Most employers and employees in the United States are subject to the minimum wage provisions set out by the Fair Labor Standards Act (FLSA).

However, the FLSA also provides various minimum wage exceptions under specific circumstances to workers with disabilities, full-time students, workers under 20 years of age (during their first 90 days of employment), tipped employees and student learners.

In addition, special rules apply to state and local government agencies in fire protection and law enforcement activities, volunteer services, and compensatory time off (instead of cash overtime pay). Employers are required to keep records on wages, hours and other items which are generally maintained as an ordinary business practice.

The Wage and Hour Division of the U. S. Department of Labor (DOL) enforces minimum wage provisions and investigates violation claims.

Minimum Wage rate

The current federal minimum wage rate is $7.25 per hour. To calculate an employee’s wage rate, an employer must include all forms of compensation given to, or paid on behalf of, the employee, except for:

  • Additional compensation for overtime hours, holiday hours or work that falls outside of a schedule set by an employment contract or collective bargaining agreement;
  • Compensation for paid time off (such as vacation, illness, holidays and production downtimes);
  • Gifts and monetary awards that are not measured by hours worked, productivity or efficiency;
  • Irrevocable employee benefit contributions (such as life insurance, health benefits and retirement accounts);
  • Value or income derived from an employer-provided grant; and
  • Value or income from stock option rights or stock appreciation and bona fide stock purchase programs.

Subminimum Wage Rates

The FLSA allows employers to hire students, student-learners, apprentices, messengers and disabled individuals at rates below the minimum wage rate. The FLSA also includes a special provision for tipped employee wages.

Learners, Apprentices and Messengers

Employers can pay learners, apprentices and messengers a wage rate below the minimum wage rate when they obtain a special certificate from the DOL. When issuing the certificates, the DOL will consider the number of workers an employer wants to cover under the special certificate, the number of hours worked by these employees and the employees’ length of service with the employer.

Learners are individuals receiving training for the occupation for which they were hired. Individuals qualify as learners until they acquire the necessary skills and attain the judgment level they need to perform their job responsibilities efficiently (generally up to 240 hours of vocational training with the same employer in a three-year period). Individuals may be learners in only two qualifying occupations. Learners can receive wages as low as 95 percent (75 percent for student-learners) of the minimum wage rate.

Apprentices are individuals (at least 16 years old) employed to learn a skilled trade through a registered apprenticeship program. The DOL establishes the wage rate for apprentices, along with other employment terms and conditions, in accordance with apprenticeship program guidelines.

Messengers are individuals employed primarily in delivering letters and messages. They may receive wages as low as 95 percent of the minimum rate.

Students

Employers can pay students a wage rate of as low as 85 percent of the current minimum rate after obtaining a special certificate from the DOL. These certificates are available to agricultural employers, retailers, service sector employers and institutions of higher learning. To obtain a special certificate from the DOL, employers must show that the student employee:

  • Does not work more than 20 hours in any workweek while school is in session;
  • Is a full-time student at an institution of learning; and
  • Does not violate any child labor laws (if applicable).

Institutions of higher learning have an additional requirement to show that each student-employee working under a certificate of subminimum wage rate is also enrolled as a full-time student at the institution where he or she works.

Employers wanting to hire more than six student-employees must show the DOL that employing the students does not reduce employment opportunities for non-student employees.

Disabled Workers

The DOL can also issue special certificates authorizing employers to pay subminimum wage rates to individuals whose earning capacity or productivity is impaired because of age, physical or mental deficiency or injury. Subminimum wage rates under these special certificates must be commensurate to the wages earned by nondisabled employees in similar jobs.

To receive a subminimum wage rate certificate for a disabled worker, an employer must provide the DOL with written assurances that it will review the disabled worker’s wages every six months and that it will adjust a disabled worker’s wages at least once per year to reflect prevailing rates for nondisabled workers in similar jobs.

Employers may not reduce a disabled individual’s wages below the wage rate indicated on the certificate, unless they receive prior authorization from the DOL to make the change.

Tipped Employees

The minimum hourly wage for tipped employees—also known as a cash wage—is $2.13 per hour. The FLSA defines a tipped employee as an individual who is engaged in an occupation in which he or she customarily and regularly receives at least $30 per month in tips.

The FLSA allows employers to use a tip credit of $5.12 per hour and reduce a tipped employee’s wage rate requirements because it assumes that the employee’s tips will offset the difference between the cash wage and the minimum wage rate, enabling the employee to receive wages at, or above, the minimum wage rate.

However, federal law requires employers to notify employees at the beginning of their employment that their wages are calculated using tips, a tip credit and a cash wage. The tip credit does not vary for a tipped employee who works overtime hours.

In addition, employers must subsidize a tipped employee’s wages to the extent that the employee’s cash wage and tips are less than the minimum wage rate.

Minimum Wage Rate Exemptions

FLSA exceptions are narrowly defined. Employers should check the exact terms and conditions for each exception carefully. The following examples are an illustrative but not all-inclusive list of employees exempt from the federal minimum wage:

  • Agricultural employees that are immediately related to their employers, are hand harvest laborers, work for employers that use more than 500 man-days of labor in any quarter of the previous calendar year or work in the range production of livestock;
  • Bona fide executive, administrative and professional employees (including teachers and academic administrative personnel in elementary and secondary schools);
  • Babysitters and companions for the elderly whose employment is casual and who provide services for individuals who are unable (because of age or infirmity) to care for themselves;
  • Computer system analysts, programmers, engineers and similarly skilled workers with wages of at least $27.63 per hour and whose primary duty is to apply system analysis techniques and procedures, consult with users or determine, design, develop, document, analyze, create, test or modify hardware, software or system functional specifications;
  • Domestic service employees whose compensation is not classified as wages under the Social Security Act or who work for less than eight hours in a workweek;
  • Newly hired employees under 20 years of age during the first 90 consecutive calendar days following their hiring date (as long as the employer does not displace, fully or partially, other employees’ work hours or benefits to accommodate new hires);
  • Newspaper delivery and publication employees when the newspaper has a circulation of less than 4,000 and its major circulation is within the county (or contiguous counties) where the paper is published;
  • Crew members and seamen working on foreign vessels;
  • Amusement park and recreational establishment employees working for a park that operates for up to seven months in a year or earns at least two-thirds of its total annual income in a six-month period (including individuals working for organized camps and religious and nonprofit educational conference centers);
  • Criminal investigators receiving availability pay (compensation provided for unscheduled services beyond the investigator’s 40-hour workweek in activities that require irregular or unscheduled work hours);
  • Seafood processing employees (individuals employed in the canning, catching, cultivating, farming, harvesting, packing, processing, propagating or taking of any kind of fish, shellfish, crustaceans, sponges, seaweeds and other aquatic forms of animal and vegetable life); and
  • Switchboard operators working for an independently owned public telephone company having no more than 750 stations.

Notice and Postings

Unless an exemption applies, federal law requires employers to post a notice explaining the FLSA to employees. The notice must be posted in every work establishment in a conspicuous place where employees regularly pass by and can easily read it. If an exception applies, employers may modify the model poster provided by the DOL to show the provisions that do not apply.

In addition, the FLSA requires employers that have been authorized to use subminimum wage rate certificates to display and make available to employees a poster explaining the general terms and conditions under which subminimum wage rates may be paid. A subminimum wage certificate notice for impaired workers must be displayed in a conspicuous place where impaired workers, their parents or guardians and other workers may read it. If the employer finds it inappropriate to post a subminimum wage rate notice for impaired workers, the employer may satisfy FLSA notice requirements by providing the notice directly only to all affected employees.

Prohibited discrimination and retaliation

Employers may not discharge or discriminate in any manner against an employee who files a complaint or cooperates with the DOL in an investigation or proceeding.

Penalties

Minimum wage violations under the FLSA are punishable by a fine up to $10,000, imprisonment for up to six months or both. In addition, these violations are subject to civil liability and employers may be required to compensate employees for unpaid wages, liquidated damages and any other penalties a court sees fit to impose. Fee amounts may increase for repeat and willful offenders.

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