Wage and hour laws in the U.S. are governed by both federal and state regulations and they serve to protect the rights of employees. The various laws stipulate how, when, and how much workers must be paid, as well as establishing thresholds for benefits including hours worked, annual and sick leave, and overtime.
Employer compliance can be complex and time-consuming due to overlapping federal and state regulations. This post will focus on federal laws such as the Fair Labor Standards Act, and provide examples of legal variations at state level. We will look at regulations including final paycheck and payday requirements, the current minimum wage, and remuneration violations. We will also provide tips and suggestions so that you can ensure compliance with the applicable laws and regulations.
TABLE OF CONTENTS
- Minimum wages act
- State by State minimum wage
- Tipped employee entitlements
- Factors affecting the minimum wage
- Wage & Hour division
- Violations in wage laws
- Company legal requirements
- Staying compliant
What are Wage and Hour Laws?
Wage and hour laws are regulated at a federal level by the Fair Labor Standards Act 1938 (FLSA), also known as the federal Wage and Hour Law. The act establishes the federal minimum wage; regulates working hours, overtime, equal pay, and recordkeeping; and restricts child labor. Generally speaking, the FLSA applies to employees that work over 40 hours per week and that are subject to an hourly wage instead of a salary (a non-exempt employee).
The basic regulations of the FLSA, include:
- Minimum wage for each hour worked by nonexempt employees.
- Overtime pay: covered nonexempt employees must receive overtime pay at a rate of 1.5 times the employee’s regular rate (for all work over the established 40 hours per week).
- No limit on the number of hours employees over the age of 16 can work in a given week.
- Special rules for tipped employees.
- Payment of wages on regular paydays and restrictions on wage deductions.
- Employer recordkeeping requirements for employee time and pay
- Equal pay requirements.
- Break time requirements for nursing mothers (unpaid)
- Special rules for child labor to prohibit their employment in jobs and under conditions detrimental to their health or well-being.
The FLSA provides basic protections but individual states are free to create higher standards for workers. As such, many states have adopted extensive laws regulating the relationship between employers and employees beyond that of federal law. All employers in the U.S. must comply with both federal and state wage and hour laws. If state laws conflict with federal regulations, the employer must apply the law that provides the greatest benefit to employees.
Laws by State
The wage and hour laws differ greatly by state. Some states offer a higher minimum wage than the federal standard, and some provide additional protections for overtime and breaks. Other states have opted to create very few additional wage and hour laws, relying solely on the federal requirements established by the FLSA.
Below are a few examples of how different regulations can vary by state.
When the final paycheck should be paid:
- California: Final check must be given within 72 hours.
- Massachusetts: Final check must be given on the next scheduled payday or on the Saturday that follows an employee’s resignation if there is no scheduled payday.
- New Jersey: Final check must be given on the next scheduled payday.
- Wyoming: Final check must be given within five business days.
- No law in Florida.
Payday requirements by state:
- Most states enforce payment of wages either twice a month or every other week.
- States including Connecticut, Massachusetts and Michigan require weekly payment.
- California, Arizona, Kentucky, and Illinois require the payment of wages on a semi-monthly basis.
- Kansas, Colorado, Delaware, and New Jersey require payment at least once a month.
State by state minimum wage
For a more detailed look at minimum wage in individual US states, check out these articles:
What Is The Minimum Wage Law?
The minimum wage law prohibits employers from hiring employees for less than a given hourly, daily, or monthly minimum wage. The Fair Labor Standards Act (FLSA) determines the minimum wage for employees in private and public sectors, in both Federal and State governments.
According to the FLSA, all non-exempt employees are entitled to a minimum wage of $7.25 per hour (effective July 24, 2009). They are also entitled to overtime pay at a minimum rate 1.5 times the regular rate for any work undertaken in addition to the established 40-hour week threshold.
Under the FLSA, an employee is considered exempt from wage and hour laws if they are paid on a salary basis and they receive a minimum of $455 per week. An employee is also exempt if they perform executive, administrative, or professional duties. Whilst all hourly employees are non-exempt, there are both exempt and non-exempt salaried employees. Non-exempt employees are entitled to an annual minimum wage and overtime pay for all hours worked.
Minimum Wage by State
Most states have their own minimum wage requirements, also including some counties and municipals that have a higher rate than their respective state’s standard wage. State laws are usually more generous to employees in terms of minimum wage and the definition of overtime. If state and federal minimum wage laws differ, the employee is entitled to the higher of the two minimum wages.
In fact, there are 30 states that have implemented a higher minimum wage standard for their residents. With some states such as Hawaii, increasing the rate every 2 years or Alaska, reviewing the state rate annually and adjusting according to CPI (Consumer Price Index).
States with lower/no minimum wage: (federal rate applies)
States like Kentucky have the same minimum wage as the federal rate. However, there are some states that have a lower rate or do not have state regulations regarding minimum wage. In these circumstances, the minimum wage rate defaults to the federal rate due to FLSA. The following states do not have state specific regulations regarding minimum wage:
- Alabama
- Mississippi
- Louisiana
- Tennessee
- South Carolina
- *Wyoming & Georgia have a minimum wage of $5.15, although this only applies to a few, specific situations
Specific Wage and Hour Laws Requirements by State:
- California requires a minimum hourly wage of $16.50. In addition, various counties that have set their own minimum wage rate to combat inflation and high costs of living.
- Florida is set to reach a minimum rate of $17.00 per hour by 2028. Federal overtime rules apply.
- Kansas has established a minimum rate of $7.25 per hour, with overtime required by state law after 46 hours worked in a week.
- The state with the highest minimum wage is Washington state with $16.66 per hour.
- Although the highest rate in the nation belongs to the District of Colombia (D.C.) at $17.50.
- The states with the lowest minimum wage are Georgia and Wyoming at $5.15 ($7.25 for those who are eligible).
Tipped Employees
If an employee earns more than $30 in tips per month, employers can pay them as little as $2.13/hr under federal law, but only if the total wages and tips equal the minimum wage for each hour worked.
- States including Montana, Washington and Oregon require employers to pay tipped employees full state minimum wage before tips.
- States including Iowa, Pennsylvania and Idaho require employers to pay tipped employees a minimum cash wage above the minimum rate established by the FLSA ($2.13/hour).
- In states such as North Carolina, Louisiana, and Kansas the minimum cash wage payment is the same as that required under the federal Fair Labor Standards Act ($2.13/hour).
- Some states, such as California, require employers to pay minimum wage even when employees receive tips.
What Factors Affect the Minimum Wage?
Exceptions to minimum rates established by state and federal law include the following:
- Age: The minimum wage for workers under the age of 20 is established as $4.25 per hour for the first 90 consecutive calendar days of employment. After 90 days of employment (or when the worker reaches the age of 20) the worker must receive the minimum wage. The current minimum wage for a 21-year-old is, therefore, $7.25.
- Disability: The FLSA allows employers to pay wages below the federal minimum wage to workers with disabilities (providing the disability affects productivity and work quality).
- Students: Students that are employed in retail or service stores, agriculture, or colleges and universities are exempt from the minimum wage, providing their employer has obtained an authorizing certificate which entitles them to pay 85% of the minimum wage (students can only work 8 hours per day / 20 hours per week during academic terms).
- Exempt workers: Farmworkers employed on small farms are exempt from both the minimum wage and overtime pay provisions of the FLSA. The same applies to commissioned sales employees, and executive, administrative, and professional employees paid on a salary basis (as defined by Department of Labor regulations).
Federal Wage and Hour Division
The Wage and Hour Division of the United States Department of Labor is the federal office responsible for enforcing federal labor laws. In addition to the FLSA which regulates federal wage and hour laws, the US Department of Wage and Hour Division enforces other wage labor laws for contractors and subcontractors.
These include:
- The Davis-Bacon and Related Acts, which applies to contractors and subcontractors performing on federally funded or assisted contracts in excess of $2,000 for the construction, alteration, or repair of public buildings or public works.
- The Service Contract Act, which requires contractors and subcontractors performing services on contracts in excess of $2,500 to pay service employees no less than the local or federal wage rates.
- The Contract Work Hours and Safety Standards Act, which covers hours and safety standards in construction contracts.
- The Walsh-Healey Public Contracts Act, which establishes minimum wage, maximum hours, and health and safety standards for work on contracts in excess of $15,000 for the manufacturing or furnishing of materials, supplies, articles, or equipment to the U.S. government.
What is a Wage and Hour Violation?
A wage and hour violation is any failure to comply with federal and/or state wage and hour laws.
The Wage and Hour Division (WHD) of the United States Department of Labor is the federal office responsible for enforcing federal labor laws. The WHD enforces over 13 laws, most notably the Fair Labor Standards Act and the Family Medical Leave Act. Each state also has its own enforcement agency for ensuring compliance with local, municipal and state laws. Failure to comply with state or federal laws can result in fines and penalties. Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to a civil money penalty of up to $1,000 for each violation.
Nonexempt employees have the right to file a complaint about an investigation in the event their employer has:
- Not paid them the correct minimum wage and hours law rate.
- Not paid them on time.
- Paid them a low “training wage”.
- Improperly classified them as exempt employees.
- Failed to pay them overtime when they have worked over 40 hours in a week
- Made them work “off-the-clock,” and not paid them for it.
- Deducted too much from their tips according to the wage and hours law rates.
- Paid them in goods, such as meals or food.
- Not followed state laws regulating breaks.
- Not paid their final paycheck on time (varies by state).
Employer Legal Requirements
Employer compliance with wage and hour laws is the responsibility of the Human Resources department. It is vital for HR managers to stay up to date with federal and state compliance laws and implement policies and procedures to ensure these regulations are adhered to at all times. Failure to do so can result in an investigation. It can also lead to hefty fines and penalties, and damage to corporate reputation.
The first towards compliance is understanding if your business is subject to the FSLA (interstate commerce or annual sales over $500,000), and if your employees are exempt. If an employee is exempt (salaried employees that earn over $455 per week) the minimum wage rate and overtime rules do not apply. If an employee is nonexempt (an hourly worker) they must receive the minimum rate and overtime pay.
Know your wage and hour laws. The DOL has published numerous web pages to help you identify which employees are covered by the FLSA.
These tools can help employers identify which employees have coverage:
- Employees covered by the FLSA under the wage and hour laws
- Hours considered FLSA “hours worked”
- Which employees are exempt from FLSA wage and overtime requirements
- Minimum wage requirements for workers with disabilities
Ensuring Employer Compliance with Wage and Hour Laws
Implementing clear policies and procedures is crucial to ensure compliance. An effective system for recording hours and wages, such as time tracking software, is also vital. It can help you easily collect & verify timesheets, calculate employee wages according to local laws and employment contracts, and ensure employees are working within established laws for working hours and breaks.
Factorial’s time tracking app is a low-cost solution to ensure your company maintains detailed payroll records and pays employees the right amount, at the right time. The tool helps you track employee working hours and monitor and pay overtime in line with wage and hour laws.
Manage your company’s legal documents with Factorial.
This article written on Wage and Hour Laws was written by Cat Symonds.
