the tip credit provision must give employees notice in advance. The notice must include the following information:
• The amount of the cash wage the employee will receive
• The additional amount the employer is using as a tip credit
• A statement that the tip credit amount cannot exceed the value of tips actually received by the employee
• A statement that all tips received by the employee must be kept by the employee except for valid tip pools
• A statement that the tip credit does not apply to any employee who has not received advance notice of the tip credit provisions
Overtime. Overtime hours are subject to the same hourly tip credit; therefore, the federal minimum overtime rate for tipped employees is calculated by multiplying the regular minimum wage rate by 1.5 and then subtracting the hourly tip credit.
An employer can also satisfy minimum wage requirements by providing an employee with food, lodging, or “other facilities.” An employer must assign a fair value to such items and cannot include profit to the employer.
Covered employers must post notices outlining the federal minimum wage requirements. The notices must be posted conspicuously and in enough places so employees can see them as they enter and exit the workplace. Posters are available from the U.S. Department of Labor, Wage and Hour Division, and may be downloaded from its website at http://www.dol.gov Please see the national Addresses and Contacts section.
The living wage movement is made up of coalitions of community and labor organizations working to enact laws at the local level requiring that city employees and the employees of companies benefiting from city contracts, subsidies, or actions be paid a living wage in excess of federal and state statutory requirements. Please see the national Living Wage section.
These acts set basic labor standards for employees working on public construction projects under federal contracts. Under both acts, employers are required to pay prevailing wages as determined by the labor secretary. The labor secretary calculates prevailing wages by surveying local rates of pay and costs of living standards in the applicable locality. Please see the national Prevailing Wages section.
For more information on federal minimum wage requirements, contact:
U.S. Department of Labor
200 Constitution Avenue, NW
Washington, DC 20210
866-4-US-WAGE
Last updated on November 23, 2016.
Related Topics:
National
The federal minimum wage is $7.25 per hour (29 USC 206). The FLSA does not supersede any state or local laws that are more favorable to employees. Therefore, if a state has a minimum wage that is higher than the federal minimum wage, employers subject to the state minimum wage law are obligated to pay the higher rate to employees working in that state. Numerous states and localities have increased their minimum wage rates above that of the federal government. In addition, there are movements in many more states, counties, and cities to push for increases in the future. These movements will continue until the federal government increases the minimum wage rate to an amount that satisfies state and local governments.
A few states across the nation have enacted laws, prohibiting cities from enacting their own minimum wage rates that are higher than the state minimum wage rate. The most recent is Alabama, precluding a minimum wage rate in Birmingham that would have increased Birmingham’s rate above the state rate.
The minimum wage for federal contract workers performing work on or in connection with federal contracts covered by Executive Order (EO) 13658 is $10.20 per hour. Future adjustments for the minimum wage will be indexed annually to reflect changes in the Consumer Price Index (CPI).
Tipped workers. The required minimum cash wage that generally must be paid to tipped employees is $6.80 per hour.
Workers with disabilities. All individuals working under service or concession contracts with the federal government will be covered by the same $10.20-per-hour minimum wage protections, including workers whose productivity is affected because of their disabilities.
Hours worked. “Hours worked” includes all time an employee must be on duty, on the employer's premises, or at any other prescribed place of work, as well as any additional time the employee is permitted to work.
Workweek. A workweek is a period of 168 hours during 7 consecutive 24-hour periods. A workweek may begin on any day of the week and at any hour of the day established by the employer. Generally, for purposes of computing minimum wage, each workweek stands alone, regardless of whether employees are paid on a weekly, biweekly, semimonthly, or monthly basis. Compensation from 2 weeks cannot be averaged for purposes of satisfying minimum wage laws.
Virtually all employers are subject to FLSA minimum wage requirements either because the employer is a "covered enterprise" or because its employees engage in interstate commerce. A "covered enterprise" as defined under the FLSA includes:
• All businesses that have $500,000 or more in annual sales or receipts
• Businesses that operate hospitals or residential care facilities for the elderly or people with disabilities
• Schools and government agencies Please see the national Fair Labor Standards Act (FLSA) section.
If an employer is not covered by the FLSA, its employees may be individually covered if they engage in:
• Interstate commerce;
• The production of goods for interstate commerce;or
• Activities closely related or directly essential to the production of goods for interstate commerce.
Interstate commerce includes activities such as working in communications or transportation, sending or receiving mail through the U.S. postal system, using telephones for interstate communication, keeping records of interstate transactions, and making credit card transactions that use the interstate banking system.
An employee is generally covered by FLSA's minimum wage requirements unless the employee qualifies for one of FLSA's exemptions. Employees that do not qualify for an exemption are "nonexempt" employees. An employee who is paid on an hourly basis is usually considered to be nonexempt, regardless of the hourly rate paid. Employees generally classified as nonexempt include clerical, blue-collar, maintenance, construction, and semiskilled workers, as well as technicians and laborers.
The FLSA exempts several “white-collar” jobs from minimum wage requirements. Please see the national Exempt Personnel section.
In addition, the FLSA provides for a number of miscellaneous exemptions from its minimum wage requirements. These include:
• Employees of certain seasonal amusement or recreational establishments
• Employees in fishing operations and in initial processing of seafood
• Agricultural workers employed by employers using fewer than 500 man-days in any quarter of the previous year
• Agricultural workers who are members of the employer's immediate family
• Locally based hand harvest workers traditionally paid a piece rate who worked fewer than 13 weeks in agriculture during the preceding calendar year
• Certain local seasonal harvesters under the age of 17
• Employees who principally work in the range production of livestock
• Seafarers on foreign vessels
• Newspaper carriers who deliver to consumers
• Persons employed outside of the United States for the entire workweek
• Employees of gas stations with annual sales of less than $250,000
In May 2016, the federal Department of Labor (DOL) released final changes to the overtime regulations. With this final rule, the DOL sought to update the salary level required for exemption to ensure that FLSA’s intended overtime protections would be fully implemented and to simplify the identification of nonexempt employees, thus making the executive, administrative, and professional employee exemption easier for employers and workers to understand and apply. These changes were to be effective on December 1, 2016. But, just a week before the December 1, 2016, effective date, the U.S. District Court for the Eastern District of Texas granted an emergency motion enjoining the DOL from enforcing the new overtime rule on a nationwide basis. This means that until further action from the courts, Congress, or the new administration, the minimum salary threshold for the white-collar exemptions will remain where it has been since 2004, at $455 a week. The salary threshold for the highly compensated employee (HCE) exemption will remain at $100,000 per year.
For employers that made plans to reclassify employees as nonexempt rather than raise their salaries to the $913–per-week level that was included in the new rule, these employees may continue to be treated as exempt (for now), as long as they otherwise qualify for exemption. Employers that took steps to raise the salaries of exempt employees will have to carefully consider their next steps, as taking back salary increases will likely create an employee relations problem, and as of right now, the decision on the rule is temporary.
Below is a summary of the regulations on hold for now:
Salary level. The most prominent change would be the increase in the salary level required for exemption from overtime to an annual salary of $47,476. This translates to a weekly salary of $913. This means that your employees who currently earn more than $455 per week ($23,660 annually), but less than $913 per week, would need to be reclassified as nonexempt, if the regulations eventually become effective, and would be entitled to overtime for any hours worked over 40 in a week. The DOL seeks to increase the salary level for employees in American Samoa to $767 per week. In addition, the base rate for employees in the motion picture industry would increase to $1,397 per week.
Automatic adjustments every 3 years. The DOL seeks to automatically update the standard salary and compensation levels every 3 years going forward. The DOL aims to set the salary level at the 40th percentile of full-time salaried workers in the lowest income region in the country, which is currently the South.
Salary level for executive, administrative, and professional employees. In order to be exempt from overtime, executive, administrative, and professional employees would have to be compensated on a salary basis of at least $913 per week, exclusive of board, lodging or other facilities, and meet the duties tests.
Computer professionals. The overtime exemption would apply to any computer employee who is compensated on a salary or fee basis at a rate of $913 per week or more, or on an hourly basis at a rate of at least $27.63 an hour, and meets the duties tests.
HCEs. The DOL aims to set the total annual compensation level for HCEs at $134,004 per year, up from the current threshold of $100,000. This compensation level is equal to the 90th percentile of earnings of full-time salaried workers nationally. According to the DOL, to be exempt as an HCE, an employee would also have to receive at least a standard salary amount of $913 per week on a salary or fee basis and pass a minimal duties test. An HCE must customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee and have the primary duty of performing office or nonmanual work.
Duties tests remain the same. The DOL did not alter the duties tests for exemption. Therefore, employers would follow the duties tests that they have been familiar with since 2004.
Counting bonuses and incentive payments toward the salary level. If the new regulations eventually go through, employers would be able to count nondiscretionary bonuses, incentive payments, and commissions toward as much as 10 percent of the salary threshold. In order to count, these payments would have to be paid on a quarterly or more frequent basis. The new rules would also permit the employer to make a catch-up payment. An HCE’s annual compensation would continue to include commissions, nondiscretionary bonuses, and other nondiscretionary compensation earned, as it has in the past. An HCE would also have to receive at least the new standard salary amount of $913 per week on a salary or fee basis.
Fee basis. Under DOL’s final regulations, administrative and professional employees would still be able to be paid on a fee basis rather than on a salary basis. To determine whether the fee payment met the minimum amount of salary required for exemption, the amount paid to the employee would be tested by determining the time worked on the job and whether the fee payment is at a rate that would amount to $913 per week if the employee worked 40 hours. For example, an artist paid $500 for a picture that took 20 hours to complete would meet the minimum salary requirement for exemption, since earnings at this rate would yield the artist $1,000 if 40 hours were worked.
Educational establishments. Under DOL’s final regulations on hold for now, employees whose primary duty is performing administrative functions directly related to academic instruction or training in an educational establishment or department would be exempt if they were compensated on a salary or fee basis of at least $913 per week (or $767 per week, if employed in American Samoa by employers other than the federal government), exclusive of board, lodging, or other facilities, or on a salary basis that is at least equal to the entrance salary for teachers in the educational establishment in which they are employed.
Computing compensation. An exempt employee’s earnings may be computed on an hourly, daily, or shift basis, without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis, regardless of the number of hours, days, or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned. The reasonable relationship test would be met if the weekly guarantee was roughly equivalent to the employee’s usual earnings at the assigned hourly, daily, or shift rate for the employee’s normal scheduled workweek. Under DOL’s final regulations, for example, where the weekly salary level required for exemption would be $913, an exempt employee guaranteed compensation of at least $1,000 for any week in which the employee performs any work, and who normally works four shifts each week, could be paid $300 per shift without violating the salary basis requirement. The reasonable relationship requirement applies only if the employee’s pay is computed on an hourly, daily, or shift basis. It does not apply, for example, to an exempt store manager paid a guaranteed salary per week that exceeds the current salary level who also receives a commission of one-half percent of all sales in the store or 5 percent of the store’s profits, which in some weeks may total as much as, or even more than, the guaranteed salary.
The DOL prohibits third-party employers, such as homecare agencies, from claiming the companionship or live-in worker exemptions. The DOL has revised the definition of “companionship services” to clarify and narrow the duties that fall within the term. As a result, many more domestic service workers are protected by FLSA’s minimum wage and overtime provisions.
According to the DOL:
• The tasks that comprise exempt companionship services are more narrowly defined than in the past.
• The exemptions for companionship services and live-in domestic service employees can be claimed only by the individual, family, or household using the services, rather than by third-party employers such as home healthcare agencies.
• The recordkeeping requirements for employers of live-in domestic service employees are revised.
The DOL states that there are no changes to regulations concerning:
• What constitutes a private home (the type of residence in which domestic service occurs);
• Whether an employment relationship exists;
• Whether an employee is jointly employed by two or more employers; or
• What constitutes compensable hours worked.
Companionship services. The term “companionship services” means the provision of fellowship and protection for an elderly person or person with an illness, injury, or disability who requires assistance in caring for himself or herself. Companionship services also includes the provision of “care” if the care is provided attendant to and in conjunction with the provision of fellowship and protection, and if it does not exceed 20 percent of the total hours worked per person each workweek. “Fellowship” means to engage the person in social, physical, and mental activities. “Protection” means to be present with the person in his or her home or to accompany the person when outside of the home to monitor the person’s safety and well-being. Examples of fellowship and protection may include conversation; reading; games; crafts; accompanying the person on walks; and going on errands, to appointments, or to social events with the person. By changing the definition of “companionship services,” the DOL has decreased the number of companions who would qualify for the minimum wage and overtime exemptions under the FLSA.
Live-in domestic service employees. Live-in domestic service workers who reside in the employer’s home permanently or for an extended period of time and are employed by an individual, family, or household are exempt from overtime pay, although they must be paid at least the federal minimum wage for all hours worked. Live-in domestic service workers who are solely or jointly employed by a third party must be paid at least the federal minimum wage and overtime pay for all hours worked by that third-party employer. These employers must maintain an accurate record of hours worked by live-in domestic service workers. The employer may require the live-in domestic service employee to record his or her hours worked and to submit the record to the employer.
Credit for lodging. The FLSA allows an employer to count the value of food, housing, or other facilities provided to employees toward wages under certain circumstances. An employer that wishes to claim the credit for lodging must ensure that the following five requirements are met:
1. Lodging must be regularly provided by the employer or similar employers.
2. The employee must voluntarily accept the lodging.
3. The lodging must be furnished in compliance with applicable federal, state, or local laws.
4. The lodging must primarily benefit the employee rather than the employer.
5. The employer must maintain accurate records of the costs incurred in the furnishing of the lodging.
An employer may pay four groups of employees below the minimum wage: people with mental or physical disabilities, full-time students, certain employees under age 20, and certain employees who receive tips.
Individuals with a mental or physical disability may be paid a subminimum wage pending receipt of a certificate from the secretary of labor.
Full-time students employed in retail or service stores, agriculture, or colleges and universities may also be paid subminimum wages. The employer that hires students can obtain a certificate from the DOL, which allows the student to be paid not less than 85 percent of the minimum wage. The certificate also limits the hours that the student may work to 8 hours in a day and no more than 20 hours a week when school is in session and 40 hours when school is out, and requires the employer to follow all child labor laws. Once students graduate or leave school, they must be paid the full minimum wage.
An “opportunity wage” of not less than $4.25 may be paid to employees under the age of 20 for their first 90 consecutive calendar days of employment with any employer as long as their work does not displace other workers. After 90 consecutive days of employment, or when the worker reaches the age of 20 (whichever comes first), the worker must receive the regular minimum wage.
The federal wage and hour administrator may issue special certificates allowing employment at wages below the minimum for apprentices, learners, messengers, students, and workers with disabilities.
Those employees who receive more than $30 per month in tips, and work in a job where tipping is customary, are considered tipped employees. Only tips actually received by an employee as money belonging to the employee may be counted in determining whether an employee qualifies as a tipped employee. Although tipped employees are entitled to minimum wage, employers are allowed to pay tipped employees a cash wage of $2.13 and take a tip credit of up to $5.12 per hour provided that the balance of the minimum wage is made up in the form of tips. Employers may apply the tip credit only to those hours during which an employee performed work as a tipped employee. For example, if tipped employees are required to attend training sessions before beginning their work as servers, the tip credit may be applied only to the hours worked as servers, not to the time spent in training sessions.
Formula: To satisfy the minimum wage requirement for a tipped employee, hours worked multiplied by the minimum cash wage for tipped employees plus tips must be equal to or greater than hours worked times the regular minimum wage rate. Employers also must be able to show that the employee receives at least the minimum wage when direct wages and the tip credit allowance are combined. An employer must make up the difference if the combined total of a tipped employee's direct wages plus tips is less than the amount the employee would have earned if paid the regular minimum wage rate. Tips that employers require employees to turn over to them or compulsory service charges added to checks or bills cannot be credited toward the minimum wage, even if those amounts are eventually distributed to employees. For example, if a hotel's negotiations with a customer for banquet facilities include amount for distribution to hotel employees, the distributed amounts are not counted as tips received.
Notice requirement. An employer that elects to use the tip credit provision must give employees notice in advance. The notice must include the following information:
• The amount of the cash wage the employee will receive
• The additional amount the employer is using as a tip credit
• A statement that the tip credit amount cannot exceed the value of tips actually received by the employee
• A statement that all tips received by the employee must be kept by the employee except for valid tip pools
• A statement that the tip credit does not apply to any employee who has not received advance notice of the tip credit provisions
Overtime. Overtime hours are subject to the same hourly tip credit; therefore, the federal minimum overtime rate for tipped employees is calculated by multiplying the regular minimum wage rate by 1.5 and then subtracting the hourly tip credit.
An employer can also satisfy minimum wage requirements by providing an employee with food, lodging, or “other facilities.” An employer must assign a fair value to such items and cannot include profit to the employer.
Covered employers must post notices outlining the federal minimum wage requirements. The notices must be posted conspicuously and in enough places so employees can see them as they enter and exit the workplace. Posters are available from the U.S. Department of Labor, Wage and Hour Division, and may be downloaded from its website at http://www.dol.gov Please see the national Addresses and Contacts section.
The living wage movement is made up of coalitions of community and labor organizations working to enact laws at the local level requiring that city employees and the employees of companies benefiting from city contracts, subsidies, or actions be paid a living wage in excess of federal and state statutory requirements. Please see the national Living Wage section.
These acts set basic labor standards for employees working on public construction projects under federal contracts. Under both acts, employers are required to pay prevailing wages as determined by the labor secretary. The labor secretary calculates prevailing wages by surveying local rates of pay and costs of living standards in the applicable locality. Please see the national Prevailing Wages section.
For more information on federal minimum wage requirements, contact:
U.S. Department of Labor
200 Constitution Avenue, NW
Washington, DC 20210
866-4-US-WAGE
Last updated on November 23, 2016.
CT-WEB01
Copyright © 2017 Business & Legal Resources. All rights reserved. 800-727-5257
This document was published on http://Compensation.BLR.com
Document URL: http://compensation.blr.com/analysis/Compliance/Minimum-Wage/