Topic 2: Minimum Wage – What minimum wage requirements apply to my business?


When the Fair Labor Standards Act applies,
an employer like Sam generally must pay employees at least the federal minimum wage for every
hour that they work. Currently, the federal minimum wage is $7.25
per hour. Keep in mind that state laws may set minimum
wages that are higher than the federal minimum wage If Sam’s business is subject to both the
federal law and state law, she needs to pay her workers whichever rate is higher so that
she’s in compliance with both laws. You can check the current minimum wage in
your state on our website. For example, if Judy works at Sam’s business’s
location in Colorado, where the minimum wage is $10.20 per hour, she is required by
Colorado law to pay her that higher wage. The FLSA doesn’t require Sam to pay her
employees on an hourly basis. She can pay them on a salary, piece rate,
or some other basis, as long as they receive at least the equivalent of the required minimum
wage for all of the hours that they work in each workweek. Let’s say Judy works 40 hours per week and
is paid a salary of $440.00. If you divide $440.00 by 40 hours, that equals
$11 per hour. That means her pay meets the federal minimum
wage requirement. Special rules apply to “tipped employees,”
like bartenders and restaurant servers, who regularly receive more than $30 a month in
tips from customers. For example, if Judy works as a waitress,
as her employer, Sam may consider her tips as part of her wages. Taking this credit for tips toward her minimum
wage obligation is called taking a “tip credit.” When an employer takes a tip credit, the FLSA
requires them to pay at least $2.13 per hour directly, and allows them to take credit for
up to $5.12 per hour for tips the worker receives from customers during that week to make up
the remainder of the full minimum wage. In any workweek when the worker’s tips,
when combined with the direct payment the employer provides, are not enough to reach
at least the minimum wage for each hour worked, the employer must make up the difference. In addition to tips, Sam may also count other
forms of compensation toward Judy’s wages. These include:
• commissions, • some bonuses, or
• the reasonable cost of housing, food, or other facilities she provides for her benefit. Employers and workers may not make agreements
calling for payment of less than the minimum wage where the FLSA otherwise requires that
the employee receive it. The employer and the worker cannot make an
agreement to break the law. Employers of workers covered by the FLSA must
post a notice explaining the law’s requirements, including the minimum wage, in a place where
workers can easily read it. We provide these posters free of charge on
our website at dol.gov/whd. Some employers pay more than $7.25 per hour,
but still violate the minimum wage requirements when they make deductions from workers’
pay that reduce wages below $7.25 per hour. Please watch our video on deductions to learn
more. When employers fail to pay employees at least
the federal minimum wage, those employers have violated the FLSA. FLSA violations can result in back wage liability,
additional damages due to the employees involved, and even financial penalties to the employer. If you have questions about the minimum wage,
or other wage and hour topics, please visit our website: dol.gov/whd or call us at 866-487-9243
for more information. All calls are free, and confidential.

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