Alabama is one of the few states in the U.S. that hasn’t enacted its own wage laws, including a state-specific minimum wage. As a result, the Alabama minimum wage aligns with the federal rate. However, Alabama does have specific labor laws and regulations that employers must follow, such as child labor laws, right-to-work provisions, and at-will employment practices. Employers also need to be aware of the FSLA regulations governing overtime pay, recordkeeping, and wage deductions at a national level to ensure compliance and fair labor practices.
Here’s everything you need to know at an employer in the Dixie State.
TABLE OF CONTENTS
- Alabama Minimum Wage: Current Rates
- What Is the Fair Labor Standards Act?
- What Is a Non-Exempt Employee?
- Are There Any Other Exemptions to the Alabama Minimum Wage?
- Who Enforces the Alabama Minimum Wage?
- What Other Alabama Labor Laws Are There?
- Best Practices for Employer Wage Law Compliance
- How Factorial Can Help Your Business
- Centralize payroll management and get ahead🚀
Alabama Minimum Wage: Current Rates
Alabama is one of five states that hasn’t adopted a state minimum wage law, so it adheres to the federal minimum wage of $7.25, which was last updated in 2009. Essentially, this means that, according to the federal Fair Labor Standards Act (FLSA), employers must pay eligible employees at least the minimum wage for all hours worked (in other words, employees who are not exempt from the FLSA). Employers must also pay employees 1.5 times their regular rate of pay when employees work more than forty (40) hours during a work week.
The last increase to the Alabama minimum wage was in 2009, when the federal rate increased from $5.15 per hour. The Alabama minimum wage has not increased since then, and there are no plans to increase the federal standard any time soon.
What Is the Fair Labor Standards Act?
The Fair Labor Standards Act (FLSA), signed the act into law in June 1938, was designed to improve the lives, health and wellbeing of workers and children. This was a landmark statute as, before this time, working conditions were often harsh and unfavorable. Both children and adults would often work long hours in dangerous, unsanitary, or hazardous conditions. The FLSA aimed to serve as a legal framework of standards to address these unacceptable working conditions and provide employees with fair standards of labor. These standards included compulsory wages, safer and healthier working environments, and the protection of children’s right to education. It also includes recordkeeping obligations, a fair minimum wage, and overtime laws.
These standards are applied to all non-exempt employees.
What Is a Non-Exempt Employee?
One important thing to consider when talking about the Alabama minimum wage is the employment classification of your workers. In other words, whether your employees are classified as exempt or non-exempt from the requirements of the Fair Labor Standards Act (FLSA).
Let’s break it down.
According to the Fair Labor Standards Act, there are two types of employees:
- Exempt employees. An employee who you class as being exempt from the overtime provisions of the Fair Labor Standards Act (FLSA), such as executive, professional, and administrative roles.
- Non-exempt employees. An employee who you do not class as being exempt from the overtime provisions of the Fair Labor Standards Act (FLSA) and who you, therefore, must pay overtime when they work over their contracted hours.
To determine if your employees should be classified as exempt or non-exempt, you need to consider the following:
- Salary level. Are you paying the employee more than $43,888 per year?
- Salary basis. Do you offer them a guaranteed minimum compensation amount, regardless of the hours they actually work?
- Duties: Have you contracted them to perform an exempt job duty? (Professional duties that require specialized education; executive duties such as supervising a team; or administrative duties that require the use of discretion and judgment)
Are There Any Other Exemptions to the Alabama Minimum Wage?
While the Alabama minimum wage applies to most workers over the age of 18 who are considered non-exempt from the FSLA, there are certain additional exemptions that you need to be aware of.
Here’s an overview of these exemptions:
- Tipped employees. You can pay tipped employees a reduced rate of $2.13 per hour if their tips bring their total earnings to at least $7.25 per hour. If they don’t, then you must cover the tip deficit.
- Student workers. You can pay full-time college or high school students working in retail, service, agriculture, or higher education institutions 85% of the Alabama minimum wage provided those students are enrolled in a work-study program or work 20 hours (or less) per week. You can pay high school students in vocational education programs 75% of the Alabama minimum wage.
- Young workers. In line with federal minimum wage requirements, you can pay employees under 20 a reduced rate of $4.25 per hour during the first 90 days of employment. After 90 days, you must pay them the full Alabama minimum wage.
- Workers with disabilities. A waiver from the US Department of Labor allows employers to pay people with disabilities less than the federal minimum wage. Employers must first apply for a certificate from the Department of Labor’s Wage and Hour Division, which will confirm the reduced rate.
- Agricultural workers. There are specific exemptions for certain agricultural workers, depending on the size of the employer and the nature of the work. Check industry guidelines if in doubt.
Who Enforces the Alabama Minimum Wage?
As there is no state-mandated minimum wage law, Alabama minimum wage enforcement falls under the jurisdiction of the U.S. Department of Labor (DOL). Specifically, the Wage and Hour Division (WHD) of the DOL is responsible for enforcing the FLSA, which sets the federal minimum wage, overtime pay, recordkeeping, and child labor standards.
If an employee believes they are not being paid the federal minimum wage or are experiencing other violations of federal labor laws, they can file a complaint with the WHD. The WHD can investigate complaints, conduct inspections, and take enforcement actions, including recovering back wages for employees and imposing penalties on employers who violate the law.
What Other Alabama Labor Laws Are There?
Alabama labor laws primarily follow federal regulations because the state has not enacted its own wage laws. However, there are a few areas where Alabama has specific guidelines that differ from federal regulations
Let’s explore all the state and federal labor laws that protect employees in Alabama so you can make sure your employee handbook meets all requirements.
Right-to-Work Law
Alabama’s right-to-work provisions ensure that employees cannot be forced to join a union or pay union dues as a condition of employment. This is outlined in Alabama’s Constitution and the Code of Alabama, which protects workers’ freedom to choose whether to associate with a union. These provisions are part of a broader trend in Southern states to provide employees with the right to work without being forced into union membership, fostering an environment that emphasizes personal choice and employment flexibility
Employment “At Will”
Alabama follows the employment-at-will doctrine. This means that employers can fire their employees at any time, for any reason, or even without cause as long as it is not unlawful. To the same effect, employees can resign without notice. For employers, this structure offers flexibility and cost control. For employees, it provides freedom to leave and opportunities for mobility.
Exceptions where termination might be deemed unlawful in Alabama:
- Discrimination. Employers cannot terminate employees based on race, color, religion, sex, national origin, disability, age (for workers over 40), or genetic information, in accordance with Title VII of the Civil Rights Act, the Americans with Disabilities Act (ADA), the Age Discrimination in Employment Act (ADEA), and the Genetic Information Nondiscrimination Act (GINA).
- Retaliation. Employees are protected from being terminated in retaliation for engaging in protected activities, such as filing a discrimination complaint, reporting workplace safety violations, or participating in an investigation of workplace misconduct.
- Public policy. Alabama recognizes a public policy exception to the at-will doctrine. This means an employee cannot be terminated for reasons that violate public policy, such as refusing to engage in illegal activities at the request of the employer or exercising a legal right (e.g., filing for workers’ compensation).
Time Tracking and Recordkeeping
Alabama follows federal guidelines for time tracking and recordkeeping, in line with the FLSA.
Specifically, under the FLSA, employers must maintain accurate records of all hours worked and wages paid to employees.
These records must include the following information.
Employee information:
- Full name and Social Security number.
- Address, including zip code.
- Birth date, if younger than 19.
- Sex and occupation.
Work hours and pay:
- Time and day of the week when the employee’s workweek begins.
- Hours worked each day.
- Total hours worked each workweek.
- The basis on which employee’s wages are paid (e.g., “$400 per week”).
- Regular hourly pay rate.
- Total daily or weekly straight-time earnings.
- Total overtime earnings for the workweek.
- All additions to or deductions from the employee’s wages.
- Total wages paid each pay period.
- Date of payment and the pay period covered by the payment.
- A record of all employee start and end times, meal breaks, and any other periods of absence.
These records must be kept for at least three years. They must also be accessible for inspection by the U.S. Department of Labor’s Wage and Hour Division.
The best way to keep track of all this information is by using an electronic or manual time-tracking system to accurately record each employee’s work hours. More on this below.
Family & Medical Leave
Alabama does not have its own state-specific Family and Medical Leave Act (FMLA). Instead, employees in Alabama are covered under the federal Family and Medical Leave Act (FMLA). Under this Act, eligible employees are entitled to up to 12 weeks of unpaid, job-protected leave per year while maintaining their health insurance coverage. All government agencies, elementary and secondary schools, and companies with 50 or more employees are covered by this law. FMLA covers a wide range of situations, including illness, childbirth, adoption, and military or family circumstances.
Final Checks & Wage Deductions
Alabama does not have state laws regarding final paychecks or wage deductions. Instead, it adheres to federal guidelines under the Fair Labor Standards Act (FLSA).
These include the following:
- Final paychecks. Federal law does not specify when employers must provide a final paycheck. Instead, it defers to state laws. Since Alabama lacks specific laws on this matter, employers must provide final paychecks within a reasonable timeframe, typically by the next scheduled payday.
- Permissible wage deductions. Under the FLSA, employers can make deductions from an employee’s wages for items such as taxes, court-ordered garnishments, and voluntary deductions (e.g., health insurance premiums, retirement plan contributions, etc.). However, deductions for items that benefit the employer (e.g., uniforms, tools) cannot reduce an employee’s wages below the Alabama minimum wage.
- Unauthorized deductions. Deductions for shortages, damages, or losses caused by the employee cannot reduce the employee’s pay below the Alabama minimum wage. Any deductions for such reasons must comply with FLSA guidelines ensuring that employees receive at least the Alabama minimum wage for all hours worked.
Employment of Minors
While Alabama child labor laws largely align with federal regulations, there are some specific provisions under state law:
- Minors aged 14 and 15 cannot work more than 3 hours on a school day, 8 hours on a non-school day, and 18 hours during a school week. They also cannot work before 7 a.m. or after 7 p.m., except from June 1 through Labor Day, when evening hours are extended to 9 p.m.
- Minors aged 16 and 17 have fewer restrictions, but Alabama law still imposes certain protections. For example, minors aged 16 and 17 cannot work before 5 a.m. or after 10 p.m. on nights preceding a school day if they are enrolled in secondary school. Alabama law also requires employers to obtain a Class II Child Labor Certificate for employing 16 and 17-year-olds and mandates specific restrictions on the types of hazardous work they can perform, such as prohibiting work in mining, meatpacking, and operating certain heavy machinery.
Finally, employers must display a child labor poster in their place of business if they hire anyone under the age of 18.
Overtime
The Fair Labor Standards Act also includes provisions relating to employee overtime. To determine whether or not you need to pay your employees overtime for any hours they work over their contracted working hours you first need to determine what their FLSA status is, as we saw above.
If your employees are categorized as exempt, then you have no obligation to pay them overtime if they work over their contracted hours in a given week. However, if your employees are non-exempt then you must pay following the FLSA’s overtime rules. Essentially this means that, unless exempt, you must pay employees covered by the FLSA overtime pay for any hours worked over 40 in a workweek at a rate not less than time and a half (one-half their regular rate of pay).
Meal and Rest Breaks
Alabama’s employment laws include federal guidelines for work breaks, ensuring employees have time to rest and recharge during their shifts.
Here’s what you need to know:
- Meal breaks. Firstly, although Alabama does not require employers to provide meal breaks for adult workers, employees under the age of 16 must receive a 30-minute break for every 5 consecutive hours of work.
- Short breaks. Secondly, while Alabama law also does not mandate short rest breaks (typically 5 to 20 minutes), federal standards encourage employers to offer them. When provided, employers must compensate these short durations as work time.
- Health and safety. Finally, for certain industries, such as those involving continuous operations or heavy machinery, breaks may be regulated by specific health and safety requirements (including working hours limits) to prevent accidents and ensure worker wellbeing.
Employers in Alabama should ideally adopt break policies that exceed minimum requirements to promote a positive work environment and increase employee satisfaction.
Equal Pay
Finally, the Clarke-Figures Equal Pay Act (CFEPA), enacted in Alabama in 2019, aims to eliminate gender-based wage discrimination. According to the CFEPA, employers must pay employees of different genders equally for work that requires similar skill, effort, and responsibility under similar working conditions (equal pay). Employers are prohibited from retaliating against employees who discuss their wages or file complaints regarding wage discrimination.
The Act also allows employees to seek legal action against employers for violations, providing a legal framework to address pay disparities and ensure fair compensation practices within the state. This aligns with the federal Equal Pay Act of 1963 which also aims to ensure that all employees receive equal pay for equal work (pay parity).
Best Practices for Employer Wage Law Compliance
And that’s pretty much everything you need to know about the Alabama minimum wage and the state’s additional wage laws. All that’s left now is to make sure that your business meets the legal requirements of these laws.
With this in mind, we’ve put together a handy list of essential tips and best practices to help you protect your business from potential non-compliance fines and penalties. And if legal compliance doesn’t get you jumping out of your seat, keep in mind that these practices will also help you foster a positive and compliant work environment for your employees. That way, you can attract and retain top talent, boost employee morale, and enhance overall productivity and workplace harmony!
Understand the Minimum Wage
As an employer in Alabama, it’s crucial to stay updated on the current federal minimum wage rates. These can vary based on employee status. In addition, familiarize yourself with the minimum wage requirements for your specific industry to ensure you’re paying your employees the correct amount.
Classify Employees Correctly
Properly classify employees as either exempt or non-exempt under the FLSA. This classification determines whether you must offer overtime pay to an employee who works extra hours. Carefully review the duties and responsibilities of each employee to determine their exempt or non-exempt status.
Implement Accurate Payroll Practices
Maintain accurate and up-to-date payroll records and regularly review your records to identify any inconsistencies or errors. Use payroll software to streamline payroll processes and minimize errors. You should also create a payroll checklist to keep you on track during each payroll cycle. That way, you won’t miss any important steps, such as verifying employee hours, ensuring correct pay rates and calculating payroll tax deductions.
Track Overtime Hours
Accurately track overtime hours worked by non-exempt employees. Implement a system for employees to report overtime hours, such as using timesheets or electronic timekeeping systems. Make sure you calculate and pay overtime at the correct rate.
Provide Meal and Rest Breaks
Employers should provide employees with meal and rest breaks. Make sure employees have access to designated break areas and take mandated breaks throughout their workday.
Maintain Accurate Records
Finally, it’s important to maintain accurate and up-to-date records of all employee work hours and wages in order to comply with federal recordkeeping requirements. In addition, regular internal and external audits can help you identify and fix mistakes so that everything runs smoothly and compliantly.
Using employee record management software can make this easier. These systems help you maintain accurate and reliable records so that you can focus on other important parts of your business while staying compliant with Alabama wage law.
How Factorial Can Help Your Business
Ensuring compliance with Alabama wage laws is crucial for employers to avoid potential penalties and legal disputes. Factorial can help you navigate the complexities of Alabama’s employment guidelines and streamline your entire payroll process.
- Automated payroll calculations. Firstly, Factorial’s automated payroll system eliminates manual calculations, reducing the risk of errors and ensuring accurate compensation for all employees. It automatically factors in Alabama minimum wage requirements, overtime pay, holiday pay, and other relevant regulations to ensure compliance with Alabama wage laws.
- Real-time tracking. Secondly, Factorial’s time tracking feature enables real-time monitoring of working hours, including overtime. This allows you to maintain and generate accurate records and reports and identify and address any issues promptly, ensuring compliance with federal overtime and time-tracking requirements.
- On-demand pay. Thirdly, Factorial’s on-demand pay feature allows employees to access their earned wages between pay periods, providing them with financial flexibility and enhancing employee satisfaction.
- Secure payroll processing. In addition, Factorial employs robust payroll security measures to safeguard sensitive employee data.
- Comprehensive payroll reporting. Finally, Factorial generates detailed payroll reports, providing valuable insights into employee compensation, overtime trends, and overall payroll expenses.
Ultimately, by implementing Factorial’s comprehensive payroll solution, employers can effectively manage payroll, comply with Alabama wage laws, and ensure that their employees are compensated in line with the Alabama minimum wage, fostering a positive and compliant work environment for all.
