State:

National
The federal minimum wage is $7.25 per hour (29 USC 206). You can find the federal and your state’s minimum wage rates and tip credit laws at http://hr.blr.com/state-comparison-charts/Updated-Minimum-Wage-Chart. 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 $10.60 per hour effective January 1, 2019. Adjustments for the minimum wage are 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 $7.40 per hour effective January 1, 2019.
Workers with disabilities. All individuals working under service or concession contracts with the federal government are to be covered by the same $10.60-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 who 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
The U.S. Department of Labor (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 include 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 the age of 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; and
• 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.
Tip pools.Employers may require their tipped employees to contribute to a tip pool to be shared with nontipped employees but only if all employees are paid the full minimum wage, not just the tipped minimum wage. The provisions in the spending bill, which will become part of a new final rule from the DOL, represent a change from the old regulation on tip pools. That regulation, put out in 2011, requires that pooled tips be distributed only to tipped employees, such as restaurant servers. Nontipped employees, such as cooks and dishwashers, couldn’t be paid out of tip pools and, therefore, had to be paid at least the full minimum wage.
In December 2017, the DOL proposed a regulation to change the Obama-era rule so that employers would be able to distribute pooled tips to nontipped workers as well as to tipped workers. That proposed rule ran into opposition from critics, who claimed it would have allowed employers to use workers’ tips to subsidize nontipped employees’ wages and even would have allowed owners to pocket money from the tip pool. The provision in the newly signed law allows money from tip pools to be shared with nontipped employees but prohibits owners, managers, and supervisors from receiving any of the tip pool.
Under the new law, employers that pay a tipped minimum wage still have to share any tip pool only with tipped employees, just like under the 2011 regulation. But if no tip credit is taken, employers can require that tips be shared with the nontipped back-of-house workers. Employers deciding to use tip pooling first must make sure they’re paying every employee at least the full minimum wage, but they also must carefully think about who can participate in the pool. The new law says managers and supervisors can’t receive pay out of a tip pool, but it doesn’t define “manager” and “supervisor.” Even though provisions in the spending bill cover how tip pools can be used, the DOL still will have to finalize a regulation.
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 DOL, Wage and Hour Division, and may be downloaded from its website at http://www.dol.gov. Please see the national Addresses and Contacts section.
What is a living wage ordinance? A living wage is a pay rate above the minimum wage that is considered to be sufficient to meet basic subsistence needs in a particular geographic area. Contractors that do business with a city or county that has a living wage ordinance must pay their employees at least a certain hourly rate and comply with other provisions of the ordinance, such as offering health benefits, providing leave, maintaining adequate records, and/or posting notice about living wage provisions. 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.
Living wage ordinances apply primarily to certain service contractors (and sometimes their subcontractors) doing business with a city or county government, contractors that receive financial assistance from the city or county, and/or city or county employees. Some ordinances require that both part-time and full-time workers be paid the living wage, and some refer only to particular types of jobs, such as healthcare workers, food service workers, janitors, security guards, landscapers, or clerical workers. Because some ordinances include provisions for automatic increases in the hourly wage rate on particular dates, or adjustments as a result of changes in the federal poverty level, employers should always determine the current requirements--even if they have done business with the same city in the past. Depending on the ordinance requirements, the city might be obligated to notify contractors of the change in writing before an increase takes effect.
Living wage ordinances are gaining in popularity. Although a majority of those ordinances have been implemented in cities and counties, a handful of universities, school boards, and other jurisdictions have also adopted living wage ordinances. Local grassroots organizations made up of coalitions of community and labor organizations, dubbed the national living wage movement, seek to pass local ordinances requiring private businesses that benefit from public money to pay their workers a living wage. Commonly, the ordinances cover employers that hold large city or county service contracts or receive substantial financial assistance from the city in the form of grants, loans, bond financing, tax abatements, or other economic development subsidies. Many grassroots campaigns have defined the living wage as equivalent to the poverty line for a family of four, with some newer campaigns pushing for even higher wages. Increasingly, living wage coalitions are proposing other community standards in addition to a wage requirement, such as health benefits, vacation days, community hiring goals, public disclosure, community advisory boards, environmental standards, and language that supports union organizing. Often spearheaded by community groups, union locals, or central labor councils, living wage campaigns are characterized by uniquely broad coalitions of local community, union, and religious leaders. Because most current living wage campaigns seek to pass legislative measures, campaigns also include lobbying and negotiations with elected officials, such as city and county councillors, the mayor's office, and city staff. Living wage campaigns also provide opportunities for organizations that work to build a mass base of low-income or working people to join up, organize, and mobilize new members.
Cities and counties that adopt living wage ordinances are striving to improve the lives of local working-class families and stimulate the local economy. According to published reports, living wage critics argue that such ordinances are burdensome to employers, result in job losses, and lead to government budgetary problems. Proponents dismiss those arguments and say that the benefits of implementing a living wage ordinance outweigh its economic costs.
A basic living wage ordinance is made up of various parts, including:
• Specification of the living wage level based on whether or not health benefits are provided;
• Length of time the living wage is in force;
• A listing of the types of employees that are covered (for example, city or county employees, contractors, or subcontractors);
• A listing of whether full and part-time employees are covered; all employees of the employer or just those on contract, etc.;
• Agency duties for monitoring and enforcing the living wage ordinance; and
• Penalties.
A living wage ordinance may also include clauses on vacation days, sick leave, labor issues, training incentives, posting of job openings, and more.
Living wages and the ordinances that implement them vary by city. Not only do hourly rates vary, but other requirements do, too. For example, some living wage ordinances apply only to certain types of workers, and some ordinances exclude small city contracts and/or set a particular threshold for contractors required to follow the ordinance's provisions. Higher thresholds may apply for contracts with nonprofit employers, or nonprofits might be exempt altogether. For example, contractors doing at least $25,000 in business for a particular city in the same year may be subject to ordinance provisions. Nonprofit corporations, on the other hand, might not have to meet the requirements at all, or they might only have to pay a living wage if their annual contracts with the city exceed $50,000. Information on living wage ordinances is readily available on some, but not all, websites for city governments that have such ordinances. If an employer cannot find the information on a website, that doesn't necessarily mean that there is no living wage ordinance. It's best to check with the department responsible for receiving bids, such as the city's Purchasing department.
Just as the living wage requirements vary by city ordinance, so do the penalties for noncompliance. Employers may be forced to pay the deficiency to employees, or the city may withhold payments to the employer. Willful and repeated violations of living wage requirements can result in a fine and/or termination of the current contract or grant and, possibly, future contracts for a specific amount of time.
Employers subject to living wage provisions may be responsible for submitting to the city a certified copy of their weekly payroll with such information as the name, job classification, Social Security number, number of hours worked each day (regular and overtime), total hours worked each week (regular and overtime), rate of pay, including overtime rate, fringe benefit payments, all payroll deductions other than those required by federal, state, or local statutes, and the total amount earned during such period by each employee on the specific job.
Contractors subject to the provisions of a living wage ordinance often must post the applicable minimum living wage rate in a conspicuous place on the jobsite.
Some living wage ordinances specify the amount of paid and/or unpaid leave employees may take each year. Employers that don't provide health benefits may be required to pay higher wages to employees than employers that do offer benefits.
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 cost-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 October 11, 2018.
Related Topics:
National
The federal minimum wage is $7.25 per hour (29 USC 206). You can find the federal and your state’s minimum wage rates and tip credit laws at http://hr.blr.com/state-comparison-charts/Updated-Minimum-Wage-Chart. 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 $10.60 per hour effective January 1, 2019. Adjustments for the minimum wage are 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 $7.40 per hour effective January 1, 2019.
Workers with disabilities. All individuals working under service or concession contracts with the federal government are to be covered by the same $10.60-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 who 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
The U.S. Department of Labor (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 include 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 the age of 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; and
• 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.
Tip pools.Employers may require their tipped employees to contribute to a tip pool to be shared with nontipped employees but only if all employees are paid the full minimum wage, not just the tipped minimum wage. The provisions in the spending bill, which will become part of a new final rule from the DOL, represent a change from the old regulation on tip pools. That regulation, put out in 2011, requires that pooled tips be distributed only to tipped employees, such as restaurant servers. Nontipped employees, such as cooks and dishwashers, couldn’t be paid out of tip pools and, therefore, had to be paid at least the full minimum wage.
In December 2017, the DOL proposed a regulation to change the Obama-era rule so that employers would be able to distribute pooled tips to nontipped workers as well as to tipped workers. That proposed rule ran into opposition from critics, who claimed it would have allowed employers to use workers’ tips to subsidize nontipped employees’ wages and even would have allowed owners to pocket money from the tip pool. The provision in the newly signed law allows money from tip pools to be shared with nontipped employees but prohibits owners, managers, and supervisors from receiving any of the tip pool.
Under the new law, employers that pay a tipped minimum wage still have to share any tip pool only with tipped employees, just like under the 2011 regulation. But if no tip credit is taken, employers can require that tips be shared with the nontipped back-of-house workers. Employers deciding to use tip pooling first must make sure they’re paying every employee at least the full minimum wage, but they also must carefully think about who can participate in the pool. The new law says managers and supervisors can’t receive pay out of a tip pool, but it doesn’t define “manager” and “supervisor.” Even though provisions in the spending bill cover how tip pools can be used, the DOL still will have to finalize a regulation.
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 DOL, Wage and Hour Division, and may be downloaded from its website at http://www.dol.gov. Please see the national Addresses and Contacts section.
What is a living wage ordinance? A living wage is a pay rate above the minimum wage that is considered to be sufficient to meet basic subsistence needs in a particular geographic area. Contractors that do business with a city or county that has a living wage ordinance must pay their employees at least a certain hourly rate and comply with other provisions of the ordinance, such as offering health benefits, providing leave, maintaining adequate records, and/or posting notice about living wage provisions. 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.
Living wage ordinances apply primarily to certain service contractors (and sometimes their subcontractors) doing business with a city or county government, contractors that receive financial assistance from the city or county, and/or city or county employees. Some ordinances require that both part-time and full-time workers be paid the living wage, and some refer only to particular types of jobs, such as healthcare workers, food service workers, janitors, security guards, landscapers, or clerical workers. Because some ordinances include provisions for automatic increases in the hourly wage rate on particular dates, or adjustments as a result of changes in the federal poverty level, employers should always determine the current requirements--even if they have done business with the same city in the past. Depending on the ordinance requirements, the city might be obligated to notify contractors of the change in writing before an increase takes effect.
Living wage ordinances are gaining in popularity. Although a majority of those ordinances have been implemented in cities and counties, a handful of universities, school boards, and other jurisdictions have also adopted living wage ordinances. Local grassroots organizations made up of coalitions of community and labor organizations, dubbed the national living wage movement, seek to pass local ordinances requiring private businesses that benefit from public money to pay their workers a living wage. Commonly, the ordinances cover employers that hold large city or county service contracts or receive substantial financial assistance from the city in the form of grants, loans, bond financing, tax abatements, or other economic development subsidies. Many grassroots campaigns have defined the living wage as equivalent to the poverty line for a family of four, with some newer campaigns pushing for even higher wages. Increasingly, living wage coalitions are proposing other community standards in addition to a wage requirement, such as health benefits, vacation days, community hiring goals, public disclosure, community advisory boards, environmental standards, and language that supports union organizing. Often spearheaded by community groups, union locals, or central labor councils, living wage campaigns are characterized by uniquely broad coalitions of local community, union, and religious leaders. Because most current living wage campaigns seek to pass legislative measures, campaigns also include lobbying and negotiations with elected officials, such as city and county councillors, the mayor's office, and city staff. Living wage campaigns also provide opportunities for organizations that work to build a mass base of low-income or working people to join up, organize, and mobilize new members.
Cities and counties that adopt living wage ordinances are striving to improve the lives of local working-class families and stimulate the local economy. According to published reports, living wage critics argue that such ordinances are burdensome to employers, result in job losses, and lead to government budgetary problems. Proponents dismiss those arguments and say that the benefits of implementing a living wage ordinance outweigh its economic costs.
A basic living wage ordinance is made up of various parts, including:
• Specification of the living wage level based on whether or not health benefits are provided;
• Length of time the living wage is in force;
• A listing of the types of employees that are covered (for example, city or county employees, contractors, or subcontractors);
• A listing of whether full and part-time employees are covered; all employees of the employer or just those on contract, etc.;
• Agency duties for monitoring and enforcing the living wage ordinance; and
• Penalties.
A living wage ordinance may also include clauses on vacation days, sick leave, labor issues, training incentives, posting of job openings, and more.
Living wages and the ordinances that implement them vary by city. Not only do hourly rates vary, but other requirements do, too. For example, some living wage ordinances apply only to certain types of workers, and some ordinances exclude small city contracts and/or set a particular threshold for contractors required to follow the ordinance's provisions. Higher thresholds may apply for contracts with nonprofit employers, or nonprofits might be exempt altogether. For example, contractors doing at least $25,000 in business for a particular city in the same year may be subject to ordinance provisions. Nonprofit corporations, on the other hand, might not have to meet the requirements at all, or they might only have to pay a living wage if their annual contracts with the city exceed $50,000. Information on living wage ordinances is readily available on some, but not all, websites for city governments that have such ordinances. If an employer cannot find the information on a website, that doesn't necessarily mean that there is no living wage ordinance. It's best to check with the department responsible for receiving bids, such as the city's Purchasing department.
Just as the living wage requirements vary by city ordinance, so do the penalties for noncompliance. Employers may be forced to pay the deficiency to employees, or the city may withhold payments to the employer. Willful and repeated violations of living wage requirements can result in a fine and/or termination of the current contract or grant and, possibly, future contracts for a specific amount of time.
Employers subject to living wage provisions may be responsible for submitting to the city a certified copy of their weekly payroll with such information as the name, job classification, Social Security number, number of hours worked each day (regular and overtime), total hours worked each week (regular and overtime), rate of pay, including overtime rate, fringe benefit payments, all payroll deductions other than those required by federal, state, or local statutes, and the total amount earned during such period by each employee on the specific job.
Contractors subject to the provisions of a living wage ordinance often must post the applicable minimum living wage rate in a conspicuous place on the jobsite.
Some living wage ordinances specify the amount of paid and/or unpaid leave employees may take each year. Employers that don't provide health benefits may be required to pay higher wages to employees than employers that do offer benefits.
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 cost-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 October 11, 2018.
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