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 in the 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.
On November 22, 2021, the Federal Department of Labor (DOL) announced publication of the final rule, “Increasing the Minimum Wage for Federal Contractors.” The DOL has finalized regulations to implement Executive Order (EO) 14026, which was signed by President Joe Biden on April 27, 2021. Contractors will see a significant increase in what they will be legally required to pay. Effective January 30, 2022, the EO requires agencies that issue contracts to incorporate the new minimum wage in all new contract solicitations, and by March 30, 2022, they must implement the new minimum wage into new contracts. The EO raises the minimum wage paid by those contractors to workers performing work on or in connection with covered federal contracts to $15.00 per hour, beginning January 30, 2022. Effective in 2023, the minimum wage will be adjusted for inflation. Contractors’ current contracts aren’t affected, but future contracts or extensions of current contracts will be.
Tipped workers. Effective January 30, 2022, the cash wage that must be paid by an employer to a tipped worker is at least $10.50 per hour. Effective January 1, 2023, this will increase to 85 percent of the full EO minimum wage, rounded to the nearest multiple of $0.05. Beginning January 1, 2024, and for each subsequent year, this will increase to 100 percent of the full EO minimum wage. The EO will gradually phase out contractors’ ability to claim a tip credit for covered federal contract work. If a tipped employee does not receive enough tips when combined with the hourly cash wage paid by the employer to earn the required minimum wage, the employer must pay a cash wage such that the employee’s total earnings equal that minimum wage.
Workers with disabilities. All individuals working under service or concession contracts with the federal government are to be covered by the same 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 the FLSA's minimum wage requirements unless the employee qualifies for one of the 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, including certain executive, administrative, professional, computer professional, and outside sales employees. 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 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.
Companionship services. The term “companionship services” means the provision of fellowship and protection for an elderly person or person with an illness, an injury, or a 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. Household work is limited to that benefiting the elderly person or person with an illness, an injury, or a disability. Household work that primarily benefits other members of the household, such as making dinner for another household member or doing laundry for everyone in the household, results in loss of the companionship exemption, and thus, the employee would be entitled to minimum wage and overtime pay for that workweek.
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. Employers may require the live-in domestic service employee to record his or her hours worked and to submit the record to the employers.
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 in which 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 the 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. The history of tip credits and tip pools has been complicated.
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.
30 minute/20 percent rule.Employers that take advantage of the tip credit will have to monitor and document their tipped employees’ tasks much more closely than they have in the past under recent tip credit rules. Employers may take a tip credit only for the hours an employee is doing tip-producing work or engaged in tasks that directly support tip-producing work. Also, the rule places limits on how much time an employer can have a worker spend on tasks that support tip-producing work if the employer uses the tip credit. The rule aims to remedy the problem of tipped employees’ spending too much time on work that doesn’t produce tips while they earn the lower wage, but attorneys who advise employers expect the rule to create new monitoring and recordkeeping burdens. The new rule recognizes three types of work: work that produces tips, such as waiting on customers in a restaurant; work that supports tip-producing work, such as rolling silverware and filling salt and pepper shakers; and work not related to tip-producing work, such as preparing food, sweeping floors, and cleaning restrooms. Under the current rules, an employer can take the tip credit only when an employee is performing tip-producing work or non-tip-producing work that doesn’t exceed a continuous period of 30 minutes or more than 20 percent of the employee’s workweek. Any time spent on non-tip-producing work or not supporting tip-producing work must be paid at the full minimum wage. Employers will have to closely monitor what tipped employees do and make sure they are being paid at the proper rate for any work they do. That means employers will have to note the time spent on work that produces tips, work that supports tipped work, and tasks unrelated to tipped work.
In addition:
• Employers now cannot keep tips received by workers even if they pay the workers the full minimum wage and do not take a tip credit toward the minimum wage obligation.
• Employers that pay the full minimum wage instead of taking a tip credit can require employees to put their tips in a tip pool that includes certain workers who don’t customarily and regularly receive tips as long as the employers meet new recordkeeping requirements. Workers who enhance a customer’s experience, such as cooks, janitors, and dishwashers, can be included in those nontraditional pools. Manager and supervisor participation in tip pools is prohibited.
• Employers that collect tips for tip pools must redistribute the tips by the regular payday for the workweek or pay period in which they collected the tips.
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.
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.
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.
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 who 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. 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.
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 January 7, 2022.
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 in the 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.
On November 22, 2021, the Federal Department of Labor (DOL) announced publication of the final rule, “Increasing the Minimum Wage for Federal Contractors.” The DOL has finalized regulations to implement Executive Order (EO) 14026, which was signed by President Joe Biden on April 27, 2021. Contractors will see a significant increase in what they will be legally required to pay. Effective January 30, 2022, the EO requires agencies that issue contracts to incorporate the new minimum wage in all new contract solicitations, and by March 30, 2022, they must implement the new minimum wage into new contracts. The EO raises the minimum wage paid by those contractors to workers performing work on or in connection with covered federal contracts to $15.00 per hour, beginning January 30, 2022. Effective in 2023, the minimum wage will be adjusted for inflation. Contractors’ current contracts aren’t affected, but future contracts or extensions of current contracts will be.
Tipped workers. Effective January 30, 2022, the cash wage that must be paid by an employer to a tipped worker is at least $10.50 per hour. Effective January 1, 2023, this will increase to 85 percent of the full EO minimum wage, rounded to the nearest multiple of $0.05. Beginning January 1, 2024, and for each subsequent year, this will increase to 100 percent of the full EO minimum wage. The EO will gradually phase out contractors’ ability to claim a tip credit for covered federal contract work. If a tipped employee does not receive enough tips when combined with the hourly cash wage paid by the employer to earn the required minimum wage, the employer must pay a cash wage such that the employee’s total earnings equal that minimum wage.
Workers with disabilities. All individuals working under service or concession contracts with the federal government are to be covered by the same 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 the FLSA's minimum wage requirements unless the employee qualifies for one of the 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, including certain executive, administrative, professional, computer professional, and outside sales employees. 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 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.
Companionship services. The term “companionship services” means the provision of fellowship and protection for an elderly person or person with an illness, an injury, or a 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. Household work is limited to that benefiting the elderly person or person with an illness, an injury, or a disability. Household work that primarily benefits other members of the household, such as making dinner for another household member or doing laundry for everyone in the household, results in loss of the companionship exemption, and thus, the employee would be entitled to minimum wage and overtime pay for that workweek.
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. Employers may require the live-in domestic service employee to record his or her hours worked and to submit the record to the employers.
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 in which 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 the 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. The history of tip credits and tip pools has been complicated.
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.
30 minute/20 percent rule.Employers that take advantage of the tip credit will have to monitor and document their tipped employees’ tasks much more closely than they have in the past under recent tip credit rules. Employers may take a tip credit only for the hours an employee is doing tip-producing work or engaged in tasks that directly support tip-producing work. Also, the rule places limits on how much time an employer can have a worker spend on tasks that support tip-producing work if the employer uses the tip credit. The rule aims to remedy the problem of tipped employees’ spending too much time on work that doesn’t produce tips while they earn the lower wage, but attorneys who advise employers expect the rule to create new monitoring and recordkeeping burdens. The new rule recognizes three types of work: work that produces tips, such as waiting on customers in a restaurant; work that supports tip-producing work, such as rolling silverware and filling salt and pepper shakers; and work not related to tip-producing work, such as preparing food, sweeping floors, and cleaning restrooms. Under the current rules, an employer can take the tip credit only when an employee is performing tip-producing work or non-tip-producing work that doesn’t exceed a continuous period of 30 minutes or more than 20 percent of the employee’s workweek. Any time spent on non-tip-producing work or not supporting tip-producing work must be paid at the full minimum wage. Employers will have to closely monitor what tipped employees do and make sure they are being paid at the proper rate for any work they do. That means employers will have to note the time spent on work that produces tips, work that supports tipped work, and tasks unrelated to tipped work.
In addition:
• Employers now cannot keep tips received by workers even if they pay the workers the full minimum wage and do not take a tip credit toward the minimum wage obligation.
• Employers that pay the full minimum wage instead of taking a tip credit can require employees to put their tips in a tip pool that includes certain workers who don’t customarily and regularly receive tips as long as the employers meet new recordkeeping requirements. Workers who enhance a customer’s experience, such as cooks, janitors, and dishwashers, can be included in those nontraditional pools. Manager and supervisor participation in tip pools is prohibited.
• Employers that collect tips for tip pools must redistribute the tips by the regular payday for the workweek or pay period in which they collected the tips.
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.
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.
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.
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 who 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. 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.
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 January 7, 2022.
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