In October, Amazon.com announced it was changing the company’s wage policy to establish a minimum wage for employees of $15.00 per hour. This created top headlines and questions regarding its impact on other companies and the overall national minimum wage.
Wages and Salaries
First, it is important to distinguish between a wage and salary. The term wage refers to an hourly or daily pay rate, whereas, a salary refers to pay based on a yearly figure.
The minimum wage in the United States is set by the Federal Government through the Fair Labor Standards Act (FLSA) of 1938. The current minimum wage in the United States is $7.25. States, local governments, and businesses are free to require or offer a higher minimum wage but cannot require or offer lower than $7.25. Some examples of higher minimum wage are:
- California $11.00
- New York State $10.40
- New York City $12.00
- Minnesota $7.87
- Massachusetts $11.00
- Alaska $9.84
- South Dakota $8.65
Locally, the minimum wage in Pennsylvania and Philadelphia are the federal rate of $7.25, whereas New Jersey is $8.60 and Delaware $8.25.
Other companies that pay higher than the federally required $7.25 are: Target & Walmart ($11.00); JP Morgan Chase & Wells Fargo ($16.50); Ikea & Costco ($12.00); and Gap ($10.00).
An exception to this is tipped employees, where the required minimum hourly wage is $2.13. Tipped employees are any employees that earn more than $30.00 in tips per month. The FLSA is clear in that tips belong to the employee and the employer can only take credit for the tips to show compliance with the minimum wage. The FLSA prohibits any arrangement between the employer and the tipped employee whereby any part of the tip received becomes the property of the employer. For example, even where a tipped employee receives at least $7.25 per hour in wages directly from the employer, the employee may not be required to turn over his or her tips to the employer. Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, the employer may pay the employee the tip, less that percentage.
Four years ago, a popular local sports bar ran into significant trouble under the FLSA concerning how it handled employees’ tips and the minimum wage, see here:
In addition to setting the minimum wage, the FLSA also regulates all rules and requirements pertaining to overtime pay and child labor.
Overtime
The FLSA defines the United States workweek as 40 hours. Anyone being paid an hourly wage is entitled to overtime pay for all hours worked over 40 hours. The overtime rate per the FLSA is time and a half, which means the employees current hourly rate plus half of that hourly rate. For example, $10.00 an hour rate equates to $15.00 per hour for all overtime worked. In some instances, such as holidays, companies will pay a higher hourly rate, or a higher rate of overtime.
If one is paid an hourly wage, being entitled to overtime is clear. However, issues arise when certain employees are paid a yearly salary but work more than 40 hours per week. Some employers believe that making a customary hourly waged employee “salaried” will relieve them of overtime liability. For example, an employer may pay a maintenance worker $35,000 a year instead of $15.00 an hour with the intent of having the employee work more than 40 hours per week and avoid overtime pay. This is a misconception and leads employers to suffer significant financial penalties when accused of failing to pay overtime.
The FLSA breaks salaried employees into the categories of “exempt” and “non-exempt” to overtime requirements. Exempt meaning the job category is not required to be paid overtime.
Examples of exempt jobs are:
- Outside Sales
- Professional Employees (Doctors, Lawyers, Accountants, Teachers, and IT Professionals)
- Transportation Employees
- Taxicab Drivers
- Agricultural Employees
- Employees of Motion Picture Theaters
- “Highly” Compensated Employees ($100,000.00 per year or more)
Other criteria to determine if a salaried employee is exempt from overtime are: (1) Direct the work of and/or supervise two or more full-time employees; (2) Have authority to hire, promote, or fire employees; or (3) Manage a department or sub-unit of a company.
To even qualify to be considered exempt, an employee must be paid at least $23,600.00 per year ($455.00) per week.
The issue the government looks for is one where a job that is customarily paid via a wage and entitled to overtime, is being paid a salary. Examples are maintenance and construction workers, cashiers, and security guards.
Child Labor
In most states, anyone under the age of 16, must have a work permit and permission from parents to be employed
Minor’s cannot:
- Work more than 6 days straight
- Work before 7am or after 7pm unless on vacation from school, then it is extended to 9pm/10pm
- Work more than 3 hours on a school day, nor more than 8 hours on non-school days
- Work more than 18 hours during a regular school week, or 40 hours on non-school weeks
The above is a simplified explanation of the generalities of Wage and Hour laws in the United States. The laws have other exceptions and unique circumstances. There is also the intersection of the Equal Pay Act and other pay laws aimed at preventing discrimination in pay.
If you suspect you are not correctly being compensated, feel free to contact me to discuss your situation. Salary and wages are managed through the Department of Labor (DOL) via the Wage and Hour Division Agency. Initial compensation complaints must be directed to the Wage and Hour Division and an attorney can assist you with properly navigating the rules and requirements.
Thank you for reading.
- Paul
