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Minimum Wage: Laws, Requirements & Exceptions

Instructor: James Walsh

M.B.A. Veteran Business and Economics teacher at a number of community colleges and in the for profit sector.

The federal minimum wage is under eight dollars per hour, but states also have minimum wage laws. Which one applies when they conflict? This lesson will cover this as well as the working Americans who are not covered by minimum wage laws and may be paid less.

Federal Minimum Wage

Starting an entry-level job? You may be paid minimum wage. The minimum wage is administered in the US by the Wage and Hour Division of the Department of Labor. Under the Fair Labor Standards Act (FLSA) the federal minimum wage in the United States is no less than $7.25 per hour effective July 24, 2009.

That means all employees covered must be paid at least that much. The FLSA also mandates that time and one half be paid for any hours worked exceeding 40 per week. So that's it, right? Not so fast, as always, the devil is in the details.

Wage and Hour Division logo
Wage and hour

States' Minimum Wage

The FSLA sets the federal minimum wage, but the states get in on this too. As of January 1, 2017, 29 out of the 50 states had a higher minimum wage than the federal minimum of $7.25. The states go as high as $11.00/hour in Massachusetts and Washington and $12.50/hour in D.C. (as of July 2017).

So who is right, the feds or the states? The law is actually pretty explicit about this. When state and federal minimum wage mandates differ, employers must pay the higher standard, or what benefits the employee the most.

In other words, in the state of Washington, the state minimum wage of $11.00 an hour is what employers must pay since it is higher than the federal amount. So it is important for all employers to check the statutes in their particular state for the correct minimum wage.

Remember that some states index their minimum wage to cover cost of living increases, so the amount may change each year.

Exceptions

Most American workers are covered by minimum wage laws, but there are quite a few who aren't. Exceptions are made for certain groups who aren't covered. Remember the higher standard rule here too. If your state doesn't allow a certain exception, then it doesn't apply and full minimum wage must be paid.

Make it a point to check your individual state statutes before using an exemption to see if it is allowed. Now let's look at the main categories of exceptions the Wage and Hour Division allows:

Youth Workers

A minimum wage of $4.25 per hour applies to workers under the age of 20 for the first 90 days they are employed. After the 90 days are up or the young worker attains the age of 20, the full minimum wage of $7.25 applies.

Student Learner Program

The student learner program applies to students at least 16 years of age who are enrolled in vocational training programs learning a trade. These students can be paid 75% of minimum wage as long as they remain in the program, and the employer has a certificate from the Wage and Hour Division of the Dept. of Labor allowing the exception.

Full Time Students

Employers that hire full time students can obtain a certificate from Wage and Hour Division that allows them to pay these students 85% of minimum wage. They are also restricted to no more than 8 hours per day and 20 hours per week when school is in session. When the student graduates or leaves school for good, the exception ends and full minimum wage applies.

Disabilities

Workers with disabilities relevant to the work being performed can be paid wages below minimum. The employer must contact the Wage and Hour Division to work out the details and obtain a certificate. This one is highly controversial and handled in different ways, so check your state statutes carefully.

Tipped Employees

Employees must report tips if they exceed $30 per week. If an employee customarily and regularly receives $30 per week in tips, they may be paid $2.13 in direct wages. However, if the direct wage plus tips earned do not add up to the minimum wage of $7.25 per hour, the employer must pay the difference.

For example, say Maria works as a server for $2.13 an hour. She worked 20 hours this week and earned $75 in tips. She earns $2.13 * 20 or $42.60 in direct pay plus the $75 in tips for a total of $117.60.

Her earnings of $117.60 / 20 hours only equals $5.88 per hour. Since that is below the minimum, her employer must pay ($7.25 - $5.88) * 20 = $27.40 to bring her up to minimum wage. Employers are not permitted to deduct for walk outs, breakage or cash register shortages if the deductions cause the wage to fall below minimum.

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